B-0301This chapter introduces important concepts in income measurement. Accountants oftentimes discuss these concepts using accounting "jargon" or "terminology. Effective business communication requires that all parties attach the same meaning to the words that are used to express concepts. Match the accounting terms in the list on the left to the accounting concept described in the list on the right.(1)Depreciation(a)The basic conditions require that an exchange has occurred and the earnings process is complete.(2)Calendar Year(b)An asset reflecting advance payment for something that will be consumed over the future.(3)Revenue Recognition(c)An entry usually prepared coincident with the end of an accounting period to update the accounting for prepaids, accruals, and other allocations.(4)Cash Basis(d)An annual reporting period that runs from January 1 through December 31.(5)Prepaids(e)Monies collected from customers for services that have not yet been provided.(6)Unearned Revenue(f)An approach that results in the initial recording of prepaids to an asset account and unearned revenues to a liability account.(7)Balance Sheet Approach(g)The notion that a continuous business process can be divided into time intervals such as years, quarters, or months for reporting purposes.(8)Adjusting Entry(h)A systematic and rational allocation scheme to spread a portion of the total cost of a productive asset to each period of use.(9)Accruals(i)Expenses and revenues that gradually accumulate with the passage of time.(10)Periodicity Assumption(j)A simplified non-GAAP based method to record revenues as received and expenses as paid.
&R&"Myriad Web Pro,Bold"&20B-03.01
B-03.01
Worksheet(1)Depreciation(h)A systematic and rational allocation scheme to spread a portion of the total cost of a productive asset to each period of use.(2)Calendar Year(3)Revenue Recognition(4)Cash Basis(5)Prepaids(6)Unearned Revenue(7)Balance Sheet Approach(8)Adjusting Entry(9)Accruals(10)Periodicity Assumption
&L&"Myriad Web Pro,Bold"&12Name:
Date: Section: &R&"Myriad Web Pro,Bold"&20B-03.01
B-03.01
B-03.02Accounting "failures" occur when reported results are not presented in accordance with generally accepted accounting principles. These failures can produce significant financial losses to investors and creditors. Oftentimes, an accounting failure results from an incorrect application of revenue recognition concepts. Revgression Corporation included each of the following described transactions in revenue during 20X5. Three of these transactions were appropriate, and three were not. Determine which are "ok" and which are "not ok."(1)Goods were sold and shipped in late 20X5, but the product still requires substantial installation and setup services. The price and terms of sale stipulate that seller must satisfactorily complete all installation and setup at the buyer's location.(2)Goods were produced according to a customer purchase order, but had not y ...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
B-0301This chapter introduces important concepts in income measure.docx
1. B-0301This chapter introduces important concepts in income
measurement. Accountants oftentimes discuss these concepts
using accounting "jargon" or "terminology. Effective business
communication requires that all parties attach the same meaning
to the words that are used to express concepts. Match the
accounting terms in the list on the left to the accounting concept
described in the list on the right.(1)Depreciation(a)The basic
conditions require that an exchange has occurred and the
earnings process is complete.(2)Calendar Year(b)An asset
reflecting advance payment for something that will be consumed
over the future.(3)Revenue Recognition(c)An entry usually
prepared coincident with the end of an accounting period to
update the accounting for prepaids, accruals, and other
allocations.(4)Cash Basis(d)An annual reporting period that
runs from January 1 through December 31.(5)Prepaids(e)Monies
collected from customers for services that have not yet been
provided.(6)Unearned Revenue(f)An approach that results in the
initial recording of prepaids to an asset account and unearned
revenues to a liability account.(7)Balance Sheet
Approach(g)The notion that a continuous business process can
be divided into time intervals such as years, quarters, or months
for reporting purposes.(8)Adjusting Entry(h)A systematic and
rational allocation scheme to spread a portion of the total cost
of a productive asset to each period of
use.(9)Accruals(i)Expenses and revenues that gradually
accumulate with the passage of time.(10)Periodicity
Assumption(j)A simplified non-GAAP based method to record
revenues as received and expenses as paid.
