Financial Accounting, 10/e 4-21
E4–9.
Req. 1
a.
Accrued revenue
b.
Deferred expense
Accrued expense
d.
Deferred revenue
e.
Deferred expense
Deferred expense
g.
Accrued expense
Req. 2 Computations
a.
Accounts receivable (+A) …………………………..
3,300
Given
Service revenue (+R, +SE) …………………………..
3,300
Advertising expense (+E, −SE) …………………………..
$2,200 x 9/12 =
Prepaid advertising (−A) …………………………..
$1,650 used
Interest expense (+E, −SE) …………………………..
$300,000 x 0.11
incurred
d.
Unearned storage revenue (−L) …………………………..
750
$4,500 x 1/6 =
Storage revenue (+R, +SE) ………………………….
750
$750 earned
e.
Depreciation expense (+E, −SE) …………………………..
18,000
Given
Accumulated depreciation (+XA, −A)
18,000
Supplies expense (+E, −SE) …………………………..
48,500
Supplies (−A) ……………………………………………..
48,500
= $48,500 used
g.
Wages expense (+E, −SE) …………………………..
Given
Wages payable (+L) …………………………..
E4–10.
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
(a)
NE
+2,700
–2,700
NE
+2,700
–2,700
(b)
NE
NE
(c)
+1,120
(d)
NE
NE
+12,100
(e)
NE
(g)
E4–11
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
(a)
+3,300
NE
+3,300
+3,300
NE
+3,300
(b)
–1,650
(c)
+5,500
NE
+5,500
(d)
NE
(e)
(g)
NE
+5,600
–5,600
+5,600
Financial Accounting, 10/e 4-23
E4–12.
Debit
Credit
Independent Situations
Code
Amount
Code
Amount
a.
Accrued wages, unrecorded and unpaid at
year-end, $400 (example).
N
400
G
400
b.
Service revenue earned but not yet
collected at year-end, $600.
C
600
L
600
Dividends declared and paid during the
year, $900.
K
900
A
900
d.
Office supplies on hand during the year,
$400; supplies on hand at year-end, $160.
240
B
240
e.
Service revenue collected in advance and
A
800
800
Depreciation expense for the year, $1,000.
g.
At year-end, interest on note payable not
yet recorded or paid, $220.
P
220
220
account, $56,000. Prepare the closing
entry at year-end.
account, $460. Prepare the closing entry
at year-end.
E4–13.
Selected Balance Sheet Accounts at December 31
Amounts to
Be Reported
Assets:
Equipment (recorded at cost per cost principle)
$25,000
Accumulated depreciation (for one year, as given)
Office supplies (on hand, as given)
Selected Income Statement Accounts for the Year Ended December 31
Expenses:
Depreciation expense (for one year, as given)
$ 2,500
E4–14.
Balance Sheet
Income Statement
Date
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
Note 1:
April 1 (current year)
+30,000/
–30,000
NE
NE
NE
NE
NE
+33,000/
–32,250
December 31 (current
January 31 (next
Note 2:
August 1 (current
+ 30,000
+ 30,000
NE
NE
NE
NE
(a) $30,000 principal x .10 annual interest rate x 9/12 of a year = $2,250
(b) Additional interest revenue next year: $30,000 x .10 x 3/12 = $750. Cash
received was $33,000 ($30,000 principal + $3,000 interest for 12 months);
receivables decreased by the $30,000 note receivable and $2,250 interest
Financial Accounting, 10/e 4-25
E4–15.
Req. 1 (a) Cash paid on accrued income taxes payable.
(b) Accrual of additional income tax expense.
Req. 2 Computations (dollars in millions):
(a)
Beg. Bal.
+
income tax expense
–
cash paid
=
End. Bal.
$20
+
406
–
?
=
$22
?
=
$404 paid
Beg. Bal.
+
–
cash paid
=
+
–
?
=
?
=
$418 paid
Beg. Bal.
+
–
cash paid
=
$35
+
–
=
=
E4–16.
