3-21
E3-7
2010
Dec. 31 Bad Debts Expense 500
Allowance for Doubtful Accounts 500
To provide for possible bad debt
losses ($25,000 x 2%).
31 Interest Receivable 500
Interest Revenue 500
To record interest earned but
not collected.
E3-8
Dec. 31 Depreciation Expense 1,725
E3-8 (continued)
Dec. 31 Interest Expense 810
Interest Payable 810
To record interest accumulated but
not paid ($9,000 x 12% x 9/12).
To record portion of rent
collected but unearned.
31 Selling Expenses 490
Advances to Sales Personnel 490
To record portion of advances to
31 Income Tax Expense 1,056
Income Taxes Payable 1,056
To record income tax expense for the
year ($8,655 – 1,725 – 810 – 890 – 280 –
260 – 490 + 120 – 800 = $3,520 x 30% =
$1,056).
3-23
E3-9
Dec. 31 Depreciation Expense 1,400
Accumulated Depreciation 1,400
To record depreciation expense
for the year ($6,600 – $5,200).
E3-10
E3-10 (continued)
Dec. 31 Income Summary 2,280
Sales Returns 200
E3-11
1. (Worksheet on Following Page)
2. GRANT CONSULTING COMPANY
Income Statement
For Year Ended December 31, 2010
Consulting revenues $ 6,100
Operating expenses
3-25
EC-13 (continued)
1.
GRANT CONSULTING 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
Prepaid rent
Rent expense
Depreciation expense
Interest expense
Interest payable
3,800
2,400
(a)1,200
(b) 700
(c) 150
(a)1,200
(c) 150
1,200
700
150
3,800
1,200
150
E3-11 (continued)
1. (continued)
3-26
E3-11 (continued)
2. (continued)
GRANT CONSULTING COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
GRANT CONSULTING COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Liabilities
Current Liabilities
Note payable $2,000
Stockholders’ Equity
Contributed Capital
Capital stock (200 shares) $4,000
3-27
EC-14
C-27
MURPHY 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
Inventory
Cost of goods sold
Salaries expense
Utilities expense
Advertising expense
Totals
2,500
4,000
8,200
21,000
7,100
3,300
4,400
85,100
300
85,100
(b) 500
(d) 450
21,000
7,600
3,300
4,400
2,500
4,000
8,200
750
E3-12
1.
3-28
E3-12 (continued)
2. MURPHY COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue $45,000
Cost of goods sold (21,000)
Gross profit on sales $24,000
Earnings per share (1,000 shares) $ 2.19
MURPHY COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, January 1, 2010 $ 10,200
3-29
E3-12 (continued)
2. (continued)
MURPHY COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash $ 2,500
Liabilities
Current Liabilities
Accounts payable $ 3,700
Note payable 5,000
3. 2010
Dec. 31 Sales Revenues 45,000
Income Summary 45,000
3-30
E3-12 (continued)
3. (continued)
Dec. 31 Income Summary 42,810
Cost of Goods Sold 21,000
Salaries Expense 7,600
E3-13
2011
E3-14
1. CP 6.
G
3-31
E3-15
1. ELLIS COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue $ 53,000a
Cost of goods sold (30,800)b
3-32
E3-15 (continued)
2. ELLIS COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash $ 4,700
Accounts receivable 5,900
Owner’s Equity
M. Ellis, Capital $18,600
Total Liabilities and Owner’s Equity $26,500
3-33
SOLUTIONS TO PROBLEMS
P3-1
1. 2010
Nov. 2 Cash 3,400
Sales Revenue 3,400
Made cash sales.
5 Cash 4,000
Gain on Sale of Land 350
Land 3,650
Sold land at a gain.
8 Prepaid Insurance 528
Cash 528
Purchased 2-year comprehensive
insurance policy.
3-34
P3-1 (continued)
1. (continued)
Nov. 17 Inventory 1,600
Accounts Payable 1,600
Purchased inventory on credit.
23 Cash 2,100
Accounts Receivable 2,100
Collected Nov. 13 accounts receivable
less Nov. 18 return.
3-35
P3-1 (continued)
2.
Cash Accounts Receivable
11/01
Bal 7,800
11/03
900
11/01
Bal 12,530
11/19
200
Allowance for Doubtful Accounts Notes Receivable
11/01
Bal 740
11/01
Bal 6,000
11/16
200
11/30
Bal 740
11/30
Bal 5,800
Buildings Accumulated Depreciation-Buildings
11/01
Bal 66,580
11/01
21,400
11/30
Bal 66,580
11/30
Bal 21,400
3-36
P3-1 (continued)
2. (continued)
Notes Payable Unearned Rent
11/01
Bal 2,400
11/01
Bal 0
11/20
6,000
11/12
1,320
11/30
Bal 8,400
11/30
Bal 1,320
Sales Returns and Allowances Gain on Sale of Land
11/01
Bal 1,567
11/01
Bal 0
11/19
200
11/05
350
11/30
Bal 1,767
11/30
Bal 350
Cost of Goods Sold
11/01
Bal 32,000
11/02
2,040
11/13
1,400
11/30
Bal 35,440
3-37
P3-1 (continued)
3. ANTIL COMPANY
Trial Balance
November 30, 2010
Debit Credit
Cash $ 12,492
Accumulated depreciation: equipment 11,480
Patents 25,000
Accounts payable 38,750
Notes payable 8,400
Unearned rent 1,320
3-38
P3-2
1. STERN COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue (net of $2,100 returns) $ 30,900
Cost of goods sold (15,040)
2. STERN COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, January 1, 2010 $ 6,770
3-39
P3-2 (continued)
3. STERN COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash $ 2,000
Accounts receivable $ 2,700
Liabilities
Current Liabilities
Accounts payable $ 3,100
Salaries payable 420
3-40
P3-2 (continued)
4. 2010
Dec. 31 Sales Revenues 33,000
Rent Revenue 1,440
Income Summary 34,440