PROBLEM 4-4B (Continued)
ABDULLA ADVERTISING AGENCY
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1 ………………………… $ 5,500
Add: Net income …………………………………………. 38,810
ABDULLA ADVERTISING AGENCY
Balance Sheet
December 31, 2014
Assets
Current assets
Cash ……………………………………………………….. $11,000
Accounts receivable ………………………………… 19,000
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable ………………………………………….. $ 8,000
Accounts payable ……………………………………. 2,000
Unearned service revenue ……………………….. 3,100
PROBLEM 4-4B (Continued)
(c) Service Revenue, Salaries and Wages Expense, Depreciation Expense,
Rent Expense, Supplies Expense, Insurance Expense, Interest Expense,
PROBLEM 4-5B
1. Dec. 31 Insurance Expense …………………………………. 6,000
Prepaid Insurance ……………………………. 6,000
2. Dec. 31 Unearned Rent Revenue …………………………. 90,000
Rent Revenue ………………………………….. 90,000
3. Dec. 31 Interest Expense …………………………………….. 750
4. Dec. 31 Salaries and Wages Expense ………………….. 2,496
Salaries and Wages Payable …………….. 2,496
PROBLEM 4-6B
(a) 1. April 30 Service Revenue ………………………………….. 75,000
Unearned Service Revenue ……………… 75,000
3. 30 Insurance Expense ($12,000 ÷ 12 X 3) …….. 3,000
Prepaid Insurance …………………………... 3,000
4. 30 Advertising Expense ……………………………. 80
5. 30 Salaries and Wages Expense
7. 30 Income Tax Expense ……………………………. 15,200
Income Taxes Payable ……………………. 15,200
PROBLEM 4-6B (Continued)
(b) TUTORS-PLUS TEST PREP
Income Statement
For the Quarter Ended April 30, 2014
Revenues
Service revenue ($240,000 – $75,000) ……………… $165,000
Expenses
Salaries and wages expense
($92,000 + $4,140) ………………………………………… $96,140
Income tax expense ……………………………………….. 15,200
Supplies expense …………………………………………… 7,200
Advertising expense ($6,400 + $80) …………………. 6,480
Maintenance and repairs expense
(c) The generally accepted accounting principles pertaining to the income
statement not recognized by Jan were the revenue recognition principle
and the expense recognition principle.
The revenue recognition principle states that revenue is recognized
when the performance obligation is satisfied. The cash payments of
$75,000 for summer classes have not been earned and, therefore,
should not be reported as income for the quarter ended April 30.
PROBLEM 4-7B
(a), (c) & (e)
Cash
8/29 780
8/25 2,900
8/31 Bal. 2,420
8/31 Bal. 3,160
8/1 Bal. 6,040
8/5 1,200
8/10 3,120
8/20 2,000
Accounts Receivable
8/31 Bal. 4,840
8/31 Bal. 1,240
8/1 Bal. 2,910
8/5 1,200
Supplies
8/1 Bal. 1,030
8/17 860
8/31 930
8/31 Bal. 960
Equipment
8/31 Bal. 12,000
8/1 Bal. 600
8/31 Bal. 920
8/31 Bal. 10,000
8/1 Bal. 4,400
8/31 Bal. 4,400
8/1 Bal. 10,000
Accounts Payable
8/20 2,000
8/1 Bal. 2,300
8/15 2,000
Unearned
Service Revenue
8/31 800
8/1 Bal. 1,260
Salaries and Wages Payable
8/10 1,420
8/1 Bal. 1,420
8/31 1,540
8/31 Bal. 1,540
Common Stock
8/1 Bal. 10,000
PROBLEM 4-7B (Continued)
Service Revenue
8/31 Bal. 6,730
8/31 Bal. 6,140
8/12 2,800
8/27 3,130
Depreciation Expense
8/31 320
8/31 Bal. 320
8/31 930
8/31 Bal. 930
Salaries and Wages Expense
8/10 1,700
8/25 2,900
Rent Expense
8/22 380
8/31 Bal. 380
PROBLEM 4-7B (Continued)
(b) General Journal
Date
Debit
Credit
Aug. 5
1,200
1,200
3,120
12
2,800
2,800
15
2,000
2,000
17
860
860
20
2,000
2,000
22
380
380
25
2,900
2,900
27
3,130
3,130
29
780
780
PROBLEM 4-7B (Continued)
(d) & (f) D & D REPAIR SERVICES
Trial Balances
August 31, 2014
Before
Adjustment
After
Adjustment
Dr.
Cr.
Dr.
Cr.
Cash ……………………………………..
Accounts Receivable ……………..
Supplies ………………………………..
$ 2,420
4,840
1,890
$ 2,420
4,840
960
(e) 1.
Aug. 31 Supplies Expense ……………………………………. 930
Supplies ($1,890 – $960) ……………………. 930
2.
3.
4.
PROBLEM 4-7B (Continued)
(g) D & D REPAIR SERVICES
Income Statement
For the Month Ended August 31, 2014
Revenues
Service revenue……………………………………….. ($6,730)
Expenses
Salaries and wages expense …………………….. $6,140
Supplies expense …………………………………….. 930
D & D REPAIR SERVICES
Retained Earnings Statement
For the Month Ended August 31, 2014
Retained earnings, August 1 …………………………... $4,400
PROBLEM 4-7B (Continued)
D & D REPAIR SERVICES
Balance Sheet
August 31, 2014
Assets
Current assets
Cash ………………………………………………………. $ 2,420
Accounts receivable ……………………………….. 4,840
Supplies …………………………………………………. 960
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ………………………………………… $ 3,160
Unearned service revenue ……………………………. 1,240
Salaries and wages payable …………………………. 1,540
Total current liabilities …………………………... $ 5,940
Stockholders’ equity