(continued) E 3-41
Req. 1
August 2 through 18 entries are repeated from Solution to E 2-39.
Journal
DATE
ACCOUNT TITLES
DEBIT
CREDIT
Aug.
2
Cash ………………………………………………….
10,000
Common Stock ……………………………….
10,000
2
Rent Expense …………………………………….
600
Cash ………………………………………………
600
Cash ………………………………………………
2,700
4
Furniture ……………………………………………
4,500
Accounts Payable …………………………..
4,500
5
Supplies …………………………………………….
800
Accounts Payable …………………………..
800
9
Cash ………………………………………………….
1,400
Service Revenue ……………………………..
1,400
12
Utilities Expense ………………………………..
300
Cash ………………………………………………
300
18
Accounts Receivable ………………………….
1,900
Service Revenue ……………………………..
1,900
21
Cash ………………………………………………….
2,700
Unearned Service Revenue ……………..
2,700
26
Accounts Payable ………………………………
800
Cash ………………………………………………
28
Cash ………………………………………………….
1,900
Accounts Receivable ………………………
1,900
Cash ………………………………………………
1,400
(continued) E 3-41
Reqs. 3 and 4
Barbara Miracle, Certified Public Accountant, P.C.
Trial Balance Worksheet
August 31, 2016
TRIAL BALANCE
ADJUSTMENTS
ADJUSTED TRIAL BALANCE
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
DEBIT
CREDIT
Cash
10,200
10,200
Accounts receivable
—
(a) 1,800
1,800
Supplies
800
(c) 400
400
Equipment
2,700
2,700
—
4,500
4,500
—
Accounts payable
4,500
4,500
Salary payable
—
(e) 600
600
Unearned service revenue
2,700
(b) 900
1,800
Common stock
10,000
10,000
Retained earnings
—
—
Dividends
1,400
1,400
Service revenue
3,300
(a)1,800
6,000
Rent expense
600
600
300
300
Salary expense
600
Supplies expense
(c) 400
20,500
23,020
(continued) E 3-41
Req. 5
Journal
DATE
ACCOUNT TITLES
DEBIT
CREDIT
Adjusting Entries
(a) Aug.
31
Accounts Receivable …………………………….
1,800
Service Revenue ………………………………..
1,800
(b)
Unearned Service Revenue ……………………
Service Revenue ………………………………..
(c)
31
Supplies ……………………………………………
(d1)
31
Depreciation Expense – Equipment ……….
45
Accumulated Depreciation – Equip. …….
45
(d2)
31
Depreciation Expense – Furniture ………….
75
Accumulated Depreciation – Furn. ………
(e)
31
Salary Expense …………………………………….
Salary Payable …………………………………..
(continued) E 3-41
Req. 6
Barbara Miracle, Certified Public Accountant, P.C.
Income Statement
Month Ended August 31, 2016
Revenues:
Service revenue ………………………………..
$6,000
Expenses:
Rent expense ……………………………………
$600
Salary expense …………………………………
600
Supplies expense ……………………………..
400
Utilities expense ……………………………….
300
Total expenses ………………………………
Net income…………………………………………….
Barbara Miracle, Certified Public Accountant, P.C.
Statement of Retained Earnings
Month Ended August 31, 2016
Retained earnings, August 1, 2016 ………………..
$ 0
Add: Net income ………………………………………….
3,980
Subtotal
3,980
Less: Dividends declared ……………………………..
Retained earnings, August 31, 2016 ………………
(continued) E 3-41
Req. 6
Barbara Miracle, Certified Public Accountant, P.C.
Balance Sheet
August 31, 2016
ASSETS
LIABILITIES
Current assets:
Current liabilities:
Cash
$10,200
Accounts payable
$ 4,500
Accounts receivable
1,800
Salary payable
600
Supplies
400
Unearned service
Total current assets
12,400
Revenue
1,800
Plant assets:
Total current liabilities
6,900
Equipment $2,700
Less: accum.
STOCKHOLDERS’ EQUITY
depr. (45)
2,655
Common stock
Retained earnings
depr. (75)
4,425
Total liabilities and
Total assets
stockholders’ equity
(continued) E 3-41
Req. 7
Journal
DATE
ACCOUNT TITLES
DEBIT
CREDIT
Closing Entries
Aug.
31
Service Revenue ……………………………………..
6,000
Retained Earnings ……………………………….
6,000
31
Retained Earnings ……………………………………
2,020
Rent Expense ………………………………………
600
Utilities Expense ………………………………….
