Financial Accounting, 9/e 3-21
E3–11.
STACEY’S PIANO REBUILDING COMPANY
Income Statement (unadjusted)
For the Month Ended January 31
Operating Revenues:
Rebuilding fees revenue
$ 19,000
Total operating revenues
19,000
Operating Expenses:
Wages expense
Utilities expense
Total operating expenses
Operating Income
Other Item:
Rent revenue
Net Income
E3–12.
Transaction
O, I, or F Activity (or No
Effect) on Statement of
Cash Flows
Direction and Amount
of Effect
a.
O
+19,000
b.
O
+600
c.
O
+850
d.
O
e.
g.
O
h.
O
k.
O
Financial Accounting, 9/e 3-23
E3–13.
Req. 1 and 2
Cash
Short-term Investments
Accounts Receivable
Beg. 1,900
(a) 9,500
160 (c)
Beg. 410
(j) 1,230
Beg. 3,570
(g) 1,620
2,980 (h)
Accumulated
Depreciation
Accounts
Payable
Unearned
Revenue
480 Beg.
210 Beg.
470 (e)
1,320 Beg.
890 (d)
480
680
2,210
Short-term Note Payable
1,780
1,260
10 (b)
1,190 (b)
2,010 Beg.
2,010
Consulting Fees
Revenue
Interest
Revenue
0 Beg.
9,500 (a)
1,620 (g)
0 Beg.
10 (k)
11,120
10
2,030 (j)
E3–13. (continued)
Req. 3
Net income using the accrual basis of accounting:
Revenues
$11,130
($11,120 + $10)
– Expenses
8,010
($6,210 + $1,800)
Net Income
(accrual basis)
$ 3,120
$ 60
3,120 net income
Req. 4
On a pure cash basis, anything that affects Cash is
included in determining net income on a cash basis:
Net income using the cash basis of accounting:
Cash receipts
$14,580
– Cash disbursements
9,290
Net Income
(cash basis)
$ 5,290
Cash
Beg. 1,900
(a) 9,500
(b) 1,200
(d) 890
(h) 2,980
(k) 10
160 (c)
1,800 (f)
5,300 (i)
2,030 (j)
7,190
Financial Accounting, 9/e 3-25
E3–14.
Conover, Inc.
Income Statement (unadjusted)
For the Year Ended December 31
Operating Revenues:
Consulting fees revenue
$ 11,120
Total operating revenues
11,120
Operating Expenses:
Salaries expense
Utilities expense
Total operating expenses
Operating Income
Other Item:
Interest revenue
Net Income
E3–15.
Req. 1 and 2
Cash
Accounts Receivable
Supplies
(f) 11,900
64,427
1,200
Beg. 0
(a)160,000
72,000 (b)
10,830 (d)
Beg. 0
(a) 2,000
Beg. 0
(a) 1,200
Equipment
Building
Accounts Payable
Beg. 0
(a) 18,300
(k) 50,000
Beg. 0
(b)360,000
(k) 20,000
0 Beg.
420 (g)
68,300
380,000
420
Mortgage Payable
0 Beg.
50,000 (c)
0 Beg.
50,000
0 Beg.
1,000 (a)
0 Beg.
(j) 600
0 Beg.
1,000
Food Sales Revenue
Catering Sales
Revenue
0 Beg.
11,900 (f)
0 Beg.
4,200 (e)
11,900
4,200
Supplies Expense
Utilities Expense
Wages Expense
Beg. 0
(d) 10,830
Beg. 0
(g) 420
Beg. 0
(i) 6,280
10,830
420
6,280
Beg. 0
(h) 363
Financial Accounting, 9/e 3-27
E3–16.
Req. 1
TRAVELING GOURMET, INC.
Income Statement (unadjusted)
For the Month Ended March 31
Revenues:
Food sales revenue
Catering sales revenue
$ 11,900
4,200
Req. 2
Transaction
O, I, or F Activity (or No
Effect) on Statement of
Cash Flows
Direction and Amount
of Effect
a.
F
+160,000
b.
I
-72,000
c.
F
+50,000
d.
-10,830
e.
+11,900
g.
h.
F
k.
I
-70,000
Req. 3
The company generated a small loss of 1,793 during its first month of operations, before
making any adjusting entries. The adjusting entries for use of the building and
equipment and interest expense on the borrowing will increase the loss. Cash flows
E3–17.
