PROBLEM 3-1B
(a) (Explanations are omitted.) and (d)
Cash
Equipment
Mar.
1
50,000
Mar.
3
1,500
Mar.
2
22,800
10
4
1,165
2,500
Mar.
3,000
Mar.
1
31
Bal.
31
60,315
Bal.
31
Accounts Receivable
Mar.
15
11,560
Mar.
26
2,600
30
6,890
Accounts Payable
Bal.
30
15,850
Mar.
21
7,600
Mar.
1
22,800
Bal.
31
15,200
Mar.
3
Mar.
Mar.
Mar.
31
Mar.
31
Mar.
10
Bal.
31
6,890
Mar.
31
Mar.
31
Mar.
Salaries and Wages Expense
Supplies Expense
Mar.
31
2,500
Mar.
31
2,500
Mar.
31
695
Mar.
31
695
PROBLEM 3-1B (Continued)
(b) ROCK MEDICAL
Trial Balance
March 31
Debit
Credit
Cash ……………………………………………………….
$36,775
Accounts Receivable…………………………..
15,850
Supplies ……………………………………………………….
470
Equipment ……………………………………………………….
22,800
Equipment ……………………………………………………….
Accounts Payable ……………………………………………………….
Service Revenue ……………………………………………………….
Rent Expense ……………………………………………………….
Office Expense ……………………………………………………….
Salaries and Wages Expense …………………………..
Supplies Expense ……………………………………………………….
695
Depreciation Expense …………………………..
380
PROBLEM 3-1B (Continued)
(c) ROCK MEDICAL
Income Statement
For the Month of March
Service revenue ……………………………………………………….
$19,300
Expenses:
Salaries and wages expense ………………………..
$2,500
ROCK MEDICAL
Statement of Owners’ Equity
For the Month of March
Owner’s Capital March 1 ……………………………………………………
$50,000
Add: Net income for March ………………………………………………
Less: Withdrawal by owner ……………………………………………….
ROCK MEDICAL
Balance Sheet
As of March 31
Assets
Liabilities and Owners’ Equity
Cash …………………………..
$36,775
Accounts payable ……………….
$15,200
Accounts receivable ………..
Supplies …………………………
Equipment. ……………………..
Rent expense ………………………………………………
Office expense …………………………..………………..
Supplies expense ………………………………………..
Depreciation expense …………………………..
Total expenses ………………………………………..
PROBLEM 3-1B (Continued)
(d) ROCK MEDICAL
Post-Closing Trial Balance
March 31
Debit
Credit
Cash ……………………………………………………….
$36,775
Accounts Receivable ………………………………………
15,850
Supplies ……………………………………………………….
Equipment ………………………………………………………
22,800
Accumulated Depreciation—Equipment …………..
PROBLEM 3-2B
(a)
Dec. 31
Accounts Receivable ……………………………………………………….
750
Service Revenue ……………………………………………………….
750
31
Unearned Service Revenue …………………………..
850
Service Revenue ……………………………………………………….
850
31
Salaries and Wages Expense …………………………..
1,850
Salaries and Wages Payable …………………………..
1,850
(b) PALM TRAVEL AGENCY
Income Statement
For the Year Ended December 31, 2014
Revenues
Service revenue ……………………………………………..
$47,700
Expenses
Salaries and wages expense …………………………..
$27,850
Depreciation expense …………………………..
Supplies expense …………………………..
Rent expense …………………………..…………………….
Insurance expense …………………………..
Interest expense……………………………………………..
Total expenses …………………………..
31
Supplies Expense ……………………………………………………….
Supplies ……………………………………………………….
31
Depreciation Expense ……………………………………………………….
31
Interest Expense ……………………………………………………….
600
Interest Payable ……………………………………………………….
600
31
Insurance Expense ……………………………………………………….
Prepaid Insurance ……………………………………………………….
PROBLEM 3-2B (Continued)
PALM TRAVEL AGENCY
Statement of Retained Earnings
For the Year Ended December 31, 2014
PALM TRAVEL AGENCY
Balance Sheet
December 31, 2014
Assets
Cash ………………………………………………………………………..