300
Salary Expense ……………………………………
600
Supplies Expense ………………………………..
400
31
Retained Earnings ……………………………………
1,400
Dividends ……………………………………………
1,400
(continued) E 3-41
Req. 8
Net working
capital
=
Total current assets –
current liabilities
=
$12,400 –
$6,900
=
$5,500
Current ratio
=
Total current assets
=
$12,400
=
1.80
Total current liabilities
$6,900
Debt ratio
Total liabilities
=
0.35
Quiz
Q3-42
a
Q3–43
d
Q3-44
b
Q3-45
a
Q3-46
d
Q3-47
d
Q3-48
c
Q3-49
d
Q3–50
b
($1,800 × 9/12 = $1,350)
Q3–51
c
($3,000 + $22,000 − $19,000 = revenue of $6,000)
Q3-52
b
Q3-53
b
Q3-54
d
Q3-55
d
Q3-56
b
Current ratio
=
$25,200 / $21,000
=
1.200
Debt ratio
=
$21,000 + $102,000
=
.614
$25,200 + $175,000
Q3-57
$4,745
($5,000 − $700 − $130 + $750 − $175)
Q3-58
d
Salary Payable
Problems
(20-30 min.) P 3-59A
Req. 1
Masters Consulting
Amount of Revenue (Expense) for October
Date
Cash Basis Accrual Basis
Oct.
1
Expense
$(3,900)
$ 0
4
Expense
(4,500)
0
5
Revenue
1,000
1,000
8
Expense
(500)
(500)
11
Revenue
0
3,200
19
0
0
24
Revenue
3,200
0
Expense
(1,900)
0
31
Expense
0
(1,300)
31
Revenue
0
31
Expense
Req. 2
Income (loss) before tax
$ (7,400)
$1,940
(continued) P 3-59A
Req. 3
The accrual-basis measure of net income is preferable because it accounts
for revenues and expenses when they occur, not when they are received or
paid in cash. For example, on October 11, the company earned $3,200 of
revenue and increased its wealth as a result. The accrual basis records this
(10-20 min.) P 3-60A
Journal
DATE
ACCOUNT TITLES
DEBIT
CREDIT
Dec.
31
a. Insurance Expense ………………………….
4,700*
Prepaid Insurance………………………..
4,700
To record insurance expense.
31
b. Salary Expense ($5,900 × 2/5) …………..
2,360
Salary Payable …………………………….
2,360
To accrue salary expense.
31
c. Interest Receivable ………………………….
500
Interest Revenue ………………………….
To accrue interest revenue.
31
d. Supplies Expense …………………………...
7,000**
Supplies ……………………………………..
7,000
To record supplies expense.
31
e. Unearned Service Revenue
($11,400 × 60%) ……………………………….
6,840
Service Revenue ………………………….
6,840
To record revenue collected in advance.
5,800
Office Furniture ………………………
To record depreciation expense.
(45-60 min.) P 3-61A
Req. 1
Spateness, Inc.
Trial Balance Worksheet
December 31, 2016
TRIAL BALANCE
ADJUSTMENTS
ADJUSTED TRIAL BALANCE
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
DEBIT
CREDIT
Cash
8,300
8,300
Accounts receivable
1,400
(a) 3,960
5,360
Prepaid rent
3,000
2,000
Supplies
(c) 1,880
Furniture
54,000
Accumulated depreciation
3,200
(d) 900**
4,100
Accounts payable
3,600
Salary payable
(e)12,000***
12,000
Common stock
13,000
13,000
Retained earnings
29,070
29,070
Dividends
3,900
3,900
Service revenue
27,400
(a) 3,960
31,360
Salary expense
3,000
(e)12,000***
15,000
Rent expense
(b) 1,000*
1,000
Utilities expense
Depreciation expense
(d) 900**
Supplies expense
(c) 1,880
(continued) P 3-61A
Req. 2
Spateness, Inc.
Income Statement
Month Ended December 31, 2016
Revenues:
Service revenue
$31,360
Expenses:
Salary expense
$15,000
Supplies expense
1,880
Rent expense
Depreciation expense, furniture
Utilities expense
Total expenses
Net income
Spateness, Inc.
