P3-3
1. NEALY COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue (net of $4,900 sales returns) $ 54,900
Cost of goods sold (27,400)
2. NEALY COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, January 1, 2010 $ 14,500
P3-3 (continued)
3. NEALY COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash $ 5,000
Accounts receivable $ 5,700
Total Assets $63,300
Liabilities
Current Liabilities
Accounts payable $ 6,400
Stockholders’ Equity
Contributed Capital
Capital stock, $1 par $ 4,000
P3-3 (continued)
4. 2010
Dec. 31 Sales Revenue 59,800
Rent Revenue 2,800
Income Summary 62,600
P3-4
2010
Dec. 31 Salaries Expense 2,840
Salaries Payable 2,840
To record accrued salaries.
3-44
P3-4 (continued)
Dec. 31 Interest Receivable 180
Interest Revenue 180
To record interest earned
($6,000 x 12% x 3/12).
P3-5
2010
Dec. 31 Supplies Expense 435
P3-5 (continued)
Dec. 31 Discount on Notes Payable* 200
Interest Expense 200
To recognize unexpired interest
($1,200 x 2/12).
31 Interest Expense 960
Interest Payable 960
($12,000 x 12% x 8/12).
31 Insurance Expense 140
Prepaid Insurance 140
To record expired insurance
($720 ÷ 3 x 7/12).
P3-5 (continued)
Dec. 31 Utility Expense 302
Utilities Payable 302
To record unpaid utility bill.
P3-6
1. 2010
Dec. 31 Depreciation Expense 3,960
Accumulated Depreciation 3,960
To record depreciation expense.
3-47
P3-6 (continued)
Dec. 31 Income Tax Expense 2,740
Income Taxes Payable 2,740
To provide for income tax liability.
31 Sales Salaries Expense ($7,850 – $7,300) 550
Advances to Sales Personnel 550
To recognize sales salaries expense.
P3-7
2010
Dec. 31 Interest Receivable 500
Interest Revenue 500
To recognize interest earned
($10,000 x 10% x 6/12).
31 Depreciation Expense 900
Accumulated Depreciation:
Delivery Equipment 900
To record depreciation of
delivery equipment for the year
[($14,000 – $2,000) ÷ 10 x 9/12].
3-49
P3-8
(1) Sales $220,000
Less: Sales returns (1,000)
(3) Gross profit $113,000
Less: Expenses (65,000)
Net income $ 48,000
(4) Beginning inventory of 2011 = Ending inventory of 2010 = $48,000
3-50
P3-9
Error
Net
Income
Total
Assets
Total
Liabilities
Total
Stockholders’
Equity
1.
The purchase of equipment for cash
is recorded as a debit to Equipment
and a credit to Accounts Payable.
N
O
O
N
P3-10
1. Liabilities understated by $16,000 ($40,000 x 2/5), net income and stockholders’
equity overstated by $16,000.
FIORILLO COMPANY
Worksheet
For Year Ended December 31, 2010
Trial Balance
Adjustments
Income Statement
Retained Earnings
Statement
Balance Sheet
Account Titles Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash
Accounts receivable
Dividends distributed
Sales revenue
Cost of goods sold
Salaries expense
Utilities expense
Office supplies expense
Delivery expense
1,900
4,700
1,300
27,185
4,080
2,000
770
1,275
49,355
(e) 370
(g) 230
27,185
4,450
2,000
540
1,275
49,355
1,300
1,900
4,700
P3-11
1. and 2.
C-52
P3-11 (continued)
1. and 2. (continued)
(a) Depreciation expense: $1,100 on buildings, $600 on equipment
(h) $50,155 – $39,125 = $11,030 pretax income x 30% = $3,309 income tax expense
3. FIORILLO COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue $49,355
Cost of goods sold (27,185)
Gross profit on sales $22,170
Operating expenses
P3-11 (continued)
3. (continued)
FIORILLO COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, January 1, 2010 $18,075
FIORILLO COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash $ 1,900
Accounts receivable $ 4,700
P3-11 (continued)
3. (continued)
Liabilities
Current Liabilities
Accounts payable $ 4,300
Stockholders’ Equity
Contributed Capital
4(a). 2010
Dec. 31 Depreciation Expense 1,700
Accumulated Depreciation:
Buildings 1,100
3-55
P3-11 (continued)
4(a). (continued)
Dec. 31 Salaries Expense 370
Salaries Payable 370
To record accrued salaries.
4(b). 2010
Dec. 31 Sales Revenue 49,355
Rent Revenue 800
Income Summary 50,155
LANGER COMPANY
Worksheet
For Year Ended December 31, 2010
Trial Balance
Adjustments
Income Statement
Retained Earnings
Statement
Balance Sheet
Account Titles Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash
Accounts receivable
Allowance for doubtful accounts
Rent revenue
Cost of goods sold
Salaries expense
Delivery expense
Heat and light expense
Other expenses
1,000
2,700
9,050
2,750
720
820
540
53,680
30
550
53,680
(a) 250
(b) 80
(g) 70
(e) 50
9,050
3,000
720
900
540
600
1,000
2,700
100
P3-12
1.
P3-12 (continued)
2. LANGER COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue $25,140
Total operating expenses (6,040)
Income from operations $10,050
Other items
Rent revenue $ 600
Interest revenue 80