3-61
*PROBLEM 3-10
(a), (b), (c)
Cash
Accounts Receivable
Allow. for Doubtful Accts.
Bal.
Bal.
32,000
Bal.
700
Adj.
1,400
2,100
Bal.
Bal.
84,000
Bal.
35,000
Adj.
12,000
47,000
Bal.
Adj.
2,550
Bal.
28,000
Bal.
3,360
Cls.
3,360
Common Stock
Sales Revenue
Insurance Expense
Bal.
80,600
Cls.
600,000
Bal.
600,000
Adj.
2,550
Cls.
2,550
Salaries and Wages
Expense (Sales)
Advertising Expense
Salaries and Wages Expense
(Administrative)
Bal.
Cls.
52,400
Bal.
6,700
Adj.
700
Adj.
65,000
Cls.
65,000
Adj.
Cls.
6,000
52,400
6,700
6,700
Supplies Expense
Prepaid Advertising
Adj.
Cls.
1,400
Bal.
5,000
Adj.
1,500
Adj.
700
Cls.
3,500
5,000
5,000
Interest Payable
Income Summary
Adj.
Adj.
12,000
Cls.
12,000
Exp.
554,210
Sales
600,000
Inc.
600,000
600,000
Salaries and Wages Payable
Adj.
Adj.
2,400
Cost of Goods Sold
Bal.
10,000
Bal.
408,000
Cls.
408,000
Inc.
45,790
3-62
*PROBLEM 3-10 (Continued)
(b)
-1-
Bad Debt Expense ……………………………………………………….
1,400
Allowance for Doubtful Accounts …………………………..
1,400
-2-
-3-
Insurance Expense ……………………………………………………….
2,550
Prepaid Insurance ……………………………………………………….
2,550
-4-
Interest Expense ……………………………………………………….
3,360
Interest Payable ……………………………………………………….
3,360
-5-
Salaries and Wages Expense (Sales) …………………………..
2,400
Salaries and Wages Payable …………………………..
2,400
-6-
Prepaid Advertising Expense …………………………………………………..
Advertising Expense ……………………………………………………….
-7-
Supplies …………………………………………………………………………………
1,500
Supplies Expense ……………………………………………………….
1,500
Depreciation Expense ($84,000 ÷ 7) …………………………..
Accumulated Depreciation—Equipment …………………………..
*PROBLEM 3-10 (Continued)
(c)
Dec. 31
Sales Revenue ……………………………………………………….
600,000
Income Summary ……………………………………………………….
600,000
Income Summary ……………………………………………………….
554,210
Cost of Goods Sold ……………………………………………………….
408,000
Advertising Expense …………………………..…………………………..
Salaries and Wages Expense (Admin.) …………………………..
Salaries and Wages Expense (Sales) …………………………..
Supplies Expense ……………………………………………………….
Insurance Expense ……………………………………………………….
Bad Debt Expense ……………………………………………………….
Depreciation Expense ……………………………………………………….
Interest Expense ……………………………………………………….
Income Summary ……………………………………………………….
Retained Earnings ……………………………………………………….
3-64
*PROBLEM 3-11
(a) ARKANSAS SALES AND SERVICE
Income Statement
For the Month Ended January 31, 2012
(1)
Cash Basis
(2)
Accrual Basis
Revenues ……………………………………………………….
$ 75,000
$98,400*
Expenses
Cost of computers & printers:
Purchased and paid …………………………..
Cost of goods sold …………………………..
Salaries and wages …………………………..
Rent ……………………………………………………….
Other operating expenses ……………………….
Total expenses …………………………..
106,500
3-65
*PROBLEM 3-11 (Continued)
(b) ARKANSAS SALES AND SERVICE
Balance Sheet
As of January 31, 2012
(1)
Cash Basis
(2)
Accrual
Basis
Assets
Cash ………………………………………………………
$58,500a
$ 58,500a
Liabilities and Owners’ Equity
Salaries and wages payable …………………….
$ 3,000
Accounts payable …………………………..
2,000
Owner’s capital ……………………………………….
$58,500c
103,900d
Total liabilities and owners’
equity ……………………………………………..
$58,500
$108,900
Inventory ………………………………………………..
Prepaid rent expense …………………………..
4,000
Total assets ……………………………………….
$108,900
*PROBLEM 3-11 (Continued)
(c) 1. The $23,400 in receivables from customers is an asset and a future
cash flow resulting from sales that is ignored. The cash basis
understates the amount of revenues and inflow of assets in
January from the sale of computers and printers by $23,400.
2. The cost of computers and printers sold in January is overstated
3. The cash basis ignores $3,000 of the salaries that have been
earned by the employees in January and will be paid in February.