&R&"Myriad Web Pro,Bold"&20B-03.01
B-03.01
Worksheet(1)Depreciation(h)A systematic and rational
allocation scheme to spread a portion of the total cost of a
productive asset to each period of use.(2)Calendar
Year(3)Revenue Recognition(4)Cash
2. Basis(5)Prepaids(6)Unearned Revenue(7)Balance Sheet
Approach(8)Adjusting Entry(9)Accruals(10)Periodicity
Assumption
&L&"Myriad Web Pro,Bold"&12Name:
Date: Section: &R&"Myriad Web
Pro,Bold"&20B-03.01
B-03.01
B-03.02Accounting "failures" occur when reported results are
not presented in accordance with generally accepted accounting
principles. These failures can produce significant financial
losses to investors and creditors. Oftentimes, an accounting
failure results from an incorrect application of revenue
recognition concepts. Revgression Corporation included each
of the following described transactions in revenue during 20X5.
Three of these transactions were appropriate, and three were
not. Determine which are "ok" and which are "not
ok."(1)Goods were sold and shipped in late 20X5, but the
product still requires substantial installation and setup services.
The price and terms of sale stipulate that seller must
satisfactorily complete all installation and setup at the buyer's
location.(2)Goods were produced according to a customer
purchase order, but had not yet been shipped by the end of
20X5.(3)Goods were delivered to customers during early 20X5,
but the customers had ordered and paid for the goods during
20X4.(4)Customers purchased goods and services during late
20X5, but credit terms permitted them to delay payment until
early 20X6. Full payment is expected eventually.(5)Advance
payment from a customer in a foreign country was received in
20X5, for services to be provided in 20X6.(6)Goods were
purchased and paid for by customers during 20X5, but
customers may return defective goods for warranty work or a
refund. The expected warranty/refund claims are subject to
reasonable estimation and not anticipated to be significant.
B-03.02
Worksheet 0302"NOT OK"
3. Revenue should not be recorded during 20X5 for the following
three items:"OK"
Revenue should be recorded during 20X5 for the following
three items:
B-03.02
B-03.03The recognition of an expense usually occurs based on
one of the following three intrinsic principles:(a)Associating
cause and effect(b)Systematic and rational
allocation(c)Immediate recognitionEvaluate the following items
and determine the intrinsic principle that establishes the basis
by which it is to be recorded as an expense.(1)The cost of a
building used in the business.(2)The cost of merchandise sold to
customers.(3)Rental costs under a three-year lease
agreement.(4)The cost of a rebate offered on goods sold to
customers.(5)An uninsured storm loss.(6)Commissions paid to a
sales person.(7)Cost of land seized as the result of a change in
government in a foreign venue.(8)The cost of paper used by a
publishing company.(9)The cost of an unfavorable verdict in a
civil lawsuit.
B-03.03
Worksheet 0303Associating cause and effect(2)The cost of
merchandise sold to customers.Systematic and rational
allocationImmediate recognition
B-03.03
B-03.04Following are three separate transactions that pertain to
prepaid items. Evaluate each item and prepare the journal
entries that would be needed for the initial recording and
subsequent end-of-20X3 adjusting entry. Assume the company
uses the balance sheet approach, and the initial recording is to
an asset account. The company has a calendar year-end and
does not make any adjusting entries prior to December
31.(1)The company purchased an 18-month insurance policy for
$18,000 on June 1, 20X3.(2)The company started 20X3 with
$20,000 in supplies (this was previously recorded, and you do
not need to make an entry for the beginning balance), purchased
$30,000 in supplies during the year, and found only $13,000 in
4. supplies on hand at the end of 20X3.(3)The company paid
$2,500 to rent a truck. The rental period began on December
16, 20X3, and ends on February 14, 20X4.
B-03.04
Worksheet 0304GENERAL
JOURNALDateAccountsDebitCredit1-Jun31-DecGENERAL
JOURNALDateAccountsDebitCreditvarious31-DecGENERAL
JOURNALDateAccountsDebitCredit16-Dec31-Dec
B-03.05Mohamed Bakar Alidini recently formed a business in
the Republic of Yemen to process liquefied natural gas for
export to other countries. Natural gas can be converted to a
liquid by cooling it to -163 degrees Celsius. It then assumes a
highly compressed state and can be transported by specially
designed cryogenic vessels. Mohamed's business invested
80,000,000 (Yemeni Rials/YER) in a cooling/containment
chamber with a 4-year life. The chamber will have no
remaining value at the end of the 4-year period.(a)Prepare
journal entries to record annual depreciation for each of the four
years, assuming Alidini uses the straight-line method.(b)Show
how the annual depreciation will appear in each year's income
statement.(c)Show how the asset, and related accumulated
depreciation will appear in each year's balance sheet.