Req. 1
Transaction
Brief Explanation
a
Issued 10,000 shares of common stock to shareholders for $82,000
cash.
b
Purchased store fixtures for $15,400 cash.
c
Purchased $24,800 of inventory, paying $6,200 cash and the balance
on account.
e
Used $1,480 of utilities during the month, not yet paid.
f
Paid $1,300 in wages to employees.
g
Paid $2,480 in cash for rent, $620 related to the current month and
$1,860 related to future months.
h
Received $3,960 cash from customers, $1,450 related to current sales
Req. 2
Kate’s Kite Company
Income Statement
For the Month Ended April 30
Sales Revenue
Expenses:
Cost of sales
Wages expense
$ 15,450
7,000
1,300
Financial Accounting, 9/e 3-29
E3–17. (continued)
Kate’s Kite Company
Balance Sheet
At April 30
Assets
Liabilities and Shareholders’ Equity
Current Assets:
Current Liabilities:
Cash
$70,400
Accounts payable
$20,080
Accounts receivable
4,180
Unearned revenue
2,510
E3–18.
Req. 1
Assets
=
Liabilities
+
Stockholders’ Equity
$ 3,200
$ 2,400
$ 800
8,000
5,600
4,000
6,400
1,600
3,200
$17,600
$9,600
$ 8,000
Inventory
Prepaid expenses
1,860
Common stock
Store fixtures
Additional paid-in capital
72,000
Retained earnings
Total Assets
E3–18. (continued)
Req. 2
Cash
Accounts
Receivable
Long-Term
Investments
800 (f)
1,600 (e)
1,600
7,200
1,600
Beg. 3,200
(a) 48,000
(b) 5,600
57,200 (d)
480 (g)
Beg. 8,000
(a) 10,000
5,600 (b)
Beg. 6,400
Common Stock
Additional
Paid-in Capital
Retained Earnings
800 Beg.
4,000 Beg.
(g) 480
3,200 Beg.
800
4,000
2,720
Consulting Fee
Revenue
Interest
Revenue
0 Beg.
0 Beg.
58,000 (a)
400 (c)
58,000
400
Travel Expense
(d) 36,000
(d) 12,000
Financial Accounting, 9/e 3-31
E3–18. (continued)
Req. 3
Revenues
$58,400
($58,000 from sales + $400 on investments)
– Expenses
56,400
($36,000 + $12,000 + $800 + $7,600)
Net Income
$ 2,000
Req. 4
Net Profit Margin
=
Net Income
=
$2,000
=
0.0345
Ratio
Sales (Operating) Revenues
$58,000*
or 3.45%
$ 800
$ 9,520
E3–19.
Req. 1
Accounts receivable increases with customer sales on account and decreases with
cash payments received from customers.
Req. 2
Trade Accounts
Receivable
Prepaid
Expenses
Unearned
Subscriptions
1/1 717
1/1 95
224 1/1
5,240
5,264
203
191
2,683
2,690
12/31 693
12/31 107
231 12/31
Financial Accounting, 9/e 3-33
E3–20.
ITEM
LOCATION
1. Description of a company’s
primary business(es).
Letter to shareholders;
Management’s Discussion and Analysis;
Summary of significant accounting policies
note
5. Description of a company’s
revenue recognition policy.
Summary of significant accounting policies
note
6. The inventory sold during the
year.
Income statement (Cost of Goods Sold)
7. The data needed to compute the
net profit margin ratio.
Income statement
Notes; Statement of cash flows
Balance sheet
PROBLEMS
P3-1.
Transactions
Debit
Credit
a.
Example: Purchased equipment for use in the business;
paid one-third cash and signed a note payable for the balance.
5
1, 8
b.
Paid cash for salaries and wages earned by employees this
period.
15
1
Paid cash on accounts payable for expenses
incurred last period.
7
1
d.
Purchased supplies to be used later; paid cash.
3
1
e.
Performed services this period on credit.
2
14
Collected cash on accounts receivable for services
performed last period.
1
2
g.
Issued stock to new investors.
1
11, 12
h.
Paid operating expenses incurred this period.
15
1
i.
Incurred operating expenses this period to be paid
next period.
15
7
Purchased a patent (an intangible asset); paid cash.
6
1
Collected cash for services performed this period.
1
14
Used some of the supplies on hand for operations.
15
3
Paid three-fourths of the income tax expense for the year;
the balance will be paid next year.
16
n.
Made a payment on the equipment note in (a); the payment
was part principal and part interest expense.
1
o.
On the last day of the current period, paid cash for an
insurance policy covering the next two years.
4
1
Financial Accounting, 9/e 3-35
P3–2.
a.
Cash (+A) ………………………………………………………………….