Req. 1 Adjusting entries that were or should have been made at December 31:
(a) No entry was made. Entry that should have been made:
Rent receivable (+A) …………………………………………… 1,400
Rent revenue (+R, +SE) ……………………………. 1,400
Entry that should have been made:
Interest expense (+E, −SE) …………………………..…….. 255
Interest payable (+L) …………………………………. 255
($17,000 x .09 x 2/12 months)
Req. 2
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
(a)
U 1,400
NE
U 1,400
U 1,400
NE
U 1,400
(b)
NE
NE
U 15,000
(c)
O 1,500
U 1,500
U 1,500
NE
U 1,500
(d)
O 1,275
U 1,275
NE
O 1,275
U 1,275
(e)
NE
O 650
NE
Financial Accounting, 10/e 4-27
E4–17.
Items
Net
Income
Total
Assets
Total
Liabilities
Stockholders’
Equity
Balances reported
$65,000
$185,000
$90,000
$95,000
Additional adjustments:
a. Wages
(37,000)
37,000
(37,000)
c. Rent revenue
Adjusted balances
123,500
d. Income taxes
Correct balances
Computations:
a. Given, $37,000 accrued and unpaid.
E4–18.
Req. 1
a.
Rent receivable (+A) ……………………………..
2,500
Revenues (rent) (+R, +SE) ………………
2,500
Income taxes payable (+L) ………………
5,100
Req. 2
As
Prepared
Effects of
Adjusting
Entries
Corrected
Amounts
Income statement:
Revenues
$97,000
a
$2,500
$99,500
Expenses
b
(4,500)
Income tax expense
c
(5,100)
Net income
$24,000
(7,100)
Balance Sheet:
Assets
Cash
$20,000
$20,000
Accounts receivable
22,000
22,000
Rent receivable
a
2,500
Equipment
50,000
50,000
Accumulated depreciation
b
(4,500)
$82,000
(2,000)
$80,000
Liabilities
Accounts payable
$10,000
$10,000
Income taxes payable
c
5,100
5,100
Stockholders’ Equity
Common stock
10,000
10,000
Additional paid-in capital
30,000
30,000
Retained earnings
32,000
24,900
$82,000
$80,000
Financial Accounting, 10/e 4-29
E4–19.
Req. 1
a.
Salaries and wages expense (+E, −SE) …………….
730
Salaries and wages payable (+L) ……………….
730
b.
Utilities expense (+E, −SE) ………………………………
440
Utilities payable (+L) …………………………………
440
c.
Depreciation expense (+E, −SE) ………………………
Accumulated depreciation (+XA, −A) …………..
d.
Interest expense (+E, −SE) ……………………………..
Interest payable (+L) ………………………………..
e.
Maintenance expense (+E, −SE) ………………………
1,100
Maintenance supplies (−A) ………………………..
1,100
will not be earned until January (next year).
g.
Income tax expense (+E, −SE) …………………………
5,800
E4–19. (continued)
Req. 2
JAY, INC.
Income Statement
For the Current Year Ended December 31
Operating Revenue:
Rent revenue
$109,000
Operating Expenses:
Salaries and wages ($26,500 + $730)
27,230
Maintenance expense ($12,000 + $1,100)
Rent expense
Utilities expense ($4,300 + $440)
Gas and oil expense
Depreciation expense
Miscellaneous expenses
Total expenses
81,870
Operating Income
27,130
Other Item:
Interest expense ($15,000 x .08 x 3/12)
300
Pretax income
26,830
Income tax expense
Net income
Earnings per share: $21,030 ÷ 7,000 shares
Req. 3
The total asset turnover ratio indicates that, for every $1 of assets, Jay earns $1.77 in
rental revenue. This ratio is lower than the industry average total asset turnover of 2.31,
implying that Jay is less effective at utilizing assets to generate revenue than the
average company in the industry.
Financial Accounting, 10/e 4-31
E4–20.