$16,500
Accounts receivable …………………………………………………
Supplies …………………………………………………………………..
Prepaid insurance …………………………………………………….
Equipment ……………………………………………………….………
Less: Accumulated depreciation—equipment …………..
Liabilities and Stockholders’ Equity
Liabilities
Notes payable………………………………………………….
$ 10,000
Accounts payable …………………………..……………….
2,600
Salaries and wages payable …………………………..
Unearned service revenue …………………………..
Interest payable ……………………………………………….
Total liabilities …………………………..………………
Common stock ………………………………………………..
Retained earnings ……………………………………………
(c) 1. Interest is $100 per month or 0.67% of the note payable. 0.67% X 12 = 8%
interest per year.
Retained earnings, January 1 ……………………………………………………
Add: Net income……………………………………………………….
PROBLEM 3-3B
1.
Dec. 31
Salaries and Wages Expense …………………………..
3,750
Salaries and Wages Payable …………………………..
3,750
2.
31
Unearned Rent Revenue …………………………..
102,000
Rent Revenue ……………………………………………………….
102,000
(2 X $8,000 X 3) = $48,000
(1 X $10,000 X 2) = 20,000
(4 X $8,500 X 1) = 34,000
3.
31
Advertising Expense ……………………………………………………….
6,600
Prepaid Advertising…………………………..
6,600
(JSK – $500 per month
for 6 months) = $3,000
(K56 – $700 per month
(L76H – $1,500 per month
for 1 months) = 1,500
4.
31
Interest Expense ……………………………………………………….
3,600
Interest Payable
($108,000 X 10% X 4/12) …………………………..
3,600
(5 X $850 X 3/5) = $2,550
(4 X $500 X 3/5) = 1,200
PROBLEM 3-4B
(a)
June 30
Supplies Expense …………………………..…………………………..
3,400
Supplies ……………………………………………………….
3,400
Depreciation Expense …………………………..
6,800
Interest Expense ……………………………………………………….
PROBLEM 3-4B (Continued)
(b) ORANGE CENTER
Adjusted Trial Balance
June 30, 2014
Dr.
Cr.
Cash …………………………..…………………………..
$ 6,800
Accounts Receivable ……………………………………………
49,800
Inventory ……………………………………………………….
56,950
Supplies ……………………………………………………….
2,200
Sales Returns and Allowances …………………………..
13,000
Cost of Goods Sold ………………………………………………
246,900
Salaries and Wages Expense …………………………..
125,650
Advertising Expense …………………………………………….
36,000
Utilities Expense ………………………………………………….
6,890
Maintenance and Repairs Expense………………………..
Delivery Expense …………………………..…………………….
16,800
Rent Expense ………………………………………………………
Supplies Expense ………………………………………………..
Depreciation Expense …………………………………………..
Interest Expense ………………………………………………….
3,800
Interest Payable ……………………………………………………
Accumulated Depr.— Equipment ………………………….
Notes Payable ……………………………………………………..
Accounts Payable ………………………………………………..
Common Stock …………………………………………………….
Retained Earnings …………………………..……………………
Sales ……………………………………………………….
PROBLEM 3-4B (Continued)
(c) ORANGE CENTER
Income Statement
For the Year Ended June 30, 2014
Sales revenue
Sales ……………………………………………………….
$506,800
Less: Sales returns and
Selling expenses
Salaries and wages expense
($125,650 X 60%) …………………………..
$75,390
Advertising expense …………………………..
36,000
Rent expense
($26,800 X 80%) …………………………..
21,440
Freight Out ……………………………………………..
16,800
Depreciation Expense …………………………..
Utilities expense
($6,890 X 80%) …………………….
5,512
Supplies expense …………………………..
3,400
Total selling expenses ………………………
Administrative expenses
Salaries and wages expense
($125,650 X 40%) …………………………..
