b.
Dec. 31 232,800
Income Summary 232,800
31 180,480
Insurance Expense 2,160
31 52,320
Retained Earnings 52,320
To transfer dividends declared in Current Year to
(4)
Retained Earnings
Retained Earnings account.
Retained Earnings account ($232,800 – $180,480 =
To transfer net income earned in Current Year to the
PROBLEM 5.2B
GARDEN WIZARDS
12/31/Current Year
(1)
GARDEN WIZARDS (continued)
Income Summary
(2)
General Journal
Service Revenue Earned
To close revenue account.
Income Summary
(3)
Office Rent Expense 33,600
Supplies Expense 6,720
Salary Expense 86,400
Depreciation Expense: Trucks 19,200
Depreciation Expense: Equipment 4,800
Repair & Maintenance Expense 6,360
Fuel Expense 2,640
Miscellaneous Expense 3,240
Interest Expense 4,560
Income Taxes Expense 10,800
To close all expense accounts.
c.
33,360$
5,160
10,440
For the year ended December 31, Current Year, the company generated net income of
$52,320 on $232,800 sales. Thus, net income as a percentage of sales was approximately
GARDEN WIZARDS (concluded)
GARDEN WIZARDS
December 31, Current Year
After-Closing Trial Balance
Cash
Unexpired insurance
Accounts receivable
d.
3,840
1,680
33,600
Notes payable
Income taxes payable
Prepaid rent
Accumulated depreciation: trucks
Unearned service revenue
Capital stock
Interest payable
Retained earnings
Accounts payable
Accumulated depreciation: equipment
a.
56,700$
6,200$
2,000$
Less: Net loss
Retained earnings (12/31/Current Year)
Client revenue earned
PROBLEM 5.3B
DEBIT DOCTORS, INC.
Expenses:
DEBIT DOCTORS, INC.
For the Year Ended December 31, Current Year
Income Statement
Revenues:
Insurance expense
DEBIT DOCTORS, INC.
Retained earnings (1/1/Current Year)
Statement of Retained Earnings
For the Year Ended December 31, Current Year
Office rent expense
Office and telephone expense
Supplies expense
Salary expense
Legal expense
Internet service expense
Depreciation expense: furniture and fixtures
Interest expense
Miscellaneous expense
Net loss
a. (cont’d)
450$
220
1,600
PROBLEM 5.3B
DEBIT DOCTORS, INC. (continued)
Cash
12/31/Current Year
Balance Sheet
Assets
DEBIT DOCTORS, INC.
Accounts receivable
Unexpired insurance
1,800
900
2,100
170
600
Interest payable
Accounts payable
Unearned client revenue
Capital Stock
Retained earnings (deficit)
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity
Stockholders’ Equity
Total liabilities
Salaries payable
Furniture & fixtures
Notes payable
Accumulated depreciation: furniture and fixtures
Total assets
Liabilities
Prepaid rent
Supplies
b.
Dec. 31 56,700
Income Summary 56,700
31 88,300
Insurance Expense 6,200
Office Rent Expense 12,000
31 31,600
Income Summary 31,600
Note: No dividends were declared in Current Year.
account ($56,700 – $88,300 = $31,600 loss.)
Retained Earnings
To transfer net loss to the Retained Earnings
PROBLEM 5.3B
DEBIT DOCTORS, INC.
December 31, Current Year
(1)
(3)
General Journal
DEBIT DOCTORS, INC. (continued)
Client revenue earned
To close revenue account.
Income Summary
(2)
Supplies Expense 300
Salary Expense 48,000
Office & Telephone Expense 4,600
Internet Service Expense 7,200
Legal Expense 1,800
Interest Expense 2,700
Miscellaneous Expense 4,300
To close all expense accounts.
c.
450$
220
1,600
1,800
d.
e.
The primary issue to be addressed in the notes to the financial statements is the company’s
For the year ended December 31, Current Year, the company suffered a net loss of $31,600
on $56,700 sales. Thus, net loss as a percentage of sales was approximately 56%. The net
DEBIT DOCTORS, INC. (concluded)
DEBIT DOCTORS, INC.
Cash
After-Closing Trial Balance
December 31, Current Year
Unexpired insurance
Accounts receivable
Prepaid rent
900
Accumulated depreciation: furniture and fixtures
Capital stock
Notes payable
Accounts payable
Retained earnings
Interest payable
Salaries payable
Furniture & fixtures
a.
Month Ended Quarter Ended 9 Months Ended
Sept. 30 Sept. 30 Sept. 30
30,000$ 120,000$ 320,000$
b.
c.
Income Statement
PROBLEM 5.4B
HOWARD REALTY
HOWARD REALTY
For the Following Time Periods
Commissions earned
Revenue:
If Howard closed its accounts monthly , the current adjusted balances could be used in
preparing financial statements for the month ended September 30. However, to prepare
The balances in the revenue and expense accounts at September 30 represent the year-to-
date. To determine revenue or expense for the month of September, the balance as of
20,200$ 63,400$ 186,400$
Rent expense
September Commissions:
Salaries expense
Net Income
Supporting computations
Expenses:
Advertising expense
Depreciation expense
Third Quarter Commissions:
a.
Dec. 31 25,000
Consulting Services Revenue 25,000
31 1,200
Prepaid Rent 1,200
Unexpired Insurance 250
Salaries Payable 12,000
Interest Payable 200
Income Taxes Payable 5,000
To record income taxes expense accrued in Dec.