B-03.05
Worksheet 0305GENERAL
JOURNALDateAccountsDebitCreditALIDINI
CORPORATION20X1Income StatementFor the Year Ending
December 31, 20X1. . .20X2Expenses. . .Depreciation. .
.20X320X4ALIDINI CORPORATIONBalance SheetDecember
31, 20X1Assets. . .Cooling chamberLess: Accumulated
depreciation. . .ALIDINI CORPORATIONIncome StatementFor
the Year Ending December 31, 20X2. . .Expenses. .
.Depreciation. . .ALIDINI CORPORATIONBalance
SheetDecember 31, 20X2Assets. . .Cooling chamberLess:
Accumulated depreciation. . .ALIDINI CORPORATIONIncome
StatementFor the Year Ending December 31, 20X3. . .Expenses.
. .Depreciation. . .ALIDINI CORPORATIONBalance
5. SheetDecember 31, 20X3Assets. . .Cooling chamberLess:
Accumulated depreciation. . .ALIDINI CORPORATIONIncome
StatementFor the Year Ending December 31, 20X4. . .Expenses.
. .Depreciation. . .ALIDINI CORPORATIONBalance
SheetDecember 31, 20X4Assets. . .Cooling chamberLess:
Accumulated depreciation. . .
B-03.05 (b)&(c)
B-03.06Stargate Publishing issues the Weekly Window. The
company's primary sources of revenue are sales of subscriptions
to customers and sales of advertising in the Weekly Window.
Stargate owns its building and has excess office space that it
leases to others.
The following transactions involved the receipt of advance
payments. Prepare the indicated journal entries for each set of
transactions.(1)On September 1, 20X5, the company received a
$24,000 payment from an advertising client for a 6-month
advertising campaign. The campaign was to run from
November, 20X5, through the end of April, 20X6. Prepare the
journal entry on September 1, and the December 31 end-of-year
adjusting entry.(2)The company began 20X5 with $120,000 in
unearned revenue relating to sales of subscriptions for future
issues. During 20X5, additional subscriptions were sold for
$1,230,000. Magazines delivered during 20X5 under
outstanding subscriptions totaled $1,020,000. Prepare a
summary journal entry to reflect the sales of subscriptions, and
the end-of-year adjusting entry to reflect magazines
delivered.(3)The company received a $3,000 rental payment on
December 16, 20X5, for the period running from mid-December
to Mid-January. Prepare the December 16 journal entry, as well
as the December 31 end-of-year adjusting entry.
B-03.06
Worksheet 0306GENERAL
JOURNAL DateAccountsDebitCredit1-Sep31-DecGENERAL
JOURNAL DateAccountsDebitCreditvarious31-DecGENERAL
JOURNAL DateAccountsDebitCredit16-Dec31-Dec
6. B-03.07Creative Hearing Technologies of London recently
introduced a Bluetooth-enabled hearing aid that allows hearing-
disabled users to not only hear better, but also interface with
their cell phones and digital music players.
The company reports the following four transactions and events
related to December of 20X7, and is seeking your help to
prepare the end-of-year adjusting entries needed at December
31.(1)On December 1, the company borrowed £10,000,000 at an
8% per annum interest rate. The loan, and all accrued interest,
is due in 3 months.(2)Early in December, the company licensed
its new technology to Apple Bites Computer, Inc., for use in
Apple's existing product lines. The agreement provides for a
royalty payment from Apple to Creative based on Apple's sales
of products using the licensed technology. As of December 31,
£45,000 is due under the agreement for actual sales made by
Apple to date.(3)Creative pays many employees on an hourly
basis. As of December 31, there are 5,320 unpaid labor hours
already worked, at an average hourly rate of £17.(4)The
company estimates that utilities used during December, for
which bills will be received in January, amount to £20,000.
