120
Problem 2-4B (Concluded)
Part 3
NUNCIO CONSULTING
Trial Balance
June 30
Debit Credit
Cash …………………………………………………… $17,860
Accounts receivable ……………………………. 2,000
Office supplies …………………………………….. 500
Office equipment …………………………………. 15,600
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Problem 2-5B (60 minutes)
Part 1
TAMA CO.
Balance Sheet
December 31, 2018
Assets
Liabilities
Cash ……………………………..
$ 30,000
Accounts payable …………………………..
$ 4,000
Accounts receivable ………
35,000
Office supplies ………………
Machinery ……………………..
Total equity …………………………..
TAMA CO.
Balance Sheet
December 31, 2019
Assets
Liabilities
Cash ……………………………..
$ 5,000
Accounts payable …………………………..
$ 12,000
Accounts receivable ………
25,000
Note payable …………………………..
250,000
Office supplies ………………
13,500
Total liabilities …………………………..
262,000
Office equipment……………
40,000
Machinery ……………………..
28,500
50,000
Total equity …………………………..
150,000
Part 2
Computation of 2019 net income:
Owner investment ………………………………………………………………..
5,000
Equity, December 31, 2019 ……………………………………………………………………………………………
Increase in equity during 2019 ………………………………………………………………………………………
$ 13,000
Part 3
(d)
(g)
5,200
Balance
20,000
Problem 2-6B (35 minutes)
Part 1
GOULD SOLUTIONS
Trial Balance
April 30
Debit Credit
Cash …………………………………………………………….. $20,000
Office supplies ……………………………………………… 750
Part 2
Cash
(a)
15,000
(b)
1,800
(f)
20,400
(c)
7,650
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Problem 2-7B (40 minutes)
Part 1
PRISEK
Income Statement
For Month Ended July 31
Revenues
Consulting revenue …………………………. $36,000
Part 2
PRISEK
Statement of Retained Earnings
For Month Ended July 31
Retained earnings, July 1 …………………….. $ 0
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124
Problem 2-7B (Concluded)
Part 3
PRISEK
Balance Sheet
July 31
Assets Liabilities
Cash …………………………. $24,000 Accounts payable ……………. $ 3,900
Accounts receivable …. 10,500 Note payable …………………… 7,200
Prepaid insurance …….. 3,000 Unearned revenue …………… 900
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125
Serial Problem — SP 2
Part 1 (120 minutes) Serial Problem, Business Solutions
2019
Oct. 1 Cash …………………………………………………. 101 45,000
Office Equipment ………………………………. 163 8,000
Computer Equipment ………………………… 167 20,000
3 Computer Supplies …………………………... 126 1,420
Accounts Payable ………………………. 201 1,420
Purchased supplies on credit.
5 Prepaid Insurance …………………………….. 128 2,220
Cash ………………………………………….. 101 2,220
Paid 12 months’ premium in advance.
15 Cash …………………………………………………. 101 4,800
Accounts Receivable …………………. 106 4,800
Collected accounts receivable.
17 Repairs Expense—Computer …………….. 684 805
Cash ………………………………………….. 101 805
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Serial Problem, Business Solutions (Continued)
28 Accounts Receivable ……………………….. 106 5,208
Paid cash dividends.
Nov. 1 Mileage Expense ………………………………. 676 320
Cash …………………………………………. 101 320
Reimbursed Rey for mileage.
2 Cash …………………………………………………. 101 4,633
Computer Services Revenue ………. 403 4,633
Collected cash revenue from client.
13 No entry necessary. (No revenue recognized until work performed.)
18 Cash …………………………………………………. 101 2,208
Accounts Receivable ………………….. 106 2,208
Collected accounts receivable.
22 Miscellaneous Expenses …………………… 677 250
Cash ………………………………………….. 101 250
Record miscellaneous expenses.