50,260
Rent expense
($26,800 X 20%) …………………………..
5,360
Utilities expense
($6,890 X 20%) …………………………..
1,378
Total admin. expenses ………………………
66,808
Total oper. expenses ……………………
Income from operations…………………………..
Other expenses and losses
Interest expense ……………………………………………..
Net sales ……………………………………………………….
Cost of goods sold …………………………………………………..
Operating expenses
PROBLEM 3-4B (Continued)
ORANGE CENTER
Retained Earnings Statement
For the Year Ended June 30, 2014
ORANGE CENTER
Balance Sheet
June 30, 2014
Assets
Current assets
Cash ……………………………………………………….
$ 6,800
Accounts receivable …………………………..
49,800
Inventory ……………………………………………………….
Supplies ……………………………………………………….
Total current assets …………………………..
Property, plant, and equipment
Equipment ………………………………………………………
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable due next year …………………………..
$10,000
Accounts payable ……………………………………………
32,500
Interest payable ………………………………………………
3,800
Total current liabilities …………………………..
Long-term liabilities
Notes payable …………………………………………………
Total liabilities …………………………..
Common stock ……………………………………………….
Retained earnings, July 1, 2013 …………………………..
Less: Net income ……………………………………………………….
PROBLEM 3-4B (Continued)
(d)
June 30
Sales Revenue ……………………………………………………….
506,800
Income Summary …………………………..
506,800
30
Income Summary ……………………………………………………….
495,850
Sales Returns and Allowances …………………………..
13,000
Cost of Goods Sold …………………………..
246,900
Salaries and Wages Expense …………………………..
125,650
(e) ORANGE CENTER
Post-Closing Trial Balance
June 30, 2014
Debit
Credit
Cash ……………………………………………………….………………
$ 6,800
Accounts Receivable ……………………………………………….
49,800
Inventory ……………………………………………………….
56,950
Equipment ……………………………………………………….
62,000
Accumulated Depreciation—Equipment …………………….
Accounts Payable …………………………………………………….
Interest Payable ……………………………………………………….
Retained Earnings ……………………………………………………
Advertising Expense …………………………..
36,000
Utilities Expense …………………………..
6,890
Maintenance and Repair Expense …………………………..
Freight Out ……………………………………………………….
16,800
Rent Expense ……………………………………………………….
26,800
Supplies Expense …………………………..
Depreciation Expense …………………………..
6,800
Interest Expense …………………………..
3,800
Income Summary ……………………………………………………….
Retained Earnings …………………………..
10,950
PROBLEM 3-5B
(a)
-1-
-2-
Interest Expense ………………………………………………..
7,200
Interest Payable
($160,000 X 12% X 135/360) * …………………….
7,200
-3-
Admissions Revenue ………………………………………….
Unearned Admissions Revenue
(5,000 X $25) …………………………………………….
-4-
Prepaid Advertising …………………………..……………….
4,500
Advertising Expense …………………………..……….
4,500
-5-
Salaries and Wages Expense ………………………………
Salaries and Wages Payable…………………………
9,200
(b) 1. Interest expense, $9,200 ($2,000 + $7,200).
2. Admissions revenue, $555,000 ($680,000 – $125,000).
Depreciation Expense ……………………………………….
Accumulated Depreciation—Equipment
(1/16 X $240,000) ……………………………………..
PROBLEM 3-6B
(a)
-1-
Service Revenue ……………………………………………………….
9,000
Unearned Service Revenue …………………………..
9,000
-2-
-3-
Bad Debt Expense ……………………………………………………….
3,650
Allowance for Doubtful Accounts …………………………..
3,650
-4-
Insurance Expense ……………………………………………………….
2,100
Prepaid Insurance ……………………………………………………….
2,100
-5-
Depreciation Expense ……………………………………………………….
4,300
Accumulated Depreciation—Equipment
($43,000 X 0.10) ……………………………………………………….
4,300
-6-
Interest Expense ……………………………………………………….
500
Interest Payable
($60,000 X 0.12 X 30/360) …………………………..