B-03.07
Worksheet 0307GENERAL
JOURNAL DateAccountsDebitCredit31-Dec31-Dec31-Dec31-
Dec
B-03.08Anthony Asher's administrative assistant maintains a
very simple computerized general ledger system. This system
includes intuitive routines for recording receipts, payments, and
sales on account. However, the system is not sufficiently robust
to automate end-of-period adjustments. Below is the trial
balance for the month ending January 31, 20X8. This trial
balance has not been adjusted for the various items that are
described below. Review the trial balance and narratives, and
prepare the necessary adjusting entries.Asher CorporationTrial
BalanceJanuary 31, 20X8DebitsCreditsCash$ 37,500$ -
Accounts receivable12,410-Prepaid insurance2,400-
7. Supplies7,113-Equipment35,000-Accumulated depreciation-
10,000Accounts payable-7,569Unearned revenue-8,500Loan
payable-15,000Capital stock-24,000Retained earnings, Jan. 1-
15,457Revenues-43,995Salary expense12,098-Rent
expense13,000-Office expense2,500-Dividends2,500-$
124,521$ 124,521Asher Corporation's equipment had an
original life of 140 months, and the straight-line depreciation
method is used. As of January 1, the equipment was 40 months
old. The equipment will be worthless at the end of its useful
life.
As of the end of the month, Asher Corporation has provided
services to customers for which the earnings process is
complete. Formal billings are normally sent out on the first day
of each month for the prior month's work. January's unbilled
work is $25,000.
Utilities used during January, for which bills will soon be
forthcoming from providers, are estimated at $1,500.
A review of supplies on hand at the end of the month revealed
items costing $3,500.
The $2,400 balance in prepaid insurance was for a 6-month
policy running from January 1 to June 30.
The unearned revenue was collected in December of 20X7. 60%
of that amount was actually earned in January, with the
remainder to be earned in February.
The loan accrues interest at 1% per month. No interest was paid
in January.
B-03.08
Worksheet 0308GENERAL
JOURNALDateAccountsDebitCredit31-Jan31-Jan31-Jan31-
Jan31-Jan31-Jan31-Jan
8. B-03.09Professor Wayne Campbell recently lectured on
adjusting entries. As he did so, he prepared T-accounts on a
marker board to illustrate the key points he was making.
As he was erasing his illustrations from the board, Candice
Greenhaw arrived late to class. She was only able to copy the
following portions of the T-account illustrations from the board.
You are to help Candice recreate the lecture by completing the
missing portions of each T-account. Then, prepare the adjusting
entries for December 31, 20X1.Example 1:Unearned
RevenuesRevenues12/31/X118,00025,00012/1/X1178,976Vario
us23,90012/15/X112/31/X118,00030,900Example 2:Prepaid
InsuranceInsurance ExpenseBeg.
Bal.15,00012/31/X112/10/X15,00020,00013,000Example
3:Salaries ExpenseSalaries
PayableVarious21,50012/31/X112/15/X12,50012/31/X127,000E
xample 4:Depreciation ExpenseAccumulated
DepreciationVarious23,90089,000Beg.
Bal.12/31/X112/31/X125,200Example 5:SuppliesSupplies
ExpenseBeg. Bal.012/31/X112/9/X13,4003,4001,600
B-03.09
Worksheet 0309Example 1:12/31/X1Unearned
Revenues18,000Revenues18,000To record previously collected
revenues now earnedExample 2:Example 3:Example 4:Example
5:
B-03.09
B-03.10Evaluate the following items, and determine the correct
amount to report on the income statement for each, using the
accrual basis of accounting for the referenced period of
time.RevenuesA Company had beginning accounts receivable of
$8,000. The company reported cash basis revenues of
$100,000. The ending accounts receivable amounted to
$18,000.SuppliesB Company purchased $25,000 of supplies.
Supplies on hand decreased by $5,000 during the period.RentC
Company started the year with no prepaid rent, and ended the
9. year with $1,000 in prepaid rent. Rent expense on a cash basis
was $13,000.EquipmentAt the beginning of the year, D
Company purchased and expensed an item of equipment for
$20,000. The equipment has a 4-year life, and will be worthless
after four years.WagesThere were no wages payable at the
beginning of the year. E Company paid $145,000 in wages
during the year, and owed an additional $12,000 at year's end.
B-03.10
Worksheet 03.10RevenuesSuppliesRentEquipmentWages
I-3.04 Plicta Motors is an automobile service center offering a
full range of repair services for high performance cars. The
following information is pertinent to adjusting entries that are
needed for Plicta, as of March 31, 20X5. Plicta has a fiscal
year ending on March 31, and only records adjusting entries at
year end.Plicta has a large investment in repair equipment, and
maintains detailed asset records. These records show that
depreciation for fiscal "X5" is $123,400.As of March 31, 20X5,
accrued interest on loans owed by Plicta is $21,678.Auto
dealerships outsource work to Plicta. This work is done on
account, and billed monthly. As of March 31, 20X5, $54,800 of
unbilled services have been provided.Plicta maintains a general
business liability insurance policy. The prepaid annual
premium is $6,000. The policy was purchased on October 1,
20X4. Another policy is a 6-month property and casualty policy,
and it was obtained on December 1, 20X4, at a cost of $3,000.