4. Rent expense on the cash basis is overstated by $4,000 under the
5. Other operating expenses on a cash basis are understated by
3-67
(a) COOKE COMPANY
Worksheet
For the Year Ended September 30, 2012
Balance Sheet
Cr.
6,000
Dr.
37,400
Income Statement
Cr.
Dr.
9,400
16,900
21,000
12,000
28,000
14,400
Adjusted Trial Balance
Cr.
6,000
Dr.
37,400
9,400
16,900
21,000
12,000
28,000
14,400
Adjustments
Cr.
6,000
(f)
Dr.
3,000
6,000
28,000
14,400
(e)
(f)
(a)
(b)
Trial Balance
Cr.
______
491,700
Dr.
37,400
9,400
16,900
18,000
6,000
491,700
Account Titles
Cash
Advertising Expense
Utilities Expenses
Prop. Tax Expense
Interest Expense
Totals
Insurance Expense
Supplies Expense
Interest Payable
42,000
42,000
14,400
36,200
18,600
31,900
Supplies
Prepaid Insurance
Accum. Depr.-Equip.
3-68
*PROBLEM 3-12 (Continued)
(b) COOKE COMPANY
Balance Sheet
September 30, 2012
Assets
Current assets
Cash ……………………………………………………….
$37,400
Supplies ……………………………………………………….
4,200
Total assets …………………………..
$203,500
Liabilities and Owners’ Equity
Current liabilities
Accounts payable ……………………………………………
$14,600
Current maturity of long-term debt …………………..
10,000
Interest payable ………………………………………….
6,000
Property taxes payable ……………………………………
3,000
Unearned admissions revenue …………………………
Total current liabilities …………………………..
Long-term liabilities
Mortgage payable ……………………………………………
Total liabilities ………………………………………..
Prepaid insurance …………………………..
Property, plant, and equipment
Land ……………………………………………………….
Equipment …………………………..………………………….
Less: Accum. depreciation …………………………..
3-69
*PROBLEM 3-12 (Continued)
(c)
Sep. 30
Insurance Expense …………………………..
28,000
Prepaid Insurance …………………………..
28,000
30
Supplies Expense ……………………………………………………….
14,400
(d)
Sep. 30
Admissions Revenue …………………………..
280,500
Income Summary …………………………..
280,500
30
Income Summary ……………………………………………………….
247,000
Salaries and Wages Expense …………………………..
109,000
Maintenance and Repairs
Expenses ……………………………………………………….
30,500
Insurance Expense …………………………..
28,000
Property Tax Expense …………………………..
21,000
Supplies Expense …………………………..
14,400
Utilities Expenses …………………………..
16,900
Interest Expense …………………………..
12,000
Advertising Expense …………………………..
Depreciation Expense …………………………..
Income Summary ……………………………………………………….
33,500
33,500
14,000
Supplies ……………………………………………………….
14,400
Depreciation Expense …………………………..
30
Unearned Admissions Revenue …………………………..
Admissions Revenue …………………………..
30
Property Tax Expense …………………………..
Property Taxes Payable …………………………..
30
Interest Expense ……………………………………………………….
Interest Payable …………………………..
3-70
*PROBLEM 3-12 (Continued)
(e) COOKE COMPANY
Post-Closing Trial Balance
September 30, 2012
Debit
Credit
Cash ……………………………………………………….
$ 37,400
Supplies ……………………………………………………….
4,200
Equipment ……………………………………………………….
Unearned Admissions Revenue …………………………..
Mortgage Payable …………………………………………………….
50,000
3-71
FINANCIAL REPORTING PROBLEM
(a) June 30, 2009 total assets: $134,833 million.
June 30, 2008 total assets: $143,992 million.
(e) An adjusting entry for deferrals is necessary when the receipt/disburse-
ment precedes the recognition in the financial statements. Accounts
such as prepaid insurance and prepaid rent may be included in the
Prepaid Expenses and Other Current Assets ($3,199 million at June 30,
2009). Both of these accounts would require an adjusting entry to
recognize the proper amount of expense incurred during the period.
In addition, depreciation expense is an adjusting entry related to a
deferral.
3-72
COMPARATIVE ANALYSIS CASE
(a) The Coca-Cola Company percentage increase is computed as follows:
Total assets (December 31, 2009) …………………………..………………..
$48,671
Total assets (December 31, 2008) …………………………..………………..
$40,519
Difference ………………………………………………………………………………
$ 8,152
(b)
5-Year Growth Rate
The Coca-Cola Company
PepsiCo, Inc.
Net sales
7.9%
7.4%
Income from continuing
operations
8.1%
7.9%
Total assets (December 29, 2009) …………………………..………………..
$39,848
Total assets (December 30, 2008) …………………………..………………..
$35,994
Difference ………………………………………………………………………………
$ 3,854