CHAPTER 4
SOLUTIONS TO EXERCISES—SET B
EXERCISE 4-1B
LAMAR COMPANY
Worksheet
For the Month Ended June 30, 2017
Account Titles
Trial Balance
Adjustments
Adj. Trial Balance
Income Statement
Balance Sheet
Dr.
Cr.
Dr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
1,760
1,760
1,760
Accounts
Receivable
2,100
2,100
2,100
Supplies
1,320
Accounts Payable
1,080
2,280
Service Revenue
2,100
2,340
Salaries/Wages
Totals
5,820
5,820
Supplies Expense
1,070
1,070
1,070
Salaries/Wages
Payable
Totals
1,560
6,070
1,960
2,340
4,110
Net Income
Totals
2,340
2,340
4,110
EXERCISE 4-2B
GOMEZ COMPANY
(Partial) Worksheet
For the Month Ended April 30, 2017
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Titles
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
11,400
11,400
Accounts Receivable
7,000
7,000
Prepaid Rent
2,000
2,000
Equipment
20,000
20,000
Accum. Depreciation
5,000
5,000
Accounts Payable
4,950
4,950
25,800
25,800
3,500
3,500
Service Revenue
14,000
14,000
Salaries and Wages
Expense
9,450
9,450
Rent Expense
500
500
Depreciation Expense
600
600
Totals
54,500
54,500
10,600
14,000
43,900
40,500
Net Income
Totals
14,000
14,000
43,900
43,900
EXERCISE 4-3B
GOMEZ COMPANY
Income Statement
For the Month Ended April 30, 2017
Revenues
Service revenue ………………………………………………. $14,000
Expenses
Salaries and wages expense ……………………………. $9,450
GOMEZ COMPANY
Owner’s Equity Statement
For the Month Ended April 30, 2017
Owner’s Capital, April 1 …………………………………………………… $25,800
GOMEZ COMPANY
Balance Sheet
April 30, 2017
Assets
Current assets
Cash ……………………………………………………………….. $11,400
Accounts receivable ………………………………………… 7,000
Prepaid rent …………………………………………………….. 2,000
Total current assets ………………………………….. $20,400
Property, plant, and equipment
EXERCISE 4-3B (Continued)
GOMEZ COMPANY
Balance Sheet (Continued)
April 30, 2017
Liabilities and Owner’s Equity
Current liabilities
Notes payable ………………………………………………….. $ 5,000
Accounts payable ……………………………………………… 4,950
EXERCISE 4-4B
(a) Apr. 30 Service Revenue ………………………………… 14,000
Income Summary ………………………… 14,000
30 Income Summary ……………………………….. 3,400
Owner’s Capital ……………………………. 3,400
30 Owner’s Capital …………………………………. 3,500
Owner’s Drawings ………………………… 3,500
(b)
EXERCISE 4-4B (Continued)
(c) GOMEZ COMPANY
Post-Closing Trial Balance
April 30, 2017
Debit
Credit
Cash …………………………………………………………… $11,400
Accounts Receivable …………………………………… 7,000
EXERCISE 4-5B
(a) Accounts Receivable …………………………………… 1,100
Service Revenue ………………………………….. 1,100
EXERCISE 4-5B (Continued)
(b)
Income Statement
Balance Sheet
Dr.
Cr.
Dr.
Cr.
Accounts Receivable
X
Prepaid Insurance
X
Accum. Depr.—Equip.
X
Salaries and Wages
Payable
X
Service Revenue
X
Salaries and Wages
Expense
Insurance Expense
X
Depreciation Expense
X
EXERCISE 4-6B
(a) Accounts Receivable—$20,000 ($35,000 – $15,000).
Supplies—$1,500 ($8,000 – $6,500).
(b) Accounts Receivable …………………………………………. 15,000
Service Revenue ………………………………………… 15,000
Insurance Expense ……………………………………………. 5,000
Prepaid Insurance ………………………………………. 5,000
Supplies Expense ……………………………………………… 6,500
Supplies …………………………………………………….. 6,500
EXERCISE 4-7B
(a) Service Revenue ……………………………………………. 5,360
Income Summary ……………………………………… 5,360
Income Summary …………………………………………… 5,050
Salaries and Wages Expense ……………………. 1,650
Miscellaneous Expense ……………………………. 350
Supplies Expense …………………………………….. 3,050
(b) PENNINGTON COMPANY
Post-Closing Trial Balance
For the Month Ended June 30, 2017
Account Titles
Debit
Credit
Cash ……………………………………………………………… $ 4,650
Accounts Receivable ……………………………………… 5,200
EXERCISE 4-8B
(a)
General Journal J15
Date
Account Titles
Ref.
Debit
Credit
July 31
Service Revenue …………………………...
404
42,400
Rent Revenue ………………………………..
429
6,100
Income Summary …………………..
350
48,500
31
Income Summary …………………………..
350
Salaries and Wages Expense ….
720
39,100
Utilities Expense ……………………
732
Depreciation Expense …………….
711
2,700
31
Owner’s Capital ……………………………..
301
3,400
Income Summary …………………..
350
3,400
31
Owner’s Capital ……………………………..
301
306
(b)
Owner’s Capital No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
July 31
Balance
30,700
31
Close net loss
J15
3,400
27,300
31
Close drawings
J15
11,000
16,300
Income Summary No. 350
Date
Explanation
Ref.