Both policies were initially recorded as prepaid insurance.The
company prepared a detailed count of shop supplies at March
31, 20X4. $37,904 was on hand at that date. Management
believed this level was greater than necessary and undertook a
strategy to reduce these levels over the next year. During the
fiscal year 20X5, Plicta purchased an additional $125,000 of
supplies, and debited the Supplies account. By March 31,
20X5, the effort to reduce inventory was successful, as the
count revealed an ending balance of only $13,600.During the
fiscal year, Plicta began offering a service contract to retail
customers entitling them regular tire rotations, car washing, and
10. other routine maintenance items. Customers prepay for this
service agreement, and Plicta records the proceeds in the
Unearned Revenue account. The service plan is a flat fee of
$219, and Plicta sold the plan to 456 customers. At March 31,
20X5, it is estimated that 25% of the necessary work has been
provided under these agreements.Plicta's primary advertising is
on billboards. Lamzar Outdoor Advertising sold Plicta a plan
for multiple sign locations around the city. Because Plicta
agreed to prepay the full price of $26,000, Lamzar agreed to
leave the signs up for 13 months. Plicta paid on June 1, 20X4,
and recorded the full amount as a prepaid. However, the
advertising campaign was not begun until July 1, 20X4. It will
conclude on July 31, 20X5.Plicta leases shop space. Monthly
rent is due and payable on the first day of each month. Plicta
paid March's rent on March 1, and expects to pay April's rent on
April 1.Prepare adjusting entries (hint: when necessary) for
Plicta, as of March 31, 20X5.
I-03.04
Worksheet I-3.04 GENERAL
JOURNAL PageDateAccountsDebitCreditMar. 31Mar. 31Mar.
31Mar. 31Mar. 31Mar. 31Mar. 31
I-3.06 Examine each of the following fact scenarios, then
prepare initial and end-of-year adjusting entries (when needed)
assuming (a) use of a "balance sheet" approach versus (b) use of
an "income statement" approach. You may assume a calendar
year end for each scenario. Use T-accounts to show how the
same financial statement results occur under either approach.
The preprinted worksheet includes an illustrative solution for
the first scenario.Scenario 1A $1,500, one-year insurance policy
was purchased on June 1, 20X1.Scenario 2$20,000 of unearned
revenue was collected on August 1, 20X1. 40% of this amount
was earned by the end of the year.Scenario 3On December 1,
20X1, $3,000 was prepaid for space in a trade-show booth. The
trade show is in February of 20X2.Scenario 4A $1,000 customer
deposit for future services was received on April 1, 20X1. On
June 20, 20X1, the customer canceled the agreement and
11. received a full refund.I-3.06
I-03.06
Worksheet I-3.06Scenario 1: Balance Sheet
Approach06/01/X1Prepaid Insurance1,500Cash1,500To record
payment for 1-year policy12/31/X1Insurance
Expense875Prepaid Insurance875To record insurance "used"
($1,500 X 7/12)Prepaid InsuranceInsurance
Expense06/01/X11,50087512/31/X112/31/X1875625Scenario 1:
Income Statement Approach06/01/X1Insurance
Expense1,500Cash1,500To record payment for 1-year
policy12/31/X1Prepaid Insurance625Insurance Expense625To
record insurance "unused" ($1,500 X 5/12)Prepaid
InsuranceInsurance
Expense12/31/X162506/01/X11,50062512/31/X1875Scenario 2:
Balance Sheet Approach08/01/X112/31/X1Unearned
RevenueRevenueScenario 2: Income Statement
Approach08/01/X112/31/X1Unearned RevenueRevenueScenario
3: Balance Sheet Approach12/01/X112/31/X1Prepaid RentRent
ExpenseScenario 3: Income Statement
Approach12/01/X112/31/X1Prepaid RentRent ExpenseScenario
4: Balance Sheet Approach04/01/X106/20/X1Unearned
RevenueRevenueScenario 4: Income Statement
Approach04/01/X106/20/X1Unearned RevenueRevenue
I-03.06
B-4.01 Amber Nestor has an eye for quality. She recently
formed an art gallery where she allows artists to display their
artwork for sale. Customers buy the artwork through the
gallery, but payments are actually made payable directly to the
originating artist. Artists, in turn, pay Amber a 20%
commission that is appropriately reflected as revenue of the
gallery.
