Problem 4-3A (Continued)
3. Multiple-step income statement
VALLEY COMPANY
Income Statement
For Year Ended August 31
Sales ………………………………………………………….. $225,600
Less: Sales discounts ………………………………… $ 2,250
Sales returns and allowances …………… 12,000 14,250
Net sales ……………………………………………………. 211,350
Cost of goods sold * …………………………………… 74,500
Gross profit ……………………………………………….. 136,850
Expenses
Selling expenses
Sales salaries expense ……………………………. 32,000
Rent expense—Selling space ………………….. 8,000
Store supplies expense …………………………... 1,500
Advertising expense ……………………………….. 13,000
Total selling expenses ……………………………. 54,500
*Cost of goods sold (alternative computation):
Beginning Merchandise inventory ………………………………… $ 25,400
Total cost of merchandise purchased (from part 2) ………. 90,100
Merchandise available for sale……………………………………… 115,500
Ending Merchandise inventory …………………………………….. 41,000
Cost of goods sold ………………………………………………………. $ 74,500
Problem 4-3A (Concluded)
4. Single-step income statement
VALLEY COMPANY
Income Statement
For Year Ended August 31
Net sales ………………………………………………………… $211,350
Expenses
Cost of goods sold ……………………………………….. $74,500
Selling expenses ………………………………………….. 54,500
Problem 4-4A (30 minutes)
Closing entries
Aug. 31 Sales ……………………………………………………………. 225,600
Income Summary …………………………………… 225,600
Close temporary accounts with credit balances.
Aug. 31 Income Summary …………………………………………. 175,750
Sales Discounts …………………………………….. 2,250
Sales Returns and Allowances ……………….. 12,000
Cost of Goods Sold ……………………………….. 74,500
Sales Salaries Expense ………………………….. 32,000
Rent Expense—Selling Space ………………… 8,000
Aug. 31 Income Summary …………………………………………. 49,850
Retained Earnings …………………………………. 49,850
Close Income Summary account.
Aug. 31 Retained Earnings ………………………………………… 8,000
Dividends ………………………………………………. 8,000
Close dividends account.
Problem 4-5A (60 minutes)
Part 1
Adjustment (a)
Jan 31 Store Supplies Expense …………………………….. 4,050
Store Supplies …………………………………….. 4,050
Record store supplies expense
($5,800 – $1,750).
Adjustment (b)
Jan 31 Insurance Expense …………………………………….. 1,400
Prepaid Insurance ……………………………….. 1,400
Record expired insurance.
Problem 4-5A (Continued)
Part 2 Multiple-step income statement
NELSON COMPANY
Income Statement
For Year Ended January 31
Sales ………………………………………………………………. $111,950
Less: Sales discounts …………………………………….. $ 2,000
Sales returns and allowances ………………… 2,200 4,200
Net sales …………………………………………………………. 107,750
Cost of goods sold* ………………………………………… 40,000
Gross profit …………………………………………………….. 67,750
Expenses
Selling expenses
Depreciation expense—Store equipment ……….. 1,525
Sales salaries expense ………………………………….. 17,500
Rent expense—Selling space ………………………… 7,500
Store supplies expense …………………………………. 4,050
Advertising expense …………………………………….. 9,800
Total selling expenses …………………………………… 40,375
Problem 4-5A (Concluded)
Part 3 Single–step income statement
NELSON COMPANY
Income Statement
For Year Ended January 31
Net sales ………………………………………………………. $107,750
Expenses
Cost of goods sold …………………………………… $40,000
Selling expenses ……………………………………… 40,375*
General and administrative expense …………. 26,400*
Total expenses ………………………………………… 106,775
Net income …………………………………………………… $ 975
*From Part 2
Part 4
Current assets
Cash …………………………………………………………………..
$ 1,000
Merchandise inventory ………………………………………..
10,900
Store supplies …………………………………………………….
1,750
Prepaid insurance ……………………………………………….
1,000*
Total current assets …………………………………………….
$ 14,650
Current liabilities ……………………………………………………
$ 10,000
Current ratio ($14,650 / $10,000) ………………………………….
1.47
*$2,400 – $1,400 = $1,000
$ 1,000
Current liabilities ……………………………………………………
$ 10,000
Cost of Goods Sold ………………………………………………..
Problem 4-6AD ONLINE APPENDIX (50 minutes)
NELSON COMPANY
Work Sheet
For Year Ended January 31
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash ……………………………………
1,000
1,000
1,000
Merchandise inventory ………..
12,500
(d)
1,600
10,900
10,900
Store supplies……………………..
5,800
(a)
4,050
1,750
1,750
Prepaid insurance ……………….