To record interest expense accrued in December.
(8)
Income Taxes Expense
Interest Expense
To record accrued but unpaid salaries in Dec.
Insurance Expense
Salaries Expense
To record portion of insurance policies expired
(7)
in December.
(6)
(5)
To record December rent expense.
Rent Expense
To record revenue accrued at the end of Dec.
December 31, Current Year
(1)
NEXT JOB, INC.
General Journal
NEXT JOB, INC.
Accounts Receivable
70 Minutes, Strong
Consulting Services Revenue 15,000
Office Supplies 500
31 1,000
(4)
To record depreciation expense in December.
(2)
Depreciation Expense: Office Equipment
To record offices supplies used in December.
Unearned Consulting Services Revenue
(3)
a. (continued)
Computations for each of the adjusting journal entries:
1. Accounts receivable increased by the $25,000 of accrued revenue in December.
NEXT JOB, INC. (continued)
PROBLEM 5.5B
a. (cont’d.)
276,500$
115,000
300
Prepaid rent 2,400
Cash
Office supplies
NEXT JOB, INC. (continued)
NEXT JOB, INC.
December 31, Current Year
Adjusted Trial Balance
Accounts receivable
Interest payable 800
Retaining earnings 40,000
Consulting fees earned 540,000
Rent expense 15,900
Insurance expense 2,450
Office supplies expense 5,000
Depreciation expense: office equipment 12,000
Salaries expense 342,000
Interest expense 3,200
Income taxes expense 50,000
Unexpired insurance
Office equipment
Accumulated depreciation: office equipment
Income taxes payable
Salaries payable
Capital stock
Unearned consulting fees
Accounts payable
Notes payable (8-month)
Utilities expense
b.
540,000$
40,000$
Retained earnings (12/31/Current Year)
Less: Dividends
Add: Net income
Retained earnings (1/1/Current Year)
For the Year Ended December 31, Current Year
NEXT JOB, INC.
Statement of Retained Earnings
PROBLEM 5.5B
NEXT JOB, INC. (continued)
Revenues:
NEXT JOB, INC.
For the Year Ended December 31, Year 1
Income Statement
Consulting fees earned
Expenses:
Net Income
Insurance expense
Rent expense
Income taxes expense
Depreciation expense: office equipment
Salaries expense
Utilities expense
Office supplies expense
Income before taxes
Interest expense
b. (cont’d)
Assets
$ 276,500
115,000
300
$ 4,000
60,000
800
14,000
3,000
7,000
$ 100,800
Interest payable
Income taxes payable
Unearned consulting fees
Dividends payable
Total liabilities
$ 200,000
141,650
$ 341,650
$ 442,450
Total liabilities and stockholders’ equity
Total stockholders’ equity
NEXT JOB, INC. (continued)
Accounts receivable
Office supplies
NEXT JOB, INC.
December 31, Current Year
Balance Sheet
Cash
Capital stock
Retained earnings
Stockholders’ Equity
Note payable (Due 3/1/Next Year)
Liabilities
Accounts payable
2,400
1,250
$ 72,000
25,000 47,000
$ 442,450
Prepaid rent
Office equipment
Unexpired insurance
Less: Accumulated Depreciation: office equipment
Total assets
c.
Dec. 31 540,000
Income Summary 540,000
31 435,350
Rent expense 15,900
31 104,650
Retained Earnings 104,650
To close dividends declared in Current Yr. to
(4)
Retained Earnings
(2)
To transfer net income earned in Current Yr. to the
Income Summary
Retained Earnings account ($540,000 – $435,350 =
(3)
Income Summary
$104,650 ).
Consulting Services Revenue
To close Agency Fees Earned.
PROBLEM 5.5B
NEXT JOB, INC.
December 31, Current Year
(1)
NEXT JOB, INC. (continued)
General Journal
Insurance expense 2,450
Office supplies expense 5,000
Depreciation expense: office equipment 12,000
Utilities expense 4,800
Interest expense 3,200
Income Taxes Expense 50,000
To close all expense accounts.
d.
276,500$
115,000
300
2,400
1,250
e.
2,450$
Monthly increase starting in Dec. ($250 – $200)
250
2,200$
Accounts receivable
NEXT JOB, INC. (continued)
Unexpired insurance
NEXT JOB, INC.
December 31, Current Year
After-Closing Trial Balance
Office supplies
Cash
Prepaid rent
Total expense incurred in Jan. through Nov.
Insurance expense incurred in Current Year
Less: Total insurance expense for December.
Accumulated depreciation: office equipment
Capital stock
Unearned consulting fees
Income taxes payable
Salaries payable
Notes payable (Due 3/1/Next Year)
Interest payable
Accounts payable
Office equipment
Retained earnings
f.
15,900$
8,400 (at $1,200/mo.)
g.
25,000$
h.
3,200$
Total interest on prior note in Jan. through Mar.
Less: Total interest expense in Sept. through Dec.
NEXT JOB, INC. (concluded)
Rent expense incurred in Current Year
PROBLEM 5.5B
Less: Total rent expense June through December
Accum. depreciation: office equip. (12/31/Current Yr.)
Interest expense incurred in Current Year
7,500$
1,500$ monthly
Monthly decrease starting in June ($1,500 – $1,200)
Total rent expense incurred in Jan. through May
Monthly rent expense in January through May