Following is Amber's trial balance after the first year of
operation. This trial balance does not reflect the adjustments
that are necessary, as described by the additional
infomation.AMBER NESTOR ART GALLERYTrial BalanceAs
12. of December 31, 20X4DebitsCreditsCash$ 18,400$ -
Supplies6,790-Display equipment15,000-Loan payable-
7,500Capital stock-25,000Revenues-48,590Rent expense11,000-
Salaries expense24,000-Interest expense500-Utilities
expense5,400-$ 81,090$ 81,090The Display equipment was
purchased near the beginning of the year. It has a 3-year life
and no salvage value. Its cost should be depreciated equally
over its life.Amber is entitled to receive $17,900 of
commissions for art sold. This revenue has not yet been
recorded, but it is fully expected that the artists will soon be
making payment.Supplies on hand at year end were counted,
and amount to $3,400.December's rent of $1,000 has not yet
been paid.(a) Prepare the necessary adjusting enties as of
December 31, 20X4.(b) Use T-accounts to determine the
adjusted balances of the accounts.(c) Prepare the adjusted trial
balance for Amber Nestor.
B-04.01
Worksheet B-4.01GENERAL JOURNAL
PageDateAccountsDebitCreditCA
SHREVENUESAMBER NESTOR ART GALLERYDec.
31Adjusted Trial BalanceAs of December 31, 20X4ACCOUNTS
RECEIVABLEDebitsCreditsDec. 31Cash$ -$ -RENT
EXPENSEAccounts receivable--Supplies--SUPPLIESDisplay
equipment--Dec. 31Accumulated depreciation--Rent payable--
SALARIES EXPENSELoan payable--Capital stock--Dec.
31DISPLAY EQUIPMENTRevenues--Rent expense--INTEREST
EXPENSESalaries expense--Interest expense--
ACCUMULATED DEPRECIATIONUtilities expense----
UTILITIES EXPENSE--$ -$ -RENT PAYABLELOAN
PAYABLECAPITAL STOCK
B-04.01 (b)
B-4.02Reagan Sakai is in charge of financial management for
Land Monitrix. Land Monitrix utilizes satellite technology and
sophisticated mapping software to alert its customers to
trespassing, illegal dumping, and other encroachments on
property these customers own around the globe. Customers
13. typically purchase one-year contracts for this service, and the
pricing depends on the number and size of sites monitored.Mr.
Sakai desires to review financial reports -- an income statement,
statement of retained earnings, and balance sheet. Prepare these
reports from the following adjusted trial balance. Mr. Sakai
needs this information for internal review purposes, and does
not require a classified balance sheet. The operating data relate
to the full year, and the blank worksheet already includes partial
data.LAND MONITRIX CORPORATIONAdjusted Trial
BalanceAs of December 31, 20X5DebitsCreditsCash$
834,221$ -Accounts receivable345,909-Prepaid
expenses45,787-Supplies66,665-Satellite equipment3,009,000-
Accumulated depreciation-1,222,199Accounts payable-
544,190Unearned revenues-455,000Loan payable-
1,000,000Capital stock-560,000Retained earnings, Jan. 1-
228,892Dividends50,000-Revenues-2,373,402Selling
expenses476,445-Interest expense80,000-Salaries
expense677,667-Maintenance and supplies expense222,989-
Depreciation expense575,000-$ 6,383,683$ 6,383,683
B-04.02
Worksheet B-4.02Income StatementRevenuesServices to
customers$ -Expenses$ ------Net income$ -Note -- The
"Excel" tip uses macros, and your security settings may limit
access.LAND MONITRIX CORPORATIONStatement of
Retained EarningsBeginning retained earnings$ -Plus: Net
income-$ --$ -
B-04.02
B-4.03Utilize the following worksheet to prepare the income
statement, statement of retained earnings, and balance sheet for
Himarios Corporation. For this problem, you do not need to
prepare a classified balance sheet.HIMARIOS