Debit
Credit
Balance
July 31
Close revenue
J15
48,500
31
Close expenses
J15
(3,400)
31
Close net loss
J15
3,400
EXERCISE 4-8B (Continued)
(c) WANG COMPANY
Post-Closing Trial Balance
July 31, 2017
Debit
Credit
Cash …………………………………………………………… $ 7,900
Accounts Receivable …………………………………… 6,200
EXERCISE 4-9B
(a) WANG COMPANY
Income Statement
For the Year Ended July 31, 2017
Revenues
Service revenue……………………………………. $42,400
Rent revenue ……………………………………….. 6,100
Total revenues ………………………………. $48,500
WANG COMPANY
Owner’s Equity Statement
For the Year Ended July 31, 2017
Owner’s Capital, August 1, 2016 …………………… $30,700
EXERCISE 4-9B (Continued)
(b) WANG COMPANY
Balance Sheet
July 31, 2017
Assets
Current assets
Cash ………………………………………………………. $ 7,900
Accounts receivable ……………………………….. 6,200
Liabilities and Owner’s Equity
Current liabilities
Accounts payable …………………………………… $ 2,800
Unearned rent revenue ……………………………. 1,200
EXERCISE 4-10B
1. True.
2. True.
5. True.
EXERCISE 4-11B
(a) June 30 Service Revenue …………………………….. 10,100
Income Summary ……………………… 10,100
30 Income Summary ……………………………. 8,750
(b)
Income Summary
June 30 8,750
June 30 10,100
June 30 1,350
10,100
10,100
EXERCISE 4-12B
(a) 1. Cash ………………………………………………………… 700
Supplies …………………………………………… 700
EXERCISE 4-12B (Continued)
3. Accounts Payable ……………………………………. 680
(b) 1. Salaries and Wages Expense …………………….. 700
Supplies …………………………………………… 700
3. Supplies …………………………..………………………. 180
Accounts Payable …………………………..…. 180
EXERCISE 4-13B
1. Accounts Payable ($720 – $270) ……………………….. 450
Cash ………………………………………………………… 450
EXERCISE 4-14B
(a) KEVER MINIATURE GOLF
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ……………………………………… $10,840
Accounts receivable ………………. 9,000
EXERCISE 4-14B (Continued)
KEVER MINIATURE GOLF
Balance Sheet (Continued)
December 31, 2017
Liabilities and Owner’s Equity
Current liabilities
Current portion of notes payable ………………. $ 15,000
Accounts payable ……………………………………. 7,400
Interest payable ……………………………………….. 1,600
(b) Current liabilities exceed current assets by $1,460 ($24,000 – $22,540).
However, approximately 50% of current assets are in the form of cash.
The company’s liquidity appears to be adequate.
EXERCISE 4-15B
CL
Accounts payable
LTI
Stock investments
CA
Accounts receivable
CA
Inventory
PPE
Land
Cash
Supplies
OE
CA
Prepaid insurance
CL
Salaries and wages payable
Equipment
Trademarks
EXERCISE 4-16B
FOYLE COMPANY
Balance Sheet
December 31, 2017
(in thousands)
Assets
Current assets
Cash ………………………………………………… $ 2,300
Debt investments ……………………………… 2,500
Accounts receivable …………………………. 1,500
Liabilities and Owner’s Equity
Current liabilities
Notes payable (due in 2018) ………………. $ 340
Long-term liabilities
Long-term debt …………………………………. 1,560
EXERCISE 4-17B
(a)
HERRERA COMPANY
Income Statement
For the Year Ended July 31, 2017
Revenues
Service revenue………………………………… $58,000
Rent revenue ……………………………………. 7,600
Total revenues …………………………... $ 65,600
Expenses
HERRERA COMPANY
Owner’s Equity Statement
For the Year Ended July 31, 2017
Owner’s Capital, August 1, 2016 ……………….. $45,000
Plus: Net Income ……………………………………. 6,800
EXERCISE 4-17B (Continued)
(b)
HERRERA COMPANY
Balance Sheet
July 31, 2017
Assets
Current assets
Cash ………………………………………………………. $13,300
Accounts receivable ……………………………….. 21,200
Liabilities and Owner’s Equity
Current liabilities
Accounts payable …………………………………… $ 3,600
Salaries and wages payable …………………….. 1,800
*EXERCISE 4-18B
(a) Dec. 31 Salaries and Wages Expense
($25,000 X 3/5) ………………………………. 15,000
Salaries and Wages Payable ………. 15,000
*EXERCISE 4-19B
(a) Dec. 31 Service Revenue ……………………………… 100,000
Income Summary ………………………. 100,000
31 Income Summary …………………………….. 11,000
Interest Expense ……………………….. 11,000
*EXERCISE 4-19B (Continued)
(c)&(e)
Accounts Receivable
Dec. 31 Balance *29,000
31 Adjusting 6,000
35,000
Jan. 1 Reversing 6,000
100,000
Jan. 1 Reversing 6,000
Interest Payable
Dec. 31 Adjusting 2,500
Jan. 1 Reversing 2,500
Dec. 31 Balance *8,500
Dec. 31 Closing 11,000
11,000
11,000
Jan. 15 3,000
Jan. 1 Reversing 2,500
(d) (1)
Jan. 10 Cash …………………………………………………….. 6,000
Service Revenue …………………………….. 6,000
(a) RELIABLE ROOFING
Worksheet
For the Month Ended March 31, 2017
PROBLEM 4-1C
Cash
Accounts Receivable
Supplies
Equipment
Totals
Net Income
Totals
2,500
1,800
1,100
6,000
1,580
(a) 860
1,580
2,500
1,800
240
6,000
13,450
13,450
2,310
860
3,170
3,170
3,170
2,500
1,800
240
6,000
11,140
11,140
10,280
860
11,140