40,000
Common stock (+SE) ……………………………………………..
20
Additional paid-in capital (+SE) ……………………………….
39,980
e.
Furniture and fixtures (or Equipment) (+A) ……………………..
15,000
Accounts payable (+L) …………………………………………..
12,000
Cash (−A) …………………………………………………………….
3,000
f.
Inventory (+A) …………………………………………………………….
2,800
Cash (−A) …………………………………………………………….
2,800
Cash (−A) …………………………………………………………….
h.
Cash (+A) ………………………………………………………………….
Accounts receivable (+A) …………………………………………….
Sales revenue (+R, +SE) ……………………………………….
Inventory (−A) ………………………………………………………
Cash (−A) …………………………………………………………….
Cash (+A) ………………………………………………………………….
b.
Cash (+A) ………………………………………………………………….
60,000
Note payable (long-term) (+L) ………………………………….
60,000
Prepaid rent (+A) ………………………………………………………..
Cash (−A) ……………………………………………………………..
d.
Prepaid insurance (+A) ………………………………………………..
2,400
Cash (−A) …………………………………………………………….
2,400
P3–3.
Req. 1
Req. 2
Balance Sheet
Income Statement
Stmt of
Cash
Flows
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
+ / –
+
NE
NE
NE
NE
O
b.
+ / –
NE
NE
NE
NE
NE
I
c.
+
NE
+
O
e.
NE
NE
+
NE
NE
NE
NE
g.
NE
+
NE
O
h.
NE
NE
+
O
* Cash is not affected in this transaction.
P3–4.
Req. 1 and 2
Cash
Accounts Receivable
Supplies
400 (l)
225
1,560
Beg. 0
(a) 30,200
(e) 11,000
5,250 (b)
1,560 (d)
Beg. 0
(h) 825
600 (k)
Beg. 0
(d) 1,560
Inventory
Prepaid Expenses
Equipment
Beg. 0
(c) 6,000
1,600 (h)
600 (m)
Beg. 0
(b) 5,250
Beg. 0
(f) 2,750
3,800
5,250
2,750
Accounts Payable
6,000 (c)
40 (a)
40
Sales Revenue
Cost of Goods Sold
Repair Expense
0 Beg.
3,500 (h)
1,200 (m)
Beg. 0
(h) 1,600
(m) 600
Beg. 0
(l) 400
4,700
2,200
400
Wage Expense
1,300
P3–4. (continued)
Req. 3
KAYLEE’S SWEETS
Income Statement (unadjusted)
For the Month Ended February 28
Revenues:
Sales revenue
$ 4,700
Req. 4
Date: (today’s date)
To: Kaylee James
From: (your name)
After analyzing the effects of transactions for Kaylee’s Sweets for February, the
company has realized a profit of $400. This is 8.5% of sales revenue. However, this is
Req. 5
Net Income
÷
Net Sales Revenue
=
Net Profit Margin Ratio
2018
$22,000
$93,500
0.235 or 23.5%
2017
11,000
82,500
0.133 or 13.3%
2016
4,400
55,000
0.080 or 8.0%
Financial Accounting, 9/e 3-39
P3–5.
Transaction
O, I, or F Activity (or No
Effect) on Statement of
Cash Flows
Direction and Amount
of Effect
a.
F
+30,200
b.
O
-5,250
c.
NE
NE
d.
O
-1,560
e.
F
+11,000
g.
O
O
O
-1,300
k.
O
O
O
P3–6.
Req. 1 and 2
Cash
Receivables
Spare Parts, Supplies,
and Fuel
Beg. 2,328
(a) 17,600
(e) 24,285
(g) 16
13,864 (c)
3,864 (d)
350 (f)
15,276 (h)
8,564 (i)
784 (j)
Beg. 4,581
(a) 21,704
24,285 (e)
Beg. 437
1,527
2,000
437
Beg. 329
4,057
610
18,977
Other Noncurrent
Assets
Accounts
Payable
Accrued Expenses
Payable
Beg. 3,557
(j) 784
1,702 Beg.
1,894 Beg.
3,557
918
1,894
1,286 Beg.
1,667 Beg.
1,286
4,751
5,616
Additional Paid-in
Capital
32 Beg.
2 (g)
2,472 Beg.
14 (g)
12,716 Beg.
2,486
12,716
Delivery Service
Revenue
Aircraft Rental
Expense
Maintenance and
Repair Expense
0 Beg.
39,304 (a)
Beg. 0
(c) 10,136
Beg. 0
(d) 3,864
39,304
10,136
3,864
Fuel Expense