2,400
(b)
1,400
1,000
1,000
Store equipment ………………….
42,900
42,900
42,900
Accum. depreciation—Store eq ….
15,250
(c)
1,525
16,775
16,775
Accounts payable ……………….
10,000
10,000
10,000
Common stock ……………………
5,000
5,000
5,000
Retained earnings ……………….
27,000
27,000
27,000
Dividends …………………………...
2,200
2,200
2,200
Sales …………………………………..
111,950
111,950
111,950
Sales discounts …………………..
2,000
2,000
2,000
Sales returns & allowances …
2,200
2,200
2,200
Cost of goods sold ………………
38,400
(d)
1,600
40,000
40,000
Depreciation expense—Store eq ..
0
(c)
1,525
1,525
1,525
Office salaries expense ……….
Insurance expense ………………
0
(b)
1,400
1,400
1,400
Rent expense—Selling Space …
Store supplies expense ……….
0
(a)
4,050
4,050
4,050
Advertising expense ……………
______
______
______
______
______
Totals ………………………………….
8,575
8,575
110,975
59,750
58,775
Problem 4-1B (40 minutes)—Perpetual & Gross Method
May 2 Merchandise Inventory ………………………………. 10,000
Accounts Payable—Havel ……………………. 10,000
Purchased goods, terms 1/15, n/30.
4 Accounts Receivable—Rath ……………………….. 11,000
Sales …………………………………………………… 11,000
Sold goods, terms 2/10, n/60.
9 Cash ………………………………………………………….. 2,500
Sales …………………………………………………… 2,500
Sold goods for cash.
9 Cost of Goods Sold ……………………………………. 2,000
Merchandise Inventory ………………………… 2,000
Record cost of May 9 sale.
10 Merchandise Inventory ………………………………. 3,650
Accounts Payable—Duke ……………………. 3,650
Purchased goods, terms 2/15, n/60.
Problem 4-1B (Concluded)
May 17 Accounts Payable—Havel …………………………. 10,000
Merchandise Inventory* ………………………. 100
Cash …………………………………………………… 9,900
Paid for goods within discount period.
*$10,000 x 1%
22 Sales Returns and Allowances ………………….. 300
Accounts Receivable—Tamer ……………… 300
Issued credit for allowances on goods sold.
25 Accounts Payable—Duke ………………………….. 3,000
Merchandise Inventory* ………………………. 60
Cash …………………………………………………… 2,940
Paid for goods within discount period.
*($3,650 – $650) x 2%
Problem 4-2B (40 minutes)—Perpetual and Gross Method
July 3 Merchandise Inventory ……………………………… 15,000
Accounts Payable—OLB …………………….. 15,000
Purchased goods, terms 1/10, n/30.
10 Merchandise Inventory ……………………………… 14,200
Accounts Payable—Rupert …………………. 14,200
Purchased goods, terms 1/10, n/45.
11 Delivery Expense ………………………………………. 300
Cash ………………………………………………….. 300
Paid shipping charges on July 7 sale.
12 Sales Returns and Allowances ………………….. 2,000
Accounts Receivable—Brill ………………… 2,000
Customer returned merchandise.
Problem 4-2B (Concluded)
July 17 Cash …………………………………………………………. 9,310
Sales Discounts* ………………………………………. 190
Accounts Receivable—Brill ………………… 9,500
Received payment within discount period.
*($11,500 – $2,000) x 2%
24 Sales Returns and Allowances ………………….. 1,000
Accounts Receivable—Brown …………….. 1,000
Issued allowance on merchandise sold.
30 Cash …………………………………………………………. 9,900
Sales Discounts* ………………………………………. 100
Accounts Receivable—Brown …………….. 10,000
Received payment within discount period.
*($11,000 – $1,000) x 1%
Problem 4-3B (40 minutes)
1.
Net sales
Sales ………………………………………………………………………
$332,650
Less: Sales discounts …………………………..………………..
5,875
Sales returns and allowances ………………………..
20,000
Net sales ………………………………………………………………..
$306,775
2.
Purchases discounts received ………………………………..
Purchases returns and allowances ………………………….
5,750
Total cost of merchandise purchases ……………………..
Problem 4-3B (Continued)
3. Multiple-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31
Sales ………………………………………………………….. $332,650
Less: Sales discounts ……………………………….. $ 5,875
Sales returns and allowances …………… 20,000 25,875
Net sales ……………………………………………………. 306,775
Cost of goods sold * …………………………………… 115,600
Gross profit ……………………………………………….. 191,175
General and administrative expenses
Office salaries expense …………………………... 40,750
Rent expense—Office space …………………… 3,800
Office supplies expense ………………………….. 1,100
Total general and administrative expenses … 45,650
Total expenses …………………………………………… 136,000
Net income …………………………………………………. $ 55,175
Problem 4-3B (Concluded)
4. Single-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31
Net sales ………………………………………………………. $306,775
Expenses
Problem 4-4B (30 minutes)
Closing entries
March 31 Sales ………………………………………………………… 332,650
Income Summary …………………………………… 332,650
Close temporary accounts with credit balances.