500
-7-
Prepaid Rent Expense …………………………..…………………………..
3,000
Rent Expense ……………………………………………………….
3,000
-8-
Salaries and Wages Expense ……………………………………………………
Salaries and Wages Payable …………………………..
Accounts Receivable …………………………..…………………………..
Service Revenue ……………………………………………………….
PROBLEM 3-6B (Continued)
(b) GATOR CONSULTING
Income Statement
For the Year Ended December 31, 2014
Service revenue ($427,500 – $9,000 + $12,600) ………………
$431,100
Expenses
Salaries and wages expense
($256,800 + $2,650) ……………………………………………
$259,450
GATOR CONSULTING
Statement of Owners’ Equity
For the Year Ended December 31, 2014
Onwer’s Capital, January 1 ……………………………………………………….
$ 43,250a
Add: Net income ……………………………………………………….
78,400
Less: Withdrawals ……………………………………………………….
Rent expense ($42,000 – $3,000) …………………………..
Utilities expense …………………………………………………..
Depreciation expense …………………………………………..
Bad debt expense ………………………………………………..
Insurance expense ……………………………………………….
Interest expense …………………………………………………..
Total expenses ………………………………………………..
PROBLEM 3-6B (Continued)
GATOR CONSULTING
Balance Sheet
December 31, 2014
Assets
Current assets
Cash ……………………………………………………….
$21,600
Accounts receivable
($85,600 + $12,600) …………………………..
$98,200
Less: Allowance for
Liabilities and Owners’ Equity
Current liabilities
Notes payable …………………………..
$50,000
Unearned service revenue …………………………..
Salaries and wages payable ………………………..
Interest payable …………………………..
Supplies …………………………..…………………………
Prepaid rent expense …………………………..
Total current assets …………………………..
Equipment ……………………………………………………….
PROBLEM 3-7B
(a)
Jun. 30
Accounts Receivable ……………………………………………………….
700
Service Revenue ……………………………………………………….
700
30
Rent Expense ……………………………………………………….
600
Prepaid Rent Expense …………………………..
600
(b) AUSTIN SPORTS INC.
Income Statement
For the Quarter Ended June 30, 2014
Revenues
Service revenue …………………………………………………..
$36,150
Rent revenue ……………………………………………………….
2,600
Total revenue ………………………………………………..
$38,750
Expenses
Salaries and wages expense…………………………..
$21,700
Rent expense ………………………………………………………
Utilities expense ………………………………………………….
Supplies expense ………………………………………………..
Depreciation expense …………………………………………..
Interest expense ………………………………………………….
500
Total expenses ………………………………………………..
30
Supplies Expense ……………………………………………………….
750
Supplies ……………………………………………………….
750
30
Depreciation Expense ……………………………………………………….
650
Accumulated Depreciation—Equipment …………………………..
650
30
Interest Expense……………………………………………………….
Interest Payable ……………………………………………………….
30
Unearned Rent Revenue ……………………………………………………….
Rent Revenue ……………………………………………………….
30
Salaries and Wages Expense …………………………..
Salaries and Wages Payable …………………………..
PROBLEM 3-7B (Continued)
AUSTIN SPORTS INC.
Retained Earnings Statement
For the Quarter Ended June 30, 2014
Retained earnings, April 1 ……………………………………………………….
$ 0
AUSTIN SPORTS INC.
Balance Sheet
June 30, 2012
Assets
Current assets
Cash ……………………………………………………….
$12,500
Accounts receivable …………………………..
Supplies ……………………………………………………..
Total current assets …………………………..
Equipment ……………………………………………………….
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable …………………………..
$20,000
Accounts payable …………………………..
1,200
Salaries and wages payable ………………………..
1,600
Unearned rent revenue …………………………..
Interest payable …………………………..
Common stock………………………………………………….
Retained earnings …………………………..
Total stockholders’ equity
Add: Net income ……………………………………………………………………….
Less: Dividends ……………………………………………………….……………….