Serial Problem — SP 4 (Continued)
Accounts Receivable—Easy Leasing Acct. No. 106.3
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Accounts Receivable—IFM Co. Acct. No. 106.4
Date Explanation PR Debit Credit Balance
Accounts Receivable—Liu Corporation Acct. No. 106.5
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Accounts Receivable—Gomez Co. Acct. No. 106.6
Date Explanation PR Debit Credit Balance
Accounts Receivable—Delta Co. Acct. No. 106.7
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Accounts Receivable—KC, Inc. Acct. No. 106.8
Date Explanation PR Debit Credit Balance
Accounts Receivable—Dream, Inc. Acct. No. 106.9
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Allowance for Sales Discounts Acct. No. 108
Date Explanation PR Debit Credit Balance
Merchandise Inventory Acct. No. 119
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Jan. 7 5,800 5,800
Inventory Returns Estimated Acct. No. 121
Date Explanation PR Debit Credit Balance
0
Computer Supplies Acct. No. 126
Date Explanation PR Debit Credit Balance
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Accumulated Depreciation—Office Equipment Acct. No. 164
Date Explanation PR Debit Credit Balance
Computer Equipment Acct. No. 167
Date Explanation PR Debit Credit Balance
Accumulated Depreciation—Computer Equipment Acct. No. 168
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 1,100
Wages Payable Acct. No. 210
Date Explanation PR Debit Credit Balance
Sales Refund Payable Acct. No. 227
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Unearned Computer Services Revenue Acct. No. 236
Date Explanation PR Debit Credit Balance
Common Stock Acct. No. 307
Date Explanation PR Debit Credit Balance
Retained Earnings Acct. No. 318
Date Explanation PR Debit Credit Balance
Computer Services Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
Jan. 11 7,000 7,000
Sales Acct. No. 413
Date Explanation PR Debit Credit Balance
Jan. 13 5,200 5,200
Sales Returns and Allowances Acct. No. 414
Date Explanation PR Debit Credit Balance
Cost of Goods Sold Acct. No. 502
Date Explanation PR Debit Credit Balance
Jan. 13 3,560 3,560
Depreciation Expense—Office Equipment Acct. No. 612
Date Explanation PR Debit Credit Balance
Depreciation Expense—Computer Equipment Acct. No. 613
Date Explanation PR Debit Credit Balance
Wages Expense Acct. No. 623
Date Explanation PR Debit Credit Balance
Jan. 4 125 125
Insurance Expense Acct. No. 637
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Advertising Expense Acct. No. 655
Date Explanation PR Debit Credit Balance
Mileage Expense Acct. No. 676
Date Explanation PR Debit Credit Balance
Miscellaneous Expenses Acct. No. 677
Date Explanation PR Debit Credit Balance
Repairs Expense—Computer Acct. No. 684
Serial Problem — SP 4 (Continued) Part 3
BUSINESS SOLUTIONS
Partial Work Sheet—March 31, 2017
No.
Account Title
Unadj. Trial Balance
Adjustments
Adj. Trial Balance
101
Cash …………………………..
68,057
106.1
Alex’s Engineering Co. ………..
0
106.2
Wildcat Services ………………..
2,800
106.3
Easy Leasing ……………………..
9,047
106.4
5,220
106.5
Liu Corporation ………………….
0
106.6
Gomez Co. …………………………
0
106.7
Delta Co. …………………………..
0
106.8
5,800
106.9
Dream, Inc. ………………………..
0
108
Allow. for Sales Disc …………..
121
400
126
Computer supplies …………….
2,005
1,110
131
Prepaid rent ……………………….
(d)
163
Office equipment………………..
164
Accumulated depreciation–
Office equipment ……………..
167
Computer equipment ………….
20,000
168
Accumulated depreciation–
Computer equip. ……………..
201
Accounts payable ………………
875
236
services revenue ……………..
Common stock …………………..
Retained earnings ………………
403
413
Sales …………………………..
415
Sales Discounts …………………
502
Cost of goods sold …………….
(g)
142
(h2)
400
13,652
612
Depreciation expense–
Office equipment ……………..
(f)
400
400
Computer equipment ……….
623
Wages expense ………………….