COMPANYWorksheet to Prepare Financial
StatementsDECEMBER 31, 20X9Trial
BalanceAdjustmentsAdjusted Trial BalanceIncome
StatementStatement of Retained EarningsBalance
SheetDebitCreditDebitCreditDebitCreditDebitCreditDebitCredit
14. DebitCreditCash$ 59,300$ 59,300$ 59,300Accounts
receivable12,37112,37112,371Equipment60,00060,00060,000Ac
cumulated depreciation$ 12,000$ 4,000$ 16,000$
16,000Accounts payable7,5667,5667,566Unearned
revenue4,000$ 1,5002,5002,500Notes
payable25,00025,00025,000Capital
stock50,00050,00050,000Retained earnings, Jan. 16,3436,343$
6,343Service revenue139,9871,500141,487$ 141,487Salaries
expense108,4254,300112,725$ 112,725Interest
expense2,1002,1002,100Dividends2,7002,700$
2,700Depreciation expense4,0004,0004,000Salaries
payable4,3004,3004,300Rent expense2,5002,5002,500Rent
payable---2,500-2,500--2,500$ 244,896$ 244,896$ 12,300$
12,300$ 255,696$ 255,696$ 121,325$ 141,487Net
income20,162--20,162$ 141,487$ 141,487$ 2,700$
26,505Retained earnings, Dec. 3123,805--23,805$ 26,505$
26,505$ 131,671$ 131,671
B-04.03
Worksheet B-4.03HIMARIOS COMPANYIncome StatementFor
the Year Ending December 31, 20X9RevenuesServices to
customers$ -Expenses$ -----Net income$ -HIMARIOS
COMPANYStatement of Retained EarningsFor the Year Ending
December 31, 20X9Beginning retained earnings$ -Plus: Net
income-$ -Less: Dividends-Ending retained earnings$ -
B-04.03
B-4.04Some of the following accounts are real (permanent)
accounts, and some are nominal (temporary) accounts. Which
are which?Capital StockRevenuesAccumulated
DepreciationSalaries ExpenseAccounts
PayableDividendsSuppliesRent ExpenseUnearned
RevenuesIncome SummaryEquipmentPrepaid RentInterest
PayableRetained EarningsLoan Payable
B-04.04
Worksheet B-4.04Capital
StockRealRevenuesTemporaryAccumulated
DepreciationSalaries ExpenseAccounts
15. PayableDividendsSuppliesRent ExpenseUnearned
RevenuesIncome SummaryEquipmentPrepaid RentInterest
PayableRetained EarningsLoan Payable
B-4.05Timber Creek prepared the following adjusted trial
balance on December 31, 20X3. The company has completed
preparation of financial statements and is now ready to prepare
closing entries.TIMBER CREEKAdjusted Trial BalanceAs of
December 31, 20X3DebitsCreditsCash$ 35,600$ -Accounts
receivable23,700-Supplies7,500-Equipment325,700-
Accumulated depreciation-40,400Accounts payable-34,800Loan
payable-100,000Capital stock-80,000Retained earnings-
70,000Dividends20,000-Revenues-478,400Rent
expense120,000-Salaries expense235,600-Supplies
expense18,000-Interest expense7,400-Depreciation
expense10,100-$ 803,600$ 803,600
B-04.05
Worksheet B-4.05GENERAL
JOURNALPageDateAccountsDebitCreditCASHDIVIDENDSDec
. 31closingTIMBER CREEKPost-Closing Trial BalanceTo close
revenues to Income SummaryAs of December 31,
20X3ACCOUNTS RECEIVABLEREVENUESDec.
31closingDebitsCredits$ -$ ---SUPPLIESRENT EXPENSE--
closing----To close expenses to Income Summary--
EQUIPMENTSALARIES EXPENSE--Dec. 31closing----To
close Income Summary to retained earnings$ -$ -
ACCUMULATED DEPRECIATIONSUPPLIES EXPENSEDec.
31closingTo close dividendsACCOUNTS PAYABLEINTEREST
EXPENSEclosingLOAN PAYABLEDEPRECIATION
EXPENSEclosingCAPITAL STOCKINCOME
SUMMARYclosingclosingclosingRETAINED
EARNINGSclosingclosing
B-04.05(b)
B-04.05(c)
B-4.06Flowcharts are often used to document business activity.
Rectangles represent "processes" and "documents" are
represented by the boxes with a rolling bottom. Rearrange the
16. following flowchart shapes into the correct order, and connect
with arrows as appropriate.
B-04.06
Transactions are recorded in the journal