Req. 1
(a) Insurance expense (+E, −SE) ……………………………… 6
Prepaid insurance (−A) ……………………………… 6
Req. 2
GREEN VALLEY COMPANY
Trial Balance
December 31
(in thousands of dollars)
Unadjusted
Adjustments
Adjusted
Account Titles
Debit
Credit
Ref.
Debit
Credit
Debit
Credit
Cash
20
20
Accounts receivable
13
13
Prepaid insurance
8
a
6
2
Machinery
85
85
Accumulated depreciation
c
Accounts payable
11
Wages payable
b
4
Income taxes payable
d
7
Common stock
4
Additional paid-in capital
67
Retained earnings
6
6
Revenues (not detailed)
82
d
E4–21.
GREEN VALLEY COMPANY
Income Statement
For the Current Year Ended December 31
(in thousands of dollars)
Revenues (not detailed)
$82
Expenses ($32 + $6 + $9 + $4)
Pretax income
Income tax expense
Net income
$24
$12
GREEN VALLEY COMPANY
Statement of Stockholders’ Equity
For the Current Year Ended December 31
(in thousands of dollars)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
Stockholders’
Equity
Beginning balances
$ 0
$ 0
$ 0
$ 0
Stock issuance
Net income
Dividends declared
$ 4
$ 67
$ 18
$ 89
Financial Accounting, 10/e 4-33
E4–21. (continued)
GREEN VALLEY COMPANY
Balance Sheet
At December 31
(in thousands of dollars)
Assets
Liabilities and Stockholders’ Equity
Current Assets:
Current Liabilities:
Cash
$ 20
Accounts payable
$ 11
Accounts receivable
13
Wages payable
4
Prepaid insurance ($8 – $6)
Income taxes payable
Total current assets
Total current liabilities
Machinery
85
Stockholders’ Equity:
Net machinery
76
Additional paid-in capital
67
Retained earnings
Total stockholders’ equity
89
Total assets
stockholders’ equity
E4–22.
Req. 1
The purposes for “closing the books” at the end of the accounting period are to:
Req. 2
Revenues (−R) ………………………………………………….. 82
P4–1.
Req. 1
Papa John’s International Inc.
Adjusted Trial Balance
At the End of a Recent Year
(in millions of dollars)
Debit
Credit
Cash
22
Short-term notes receivable
4
Accounts receivable
65
Inventories
Income tax receivable
4
Prepaid expenses and other current assets
Land
Buildings and leasehold improvements
Equipment
Accumulated depreciation
Long-term notes receivable
Intangible assets
Other assets
Accounts payable
32
Accrued expenses payable
68
Unearned revenue
6
Income taxes payable
11
Long-term debt
470
Other long-term liabilities
73
1
Additional paid-in capital
Treasury stock
Retained earnings
Restaurant and franchise sales revenue
Cost of sales
Salaries and benefits expense
Rent and utilities expense
Advertising expense
General and administrative expenses
Depreciation expense
Loss on impairment of assets
2
Interest revenue
1
Interest expense
Income tax expense
Financial Accounting, 10/e 4-35
P4–1. (cont.)
Req. 2
Since debits are supposed to equal credits in a trial balance, the balance in Retained
P4–2.
Req. 1
a.
Deferred revenue
e.
Deferred expense
b.
Accrued expense
Accrued revenue
Deferred expense
g.
Accrued expense
d.
Deferred revenue
h.
Accrued expense
Req. 2
a.
Unearned rent revenue (−L) …………………………………..
6,400
Rent revenue (+R, +SE) …………………………………
6,400
($9,600 ÷ 6 months = $1,600 per month x 4 months)
b.
Interest expense (+E, −SE) ……………………………………
Interest payable (+L) ……………………………………..
540
($18,000 x .12 x 3/12)
Depreciation expense (+E, −SE) …………………………….
3,500
Accumulated depreciation (+XA, −A) ………………
d.
Unearned service revenue (−L) ………………………………
500
Service revenue (+R, +SE) …………………………….
500
($3,000 x 2/12)
e.
Insurance expense (+E, −SE) ………………………………..