Statement of Retained Earnings
Month Ended December 31, 2016
Retained earnings, December 1, 2016
$29,070
Add: Net income
12,110
Subtotal
41,180
Less: Dividends declared
Retained earnings, December 31, 2016
(continued) P 3-61A
Req. 2 (continued)
Spateness, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Current assets:
Current liabilities:
Cash
$ 8,300
Accounts payable
$ 3,600
Accounts receivable
5,360
Salary payable
12,000
Prepaid rent
2,000
Total current liabilities
15,600
Supplies
320
Total current assets
15,980
Common stock
deprec. (4,100)
49,900
Retained earnings
Total liabilities and
Total assets
(10-20 min.) P 3-62A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
June
30
Accounts Receivable ($6,810 − $6,000) …………….
810
Rental Revenue …………………………………………..
810
To accrue rental revenue.
30
Interest Receivable ($300 − $0) …………………………
Interest Revenue ($1,000 − $700) ………………….
To accrue interest revenue.
Supplies ($1,400 − $700) ………………………………
To record supplies expense.
30
Insurance Expense ($1,700 − $0) ………………………
1,700
Prepaid Insurance ($2,600 − $900) ………………..
1,700
To record insurance expense.
30
Depreciation Expense−Building ($1,600 − $0) ……
1,600
Accumulated Depreciation−Building
($9,500 − $7,900) ……………………………………..
1,600
To record depreciation expense.
Wages Payable ($840 − $0) …………………………..
840
To accrue wage expense.
Rental Revenue ($11,530 − $10,300 − $810) …..
420
To record revenue that was collected in advance.
(continued) P 3-62A
Req. 2
Total assets
=
$74,710 ($8,000 + $6,810 + $300 + $4,500 +
$700 + $900 + $63,000 − $9,500)
Total liabilities
=
$8,720 ($6,500 + $840 + $1,380)
$400 − $2,240 − $700 − $1,700)
(20-30 min.) P 3-63A
Req. 1
Nicholl Corporation
Income Statement
Year Ended October 31, 2016
Revenues:
Service revenue
$93,200
Expenses:
Salary expense
$40,500
Rent expense
10,400
Insurance expense
3,800
Interest expense
2,600
Supplies expense
2,500
Depreciation expense, equipment
Income before tax
Income tax expense
Net income
Nicholl Corporation
Statement of Retained Earnings
Year Ended October 31, 2016
Retained earnings, October 31, 2015
$ 2,900
Add: Net income
24,200
Subtotal
27,100
Less: Dividends declared
Retained earnings, October 31, 2016
(continued) P 3-63A
Req. 1 (continued)
Nicholl Corporation
Balance Sheet
October 31, 2016
ASSETS
LIABILITIES
Cash
$ 15,000
Accounts payable
$ 8,800
Accounts receivable
18,600
Interest payable
600
Supplies
2,500
Unearned service revenue
200
Prepaid rent
1,800
Income tax payable
2,500
Note payable
Equipment
$36,000
Total liabilities
Less: Accum.
deprec.
(4,700)
Common stock
Retained earnings
Total liabilities and
Total assets
$69,200
Req. 2
Debt ratio:
$30,100
=
0.43
$69,200
(20 min.) P 3-64A
Req. 1
Journal
DATE
ACCOUNT TITLES
DEBIT
CREDIT
Closing Entries
Jan.
31
Service Revenue …………………………..…..
95,000
Retained Earnings …………………………
95,000
31
Retained Earnings …………………………….
44,400
Advertising Expense ……………………..
11,300
Depreciation Expense−Equipment …
1,900
Interest Expense …………………………..
Salary Expense …………………………….
Supplies Expense …………………………
4,600
31
Retained Earnings …………………………….
Dividends ……………………………………..
Req. 2
Retained Earnings
Jan. 31, 2016 Expenses
44,400
Jan. 31, 2015 Bal.
13,300
Jan. 31, 2016 Dividends
12,500
Jan. 31, 2016 Revenues
95,000
Jan. 31, 2016 Bal.
51,400
Net income = $50,600 ($95,000 − $44,400)
Req. 3
(25-40 min.) P 3-65A
Req. 1
Granger Services, Inc.
Balance Sheet
January 31, 2016
ASSETS
Current assets:
Cash
$ 17,400
Accounts receivable
17,000
Prepaid expenses
5,900
Supplies
Total current assets
Plant assets:
Equipment
Less: Accumulated depreciation
35,500
Other assets, long-term
Total assets
$93,000
LIABILITIES
Current liabilities:
Current portion of note payable
$ 1,900
Accounts payable
12,200
Salary payable
3,400
Unearned service revenue
2,800
Total current liabilities
20,300
Note payable, long-term
16,000
Total liabilities
36,300
Common stock
5,300
Retained earnings