Problem 2–9 (continued)
Insurance expense Utility expense
___________________________ ___________________________
Bal. 0 Bal. 30,000
Adjusting 1,500
2–82 Intermediate Accounting, 8/e
Problem 2–9 (continued)
Requirement 3
Account Title
Debits
Credits
Cash
8,000
Accounts receivable
9,000
Prepaid insurance
1,500
Land
200,000
Buildings
50,000
Accumulated depreciation—buildings
21,000
Office equipment
100,000
Accounts payable
35,050
Salaries and wages payable
Deferred rent revenue
1,200
Common stock
200,000
Retained earnings
56,450
Sales revenue
90,000
Interest revenue
3,000
Rent revenue
6,300
Salaries and wages expense
38,500
11,000
Insurance expense
1,500
Utility expense
30,000
Maintenance expense
15,000
464,500
464,500
Problem 2–9 (continued)
Requirement 4
December 31, 2016
Sales revenue ………………………………………………………… 90,000
Interest revenue …………………………………………………….. 3,000
Problem 2–9 (concluded)
Requirement 5
Account Title
Debits
Credits
Cash
8,000
Accounts receivable
9,000
Prepaid insurance
1,500
Land
200,000
Buildings
50,000
Office equipment
100,000
Accounts payable
Salaries and wages payable
Common stock
Retained earnings
Problem 2–10
Computations:
Sales revenue
Sales revenue during 2016 = $320,000 + 22,000 = $342,000
Cost of goods sold
Accounts payable
Inventory
1/1 Balance 0
Purchases 250,000
? Cost of goods sold
12/31 Balance 50,000
Cost of goods sold during 2016 = $250,000 – 50,000 = $200,000
Rent expense and prepaid rent
2–86 Intermediate Accounting, 8/e
Problem 2–10 (continued)
Sales revenue ……………………………………………
$342,000
Cost of goods sold …………………………………….
200,000
Gross profit ………………………………………………
142,000
Other expense:
Problem 2–10 (concluded)
McGUIRE CORPORATION
Balance Sheet
At December 31, 2016
Assets
Current assets:
Cash ……………………………………………………
$ 56,000
(1)
Accounts receivable ……………………………..
Prepaid rent …………………………………………
2,000
Inventory …………………………………………….
Office equipment ……………………………………
Less: Accumulated depreciation …………….
$157,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable …………………………………
$ 30,000
Salaries and wages payable ……………………
5,000
Common stock …………………………………….
Retained earnings …………………………………
$157,000
2–88 Intermediate Accounting, 8/e
Problem 2–11
Requirement 1
a. Sales revenue
Accounts receivable
11/30 Balance 10,000
b. Cost of goods sold
Accounts payable
12,000 11/30 Balance
Cash paid 60,000
Inventory
11/30 Balance 7,000
Purchases 63,000
Problem 2–11 (concluded)
c. Insurance expense
Prepaid insurance
d. Salaries and wages expense
Salaries and wages payable
5,000 11/30 Balance
Cash payments 10,000
Requirement 2
Accounts receivable ……………………………………………….. 73,000
Sales revenue …………………………………………………….. 73,000
Problem 2–12
Requirement 1
Computations:
Sales revenue:
Cash collected from customers $675,000
Add: Increase in accounts receivable 30,000
Sales revenue $705,000
Cost of goods sold:
Cash paid for merchandise $390,000
Add: Increase in accounts payable 12,000
Purchases during2016 402,000
Add: Decrease in inventory 18,000
Cost of goods sold $420,000
Problem 2–12 (continued)
Interest expense:
Amount accrued at the end of 2016
($100,000 x .06 x 2/12) $1,000 (d)
Rent expense:
Depreciation expense: Increase in accumulated depreciation $10,000
Zambrano Wholesale Corporation
Income statement
For the Year Ended December 31, 2016
Sales revenue $705,000
Cost of goods sold 420,000
2–92 Intermediate Accounting, 8/e
Problem 2–12 (concluded)
Requirement 2
a. Prepaid insurance $ 2,000
Problem 2–13
Account Title
Unadjusted Trial Balance
Adjusting Entries
Adjusted Trial Balance
Income Statement
Balance Sheet
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
23,300
23,300
23,300
Accounts receivable
32,500
32,500
32,500
Supplies
0
(4) 500
500
500
Prepaid rent
0
(5) 1,000
Inventory
65,000
65,000
65,000
Office equipment
75,000
75,000
75,000
Accumulated depreciation-
Accounts payable
26,100
26,100
26,100
Note payable
30,000
30,000
30,000
Interest payable
0
(3) 1,000
Common stock
80,000
80,000
80,000
Retained earnings
16,050
16,050
16,050
Sales revenue
Cost of goods sold
95,000
95,000
95,000
Interest expense
0
(3) 1,000
Rent expense
14,000
(5) 1,000
13,000
13,000
Supplies expense
(4) 500
Utility expense
Depreciation expense
0
13,375
13,375
Problem 2–13 (continued)
Sales revenue ………………………………………..
$180,000
Cost of goods sold …………………………………
95,000
Gross profit …………………………………………..
85,000
Operating expenses:
63,725
Operating income ………………………………….
Other expense:
Net income …………………………………………..
Problem 2–13 (continued)
EXCALIBUR CORPORATION
Statement of Shareholders’ Equity
For the Year Ended December 31, 2016
Total
Common Retained Shareholders’
Stock Earnings Equity
Balance at January 1, 2016 $80,000 $22,050 $102,050
2–96 Intermediate Accounting, 8/e
Problem 2–13 (continued)
Assets
Current assets:
Cash ……………………………………………………..
$ 23,300
Accounts receivable ………………………………..
Supplies ………………………………………………..
Prepaid rent …………………………………………….
1,000
Inventory …………………………..…………………..
Office equipment ………………………………………
Less: Accumulated depreciation ……………….
$177,925
Current liabilities:
Accounts payable ……………………………………
$ 26,100
Salaries and wages payable ……………………..
4,500
Common stock ……………………………………….
Retained earnings …………………………………..
$177,925
Problem 2–13 (concluded)
December 31,2016
Sales revenue ………………………………………………………… 180,000
Income summary ……………………………………………….. 180,000
Income summary …………………………………………………… 159,725
2–98 Intermediate Accounting, 8/e
Judgment Case 2–1
Requirement 1
Cash basis accounting produces a measure of performance called net operating
Requirement 2
In most cases, the accrual accounting model provides a better measure of
Requirement 3
Judgment Case 2–2
Requirement 1
Cash basis net income $26,000
Add: 1. Unexpired (prepaid insurance) $12,000 x 8/12 8,000
Requirement 2
Assets would be higher by $12,500 ($8,000 + 1,500 + 3,000) and liabilities
CASES
Communication Case 2–3
Requirement 1
Prepayments occur when the cash flow precedes either expense or revenue
recognition. Accruals occur when the cash flow comes after either expense or revenue
recognition.
Requirement 2
The appropriate adjusting entry for a prepaid expense is a debit to expense and a
cause liabilities to be overstated and shareholders’ equity to be understated.
Requirement 3
The required adjusting entry for accrued liabilities is a debit to expense and a
credit to a liability. For accrued receivables, the appropriate adjusting entry is a debit