1,400
Prepaid insurance (−A) ………………………………….
($8,400 ÷ 12 months = $700 per month x 2 months of coverage)
Accounts receivable (+A) ………………………………………
Service revenue (+R, +SE) …………………………….
g.
Wage expense (+E, −SE) ………………………………………
Wages payable (+L) ………………………………………
h.
Property tax expense (+E, −SE) ……………………………..
500
Property tax payable (+L) ……………………………….
500
P4–3.
Req. 1
a.
Deferred expense
e.
Accrued revenue
b.
Deferred expense
Deferred expense
Accrued expense
g.
Accrued expense
d.
Accrued expense
h.
Accrued expense
Req. 2
a.
Depreciation expense (+E, −SE) …………………………….
3,800
Accumulated depreciation (+XA, −A) ………………
3,800
b.
Supplies expense (+E, −SE) ………………………………….
1,220
Supplies (−A) ………………………………………………
1,220
(Beg. Inventory of $400 + Purchases $1,000 – Ending Inventory $180)
Repairs expense (+E, −SE) ……………………………………
Accounts payable (+L) …………………………………
Property tax expense (+E, −SE) ……………………………..
1,900
e.
Accounts receivable (+A) ………………………………………
4,000
Service revenue (+R, +SE) …………………………..
4,000
f.
Insurance expense (+E, −SE) ………………………………..
150
Prepaid insurance (−A)………………………………..
150
($900 ÷ 36 months x 6 months of coverage)
g.
Interest expense (+E, −SE) ……………………………………
750
Interest payable (+L) ……………………………………..
($25,000 x .12 x 3/12)
Income tax expense (+E, −SE) ………………………………
Income tax payable (+L) …………………………………
5,895
Income tax expense $ 5,895
P4–4.
Req. 1
a.
Deferred revenue
e.
Deferred expense
b.
Accrued expense
Accrued revenue
c.
Deferred expense
g.
Accrued expense
d.
Deferred revenue
h.
Accrued expense
Req. 2
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
NE
–6,400
+6,400
+6,400
NE
+6,400
b.
NE
d.
NE
NE
e.
+4,000
+4,000
NE
g.
NE
+14,000
h.
NE
Computations:
a.
$9,600 ÷ 6 months = $1,600 per month x 4 months = $6,400 earned
b.
$18,000 principal x .12 x 3/12 = $540 interest incurred
c.
Amount is given.
e.
$8,400 ÷ 12 months = $700 per month x 2 months of coverage = $1,400 incurred
Amount is given.
g.
Amount is given.
Financial Accounting, 10/e 4-39
P4–5.
Req. 1
Req. 2
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
− 3,800
NE
− 3,800
NE
+ 3,800
− 3,800
b.
− 1,220
NE
− 1,220
NE
+ 1,220
– 1,220
+ 2,600
− 2,600
NE
+ 2,600
d.
+ 1,900
− 1,900
NE
+ 1,900
− 1,900
NE
NE
g.
NE
h.
− 5,895
NE
Computations:
a.
Amount is given.
b.
Beg. inventory, $400 + Purchases, $1,000 – Ending inventory, $180 = $1,220 used
c.
Amount is given.
d.
Amount is given.
e.
Amount is given.
$900 x 6/36 = $150 used
g.
P4–6.
Req. 1
December 31 Adjusting Entries
(1)
Accounts receivable (+A) …………………………………..
1,820
(b)
Service revenue (+R, +SE) ………………………
1,820
(i)
To record service revenue earned, but not collected.
To record insurance expired as an expense.
To record depreciation expense.
Income taxes payable (+L) ……………………….
(f)
To record income taxes for the current year.
Req. 2
Amounts before
Adjusting Entries
Amounts after
Adjusting Entries
Revenues:
Service revenue
$64,400
$66,220
Expenses:
Salary expense
55,470
55,470
Depreciation expense
Insurance expense
Income tax expense
1,155
Net income (loss)
Req. 3
Earnings per share = $3,465 net income 3,000 shares = $1.16 per share