March 31 Income Summary ……………………………………….. 277,475
Sales Discounts …………………………………….. 5,875
Sales Returns and Allowances ……………….. 20,000
Cost of Goods Sold ……………………………….. 115,600
Sales Salaries Expense ………………………….. 44,500
Rent Expense, Selling Space ………………….. 16,000
Store Supplies Expense …………………………. 3,850
Problem 4-5B (60 Minutes)
Part 1
Adjustment (a)
Oct. 31 Store Supplies Expense …………………………….. 6,000
Store Supplies …………………………………….. 6,000
Record store supplies expense
($9,700 – $3,700).
Adjustment (c)
Oct. 31 Depreciation Expense—Store Equip …………… 3,000
Accumulated Deprec.—Store Equip …….. 3,000
Record depreciation expense.
Problem 4-5B (Continued)
Part 2 Multiple-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31
Sales ………………………………………………………………. $227,100
Less: Sales discounts …………………………………….. $ 1,000
Sales returns and allowances ………………… 5,000 6,000
Store supplies expense ……………………………….. 6,000
Advertising expense ……………………………………. 17,800
Total selling expenses …………………………………. 71,300
General and administrative expenses
Insurance expense ………………………………………. 2,800
Office salaries expense ……………………………….. 31,500
Rent expense—Office space ………………………… 13,000
Total general and administrative expenses …… 47,300
Total expenses ………………………………………………. 118,600
Net income ……………………………………………………… $ 24,000
* $78,500 = $75,800 + $2,700 (shrinkage)
Part 3 Single–step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31
Net sales …………………………………………………………. $221,100
Expenses
Cost of goods sold ……………………………………… $78,500
Problem 4-5B (Concluded)
Part 4
Current assets
Cash ………………………………………………………………… $ 7,400
Merchandise inventory …………………………………….. 21,300
Store supplies ………………………………………………….. 3,700
Prepaid insurance ……………………………………………. 3,800*
Total current assets ………………………………………….. $ 36,200
Current liabilities ………………………………………………… $ 18,000
Current ratio ($36,200 / $18,000) ………………………………. 2.01
*$6,600 – $2,800 = $3,800
Problem 4-6BD ONLINE APPENDIX (50 minutes)
FOSTER PRODUCTS COMPANY
Work Sheet
For Year Ended October 31
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash …………………………………….
7,400
7,400
7,400
Merchandise inventory …………
24,000
(d)
2,700
21,300
21,300
Store supplies ………………………
9,700
(a)
6,000
3,700
3,700
Prepaid insurance ………………..
6,600
(b)
2,800
3,800
3,800
Store equipment …………………..
81,800
81,800
81,800
Accum. depreciation—Store eq …..
32,000
(c)
3,000
35,000
35,000
Accounts payable ………………..
18,000
18,000
18,000
Common stock …………………….
3,000
3,000
3,000
Retained earnings ………………..
40,000
40,000
40,000
Dividends …………………………….
2,000
2,000
2,000
Sales ……………………………………
227,100
227,100
227,100
Sales discounts ……………………
1,000
1,000
Sales returns and allowances
5,000
5,000
Cost of goods sold ……………….
75,800
(d)
2,700
78,500
78,500
Depreciation expense—Store eq …
(c)
3,000
3,000
Sales salaries expense …………
Office salaries expense ………..
Insurance expense ……………….
(b)
2,800
2,800
Rent expense—Selling space ….
Rent expense—Office space ……
Store supplies expense ………..
(a)
6,000
6,000
Advertising expense …………….
______
______
______
______
______
Totals …………………………………..
203,100
96,000
Net income …………………………..
______
______
24,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
SERIAL PROBLEM — SP 4
Serial Problem — SP 4, Business Solutions (120 minutes) Part 1
Journal entries
Jan. 4 Wages Expense ……………………………………….623 125
Wages Payable ………………………………………..210 500
Cash …………………………………………………101 625
Paid employee.
11 Accounts Receivable—Alex’s Eng. Co …………106.1 5,500
Unearned Computer Services Revenue ……….236 1,500
Computer Services Revenue ……………..403 7,000
Completed work on project.
13 Accounts Receivable—Liu Corp. ……………….106.5 5,200
Sales …………………………………………………413 5,200
Sold merchandise on credit.