2,375
875
637
Insurance expense ……………..
0
(b)
555
640
Rent expense …………………….
0
(d)
0
655
Advertising expense …………..
676
Mileage expense ………………..
0
Serial Problem — SP 4 (Continued)
Part 4
BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2017
Revenues
Computer services revenue ……………………………….. $25,307
Part 5
BUSINESS SOLUTIONS
Statement of Retained Earnings
For Three Months Ended March 31, 2017
Retained earnings, Dec. 31, 2016………………………… $ 7,360
Serial Problem — SP 4 (Concluded)
Part 6
BUSINESS SOLUTIONS
Balance Sheet
March 31, 2017
Assets
Current assets
Cash ………………………………………………………………….. $ 68,057
Accounts receivable* ………………………………………….. 22,867
Liabilities
Equity
Reporting in Action — BTN 4-1
1. Compute cost of sales for 2014 as follows ($ millions)
September 28, 2013 inventory………………………… $ 1,764
Plus cost of goods purchased ……………………….. ?
2.
2014
2013
$ millions
Current
Ratio
Acid-Test
Ratio
Current
Ratio
Acid-Test
Ratio
Current assets
Cash and equivalents ……….
$13,844
$13,844
$14,259
$14,259
Short–term marketable sec ……
11,233
11,233
26,287
26,287
Accounts receivables, net …..
17,460
17,460
13,102
13,102
Inventories, net …………………
Deferred tax assets …………..
Vendor non–trade receivables …
Other current assets …………
$68,531
$53,648
$63,448
$43,658
Interpretation: The current ratio decreased from 1.68 in 2013 to 1.08 in
Comparative Analysis — BTN 4-2
1.
Apple
Google
$ millions
Current
Prior
Current
Prior
Net sales ………………
$182,795
$170,910
$66,001
$55,519
Gross margin ………..
$33,526
2. In both years, Google’s gross margin ratio was higher than that for
Ethics Challenge — BTN 4-3
1. A few students sometimes feel that Amy has devised a clever way to
beat the system. She appears to be succeeding in getting something for
Ethics Challenge, BTN 4-3 — (Concluded)
2. The merchandising company accounts for sales returns using a contra
revenue account called Sales Returns and Allowances. A suit returned
with a sales bill of $200 would be accounted for as follows:
Communicating in Practice — BTN 4-4
Note: While responses will vary, the essence of its content follows:
TO: Mr. V. Velakturi
FROM:
DATE:
SUBJECT: Reply to inventory shrinkage question
You are correct in noting that Music Plus has lost inventory as a result of
shoplifting and other forms of shrinkage. However, you will be pleased to
know your investment in security has paid off. Let me explain.
Taking It to the Net — BTN 4-5
Fiscal Year ($ thousands)
2013
2014
2015
Net sales …………………………..
$2,227,717
$2,428,257
$2,579,695
Gross margin …………………………..
$1,006,114
Teamwork in Action — BTN 4-6
1.
a. Net sales computation
Sales …………………………………………………………………. $600,000
b. Total cost of merchandise purchases computation
Invoice cost of merchandise purchases ………………..
$360,000
Purchase returns and allowances ………………
$362,000
c. Cost of goods sold computation
Merchandise inventory, Beginning ……………………….. $ 98,000
d. Gross profit computation
Net sales (from a) ……………………………………………….. $567,000
3. The inventory account balance is $84,000. If actual (physical) inventory
Entrepreneurial Decision — BTN 4-7
1.
Chipotle
Forecasted Income Statement
For Year Ended January 31, 2016
Net sales ($1,000,000 x 1.09) ………………………………………. $1,090,000
3. There are many issues that should be considered. Among them are:
• First, there is the issue of the prediction itself. That is, are estimates
reasonable or could reality be markedly different from these estimates?
Hitting the Road — BTN 4-8
There is no formal solution for this field activity. As the discussion
Global Decision — BTN 4-9
1.
(in millions)
Samsung*
Apple
Google
Gross Margin %
Rank
Google ……………………………….
61.1%
1
37.8%
3
2. Samsung, Apple and Google each use the multiple-step format for their
income statements. Google’s income statement is a mix between