Salaries expense Income summary

__________________________ __________________________

1/1 Bal. 0 100,000 Closing

d. 41,000 Closing 69,000

Adjusting 1,000 42,000 Closing Closing 31,000

_______________ _______________

12/31 Bal. 0 12/31 Bal. 0

Problem 2-6 (concluded)

Requirement 9

Problem 2-7

Requirement 1

a. Interest receivable ................................................ 600

Interest revenue ($10,000 x 12% x 1/2)................... 600

b. Depreciation expense ($30,000 x 1/5)....................... 6,000

Accumulated depreciation................................ 6,000

c. Unearned rent revenue.......................................... 2,000

Rent revenue ($6,000 x 2/6).................................. 2,000

d. Prepaid insurance ................................................ 1,500

Insurance expense ($2,400 x 15/24)...................... 1,500

e. Interest expense ($20,000 x 12% x 3/12)..................... 600

Interest payable................................................ 600

f. Supplies expense ($1,800 - 700)............................... 1,100

Supplies............................................................ 1,100

Requirement 2

Income overstated

(understated)

Adjustments to revenues:

Understatement of interest revenue $ (600)

Understatement of rent revenue (2,000)

Adjustments to expenses:

Overstatement of insurance expense (1,500)

Understatement of depreciation expense 6,000

Understatement of interest expense 600

Understatement of supplies expense 1,100

Overstatement of net income $3,600

Problem 2-8

1. Depreciation expense ($75,000 ÷ 8 years).................. 9,375

Accumulated depreciation................................ 9,375

2. Wage expense ($4,500 - 3,000)................................. 1,500

Wages payable.................................................. 1,500

3. Bad debt expense ................................................ 550

Allowance for uncollectible accounts................ 550

[($32,500 x 2%) - $100]..........................................

4. Interest expense ($30,000 x 10% x 4/12)..................... 1,000

Interest payable................................................ 1,000

5. Supplies............................................................... 500

Supplies expense.............................................. 500

6. Prepaid rent.......................................................... 1,000

Rent expense.................................................... 1,000

Problem 2-9

Requirements 1 and 2

a. Depreciation expense ($50,000 ÷ 50 years)................ 1,000

Accumulated depreciation - buildings............... 1,000

b. Depreciation expense ($100,000 x 10%)................... 10,000

Accumulated depreciation - equipment............. 10,000

c. Insurance expense................................................ 1,500

Prepaid insurance ............................................ 1,500

d. Bad debt expense ................................................ 850

Allowance for uncollectible accounts................ 850
[($9,000 x 10%) - $50]

e. Salaries expense................................................... 1,500

Salaries payable................................................ 1,500

f. Rent revenue......................................................... 1,200

Unearned rent revenue...................................... 1,200

Problem 2-9 (continued)

Balance sheet Accounts

Cash Accounts receivable

__________________________ __________________________

Bal. 8,000 Bal. 9,000

_______________ _______________

12/31 Bal. 8,000 12/31 Bal. 9,000

Prepaid insurance Allow. for uncollectible accounts

__________________________ __________________________

Bal. 3,000 50 Bal.

1,500 Adjusting 850 Adjusting

_______________ _______________

Bal. 1,500 900 12/31 Bal.

Land Buildings

__________________________ __________________________

Bal. 200,000 Bal. 50,000

_______________ _______________

12/31 Bal. 200,000 12/31 Bal. 50,000

Equipment Accumulated depreciation-bldg.

__________________________ __________________________

Bal. 100,000 20,000 Bal.

1,000 Adjusting

_______________ _______________

Bal. 100,000 21,000 12/31 Bal.

Accumulated depreciation-equip. Accounts payable

__________________________ __________________________

40,000 Bal. 35,000 Bal.

10,000 Adjusting

_______________ _______________

50,000 12/31 Bal. 35,000 12/31 Bal.

Problem 2-9 (continued)

Salaries payable Unearned rent revenue

__________________________ __________________________

0 Bal. 0 Bal.

1,500 Adjusting 1,200 Adjusting

_______________ _______________

1,500 12/31 Bal. 1,200 12/31 Bal.

Common stock Retained earnings

__________________________ __________________________

200,000 Bal. 56,450 Bal.

_______________ _______________

200,000 12/31 Bal. 56,450 12/31 Bal.

InCOME STATEMENT Accounts

Sales revenue Interest revenue

__________________________ __________________________

90,000 Bal. 3,000 Bal.

_______________ _______________

90,000 12/31 Bal. 3,000 12/31 Bal.

Rent revenue Salaries expense

__________________________ __________________________

7,500 Bal. Bal. 37,000

Adjusting 1,200 Adjusting 1,500

_______________ _______________

6,300 12/31 Bal. 12/31 Bal. 38,500

Bad debt expense Depreciation expense

__________________________ __________________________

Bal. 0 Bal. 0

Adjusting 850 Adjusting 1,000

Adjusting 10,000

_______________ _______________

12/31 Bal. 850 12/31 Bal. 11,000

Problem 2-9 (continued)

Insurance expense Utility expense

__________________________ __________________________

Bal. 0 Bal. 30,000

Adjusting 1,500

_______________ _______________

12/31 Bal. 1,500 12/31 Bal. 30,000

Date: 2015-12-11; view: 1248