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Rent expense Depreciation expense__________________________ __________________________ 3/1 Bal. 0 3/1 Bal. 0 5. 5,000 9. 1,000 _______________ _______________ 3/31 Bal. 5,000 3/31 Bal. 1,000
Common stock............................................................. 500,000 2. Furniture and fixtures............................................... 100,000 Cash............................................................................. 40,000 Note payable ............................................................... 60,000 3. Inventory.................................................................. 200,000 Accounts payable......................................................... 200,000 4. Accounts receivable.................................................. 280,000 Sales revenue................................................................ 280,000 Cost of goods sold.................................................... 140,000 Inventory...................................................................... 140,000 5. Rent expense................................................................. 6,000 Cash............................................................................. 6,000 6. Prepaid insurance.......................................................... 3,000 Cash............................................................................. 3,000 7. Accounts payable...................................................... 120,000 Cash............................................................................. 120,000 8. Cash............................................................................ 55,000 Accounts receivable...................................................... 55,000 9. Retained earnings.......................................................... 5,000 Cash............................................................................. 5,000 10.Depreciation expense.................................................... 2,000 Accumulated depreciation............................................ 2,000 11.Insurance expense ($3,000 ÷ 12 months)......................... 250 Prepaid insurance......................................................... 250
k 1. Source documents a. Record of the dual effect of a transaction in e 2. Transaction analysis b. Internal events recorded at the end of a reporting period. a 3. Journal c. Primary means of disseminating information to external decision makers. j 4. Posting d. To zero out the owners’ equity temporary accounts. f 5. Unadjusted trial balance e. Determine the dual effect on the accounting equation. b 6. Adjusting entries f. List of accounts and their balances before recording adjusting entries. h 7. Adjusted trial balance g. List of accounts and their balances after recording closing entries. c 8. Financial statements h. List of accounts and their balances after recording adjusting entries. d 9. Closing entries i. A means of organizing information; not part of the formal accounting system. g 10. Post-closing trial balance j. Transferring balances from the journal to the ledger. i 11. Worksheet k. Used to identify and process external transactions.
Decrease (D)Account
1. I Inventory 2. I Depreciation expense 3. D Accounts payable 4. I Prepaid rent 5. D Sales revenue 6. D Common stock 7. D Wages payable 8. I Cost of goods sold 9. I Utility expense 10. I Equipment 11. I Accounts receivable 12. D Allowance for uncollectible accounts 13. I Bad debt expense 14. I Interest expense 15. D Interest revenue 16. D Gain on sale of equipment Exercise 2-7 Account(s) Account(s) Debited Credited Example: Purchased inventory for cash 3 5 1. Paid a cash dividend. 10 5 2. Paid rent for the next three months. 8 5 3. Sold goods to customers on account. 4,16 9,3 4. Purchased inventory on account. 3 1 5. Purchased supplies for cash. 6 5 6. Paid employees wages for September. 15 5 7. Issued common stock in exchange for cash. 5 12 8. Collected cash from customers for goods sold in 3. 5 4 9. Borrowed cash from a bank and signed a note. 5 11 10. At the end of October, recorded the amount of supplies that had been used during the month. 7 6 11. Received cash for advance payment from customer. 5 13 12. Accrued employee wages for October. 17 15
Insurance expense............................................. 10,000 2. Depreciation expense........................................... 15,000 Accumulated depreciation ............................... 15,000 3. Bad debt expense ($6,500 - 2,000)............................ 4,500 Allowance for uncollectible accounts................ 4,500 4. Salaries expense................................................... 18,000 Salaries payable................................................ 18,000 5. Interest expense ($200,000 x 12% x 2/12).................... 4,000 Interest payable................................................ 4,000 6. Unearned rent revenue.......................................... 1,500 Rent revenue (1/2x $3,000).................................. 1,500 Exercise 2-9 1. Interest receivable ($90,000 x 8% x 3/12).................... 1,800 Interest revenue................................................ 1,800 2. Rent expense ($6,000 x 2/3)...................................... 4,000 Prepaid rent...................................................... 4,000 3. Rent revenue ($12,000 x 7/12)................................... 7,000 Unearned rent revenue ..................................... 7,000 4. Depreciation expense........................................... 4,500 Accumulated depreciation................................ 4,500 5. Salaries expense .................................................. 8,000 Salaries payable................................................ 8,000 6. Supplies expense ($2,000 + 6,500 - 3,250).................. 5,250 Supplies............................................................ 5,250
1. $7,200 ÷ .75 = $9,600 in annual interest $9,600 ÷ $120,000 = 8% interest rate
Or, $7,200 ÷ $120,000 = .06 nine-month rate To annualize the nine month rate: .06 x 12/9 = .08 or 8%
2. $60,000 ÷ 12 months = $5,000 per month in rent $35,000 ÷ $5,000 = 7 months expired. The rent was paid on June 1, seven months ago.
3. $500 represents two months (November and December) in accrued interest, or $250 per month. $250 x 12 months = $3,000 in annual interest Principal x 6% = $3,000 Principal = $3,000 ÷ .06 = $50,000 note
Exercise 2-11 (continued)
*Beginning balance of $100,000 plus net income of $101,000. Exercise 2-11 (concluded) Requirement 2
December 31, 2011 Sales revenue............................................................. 800,000 Income summary................................................... 800,000
Income summary....................................................... 699,000 Cost of goods sold................................................. 480,000 Salaries expense.................................................... 120,000 Rent expense......................................................... 30,000 Depreciation expense............................................ 60,000 Interest expense..................................................... 4,000 Bad debt expense.................................................. 5,000
Income summary ($800,000 - 699,000)........................... 101,000 Retained earnings.................................................. 101,000
December 31, 2011 Sales revenue............................................................. 750,000 Interest revenue......................................................... 3,000 Income summary................................................... 753,000
Income summary....................................................... 576,000 Cost of goods sold................................................. 420,000 Salaries expense.................................................... 100,000 Rent expense......................................................... 15,000 Depreciation expense............................................ 30,000 Interest expense..................................................... 5,000 Insurance expense................................................. 6,000
Income summary ($753,000 - 576,000)........................... 177,000 Retained earnings ................................................. 177,000 Exercise 2-13
December 31, 2011 Sales revenue............................................................. 492,000 Interest revenue......................................................... 6,000 Gain on sale of investments ..................................... 8,000 Income summary................................................... 506,000
Income summary....................................................... 440,000 Cost of goods sold................................................. 284,000 Salaries expense.................................................... 80,000 Insurance expense................................................. 12,000 Interest expense..................................................... 4,000 Advertising expense.............................................. 10,000 Income tax expense............................................... 30,000 Depreciation expense ........................................... 20,000
Income summary ($506,000 – 440,000)........................... 66,000 Retained earnings ................................................. 66,000
Supplies 11/30 Balance 1,500 Expense 2,000 Purchased ? 12/31 Balance 3,000
Cost of supplies purchased = $3,000 + 2,000 - 1,500 = $3,500 Exercise 2-14 (continued) Requirement 2 Prepaid insurance 11/30 Balance 6,000 Expense ? 12/31 Balance 4,500
Insurance expense for December = $6,000 - 4,500 = $1,500
December 31, 2011 Insurance expense..................................................... 1,500 Prepaid insurance.................................................. 1,500 Requirement 3
Wages payable 10,000 11/30 Balance Wages paid 10,000 ?Accrued wages
15,000 12/31 Balance
Accrued wages for December = $15,000
December 31, 2011 Wages expense.......................................................... 15,000 Wages payable...................................................... 15,000 Exercise 2-14 (concluded) Requirement 4 Unearned rent revenue 2,000 11/30 Balance Earned for Dec. 1,000 1,000 12/31 Balance
Rent revenue recognized each month = $3,000 x 1/3 = $1,000
December 31, 2011 Unearned rent revenue.............................................. 1,000 Rent revenue.......................................................... 1,000 Exercise 2-15 Requirement 1
Requirement 2
Exercise 2-16 Unadjusted net income $30,000
Adjustments: a. Only $2,000 in insurance should be expensed + 4,000 b. Sales revenue overstated - 1,000 c. Supplies expense overstated + 750 d. Interest expense understated ($20,000 x 12% x 3/12) - 600 Adjusted net income $33,150
(1) $320,000 cash collected less $5,000 decrease in accounts receivable. Cash ............................................................................ 320,000 Accounts receivable (decrease in account)....................... 5,000 Sales revenue (to balance)............................................... 315,000
(2) $25,000 cash paid for the purchase of supplies less $500 increase in supplies. Supplies expense (to balance) ........................................ 24,500 Supplies (increase in account)....................................... 500 Cash ............................................................................... 25,000 Exercise 2-17 (concluded)
(3) $6,000 cash paid for insurance less $2,000 ending balance in prepaid insurance. Insurance expense (to balance) ........................................ 4,000 Prepaid insurance (increase in account)............................ 2,000 Cash ............................................................................... 6,000
(4) $20,000 cash paid for miscellaneous expenses plus increase in accrued liabilities. Miscellaneous expense (to balance) ............................... 21,000 Accrued liabilities (increase in account).......................... 1,000 Cash ............................................................................... 20,000
(5) $100,000 x 6% x 3/12 = $1,500 Interest expense .............................................................. 1,500 Interest payable............................................................... 1,500 Exercise 2-18
Add: Increase in prepaid insurance ($6,000 – 4,500) 1,500 Deduct: Depreciation expense (22,000) Decrease in accounts receivable ($62,000 – 55,000) (7,000) Decrease in prepaid rent ($9,200 – 8,200) (1,000) Increase in unearned service fee revenue ($11,000 – 9,200) (1,800) Increase in accrued liabilities ($15,600 – 12,200) (3,400)
Accrual basis income $ 99,300
Exercise 2-19 (continued) Requirement 2
Exercise 2-19 (concluded)
*Beginning balance of $29,000 plus net income of $9,000. Exercise 2-20 Requirement 1
Date: 2015-12-11; view: 1166
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1. Cash.......................................................................... 500,000
List A List B
Increase (I) or
1. Prepaid insurance ($12,000 x 30/36).......................... 10,000
$7,200 represents nine months of interest on a $120,000 note, or 75% of annual interest.
Requirement 1
Requirement 1