24 Accounts Receivable ………………………… 106 3,950
Computer Services Revenue ………. 403 3,950
Billed customer for services.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
Serial Problem, Business Solutions (Continued)
Part 2
General Ledger accounts
Cash Acct. No. 101
Date
Explanation
PR
Debit
Credit
Balance
Oct. 1 45,000 45,000
2 3,300 41,700
5 2,220 39,480
8 1,420 38,060
15 4,800 42,860
Accounts Receivable Acct. No.106
Date
Explanation
PR
Debit
Credit
Balance
Oct. 6 4,800 4,800
12 1,400 6,200
Computer Supplies Acct. No. 126
Date
Explanation
PR
Debit
Credit
Balance
Oct. 3 1,420 1,420
Nov. 5 1,125 2,545
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Serial Problem, Business Solutions (Continued)
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Office Equipment Acct. No. 163
Date
Explanation
PR
Debit
Credit
Balance
Oct. 1 8,000 8,000
Computer Equipment Acct. No. 167
Date
Explanation
PR
Debit
Credit
Balance
Oct. 1 20,000 20,000
Date
Explanation
PR
Debit
Credit
Balance
Common Stock Acct. No. 307
Date
Explanation
PR
Debit
Credit
Balance
Oct. 1 73,000 73,000
Date
Explanation
PR
Debit
Credit
Balance
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129
Serial Problem, Business Solutions (Concluded)
Computer Services Revenue Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
Oct. 6 4,800 4,800
Wages Expense Acct. No. 623
Date
Explanation
PR
Debit
Credit
Balance
Oct. 31 875 875
Nov. 30 1,750 2,625
Date
Explanation
PR
Debit
Credit
Balance
Mileage Expense Acct. No. 676
Date
Explanation
PR
Debit
Credit
Balance
Nov. 1 320 320
28 384 704
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
Serial Problem, Business Solutions (Continued)
Part 3
BUSINESS SOLUTIONS
Trial Balance
November 30
Debit Credit
Cash ………………………………………………………… $38,264
Accounts receivable ………………………………… 12,618
Dividends ………………………………………………… 5,600
Computer services revenue ……………………… 25,659
Wages expense ……………………………………….. 2,625
Advertising expense ………………………………… 1,728
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
Company Analysis — AA 2-1 (20 minutes)
$ millions
1. (a) $241,272
(b) $193,437
4. 2017
Explanation: Apple has greater financial leverage when a greater
Comparative Analysis — AA 2-2 (25 minutes)
$ millions
1. Apple
2. Google
3. Apple
Explanation: Apple has the higher degree of financial leverage. Apple’s
debt ratio is markedly higher for the current year than that of Google.
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132
Global Analysis — AA 2-3 (20 minutes)
₩ and $ in millions
1. Samsung
3. (a) Less Risky Explanation: Samsung’s debt ratio of 28.9% is lower
than Apple’s debt ratio of 64.3% ($241,272/$375,319).
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133
Ethics Challenge — BTN 2-1
This case involves a conflict between the need for efficiency and the need
for control. While it makes sense to take and process lunch orders quickly,
this efficiency is being accomplished by a shortcut that greatly weakens
control over cash receipts. Cash could be received and lost or stolen
because there would be no initial record of how much was received.
It is possible that the assistant manager does not understand the potential
for fraud and abuse if this shortcut is used. If the relationship between you
and the assistant manager is such that you feel you can do so, you should
explain your understanding of how the shortcut could lead to the problems
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134
Communicating in Practice — BTN 2-2
MEMORANDUM
To: Lila Corentine
From:
Subject: Financial statements explanation
Date:
The four major financial statements and their purposes are:
• Income statement describes a company’s revenues and expenses along
with the resulting net income or loss over a period of time. It helps
explain how equity changes during a period due to earnings activities.
These financial statements are linked to each other across time.
Specifically, a balance sheet reports an organization’s financial position at
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
135
Taking It to the Net — BTN 2-3
1. The prior three years’ net income or (loss) for Amazon are ($ millions):
2016 = $2,371 2015 = $596 2014 = $(241)
Teamwork in Action — BTN 2-4
<Instructor note: There is no specific solution to this activity.>
The following sample solution gives a summary outline of what a minimum report
needs to include. Assume a team member selects assets:
Category: Assets
a. Increases (decreases) in assets are debits (credits) to asset accounts.
d. Paid rent expense with $2,000 cash.
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Entrepreneurial Decision — BTN 2-5
There are several issues that ownership should consider. Those
considerations include the following three issues (among others).
• If ownership chooses to contribute personal funds for the expansion,
ownership money will be at risk (not business loans); in this case, the
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
Entrepreneurial Decision — BTN 2-6
1.
MARTIN MUSIC SERVICES
Balance Sheet
December 31
Assets Liabilities
Cash ……………………………… $ 3,600 Accounts payable ………………. $ 2,200
Accounts receivable …….. 9,600 Unearned lesson fees ……….. 15,600
2.
Debt ratio = Total liabilities / Total assets = $17,800 / $80,700 = 22.1%
3. The prospects of a bank loan are likely to be good. (i) The debt ratio
indicates that 78% of the company’s funding is from equity. Also, there
are no debt obligations requiring periodic payments. This implies low
risk. (ii) The level of return on assets is very high. This implies good
return.
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138
Hitting the Road — BTN 2-7
Findings will vary. It is advisable that the instructor obtain a few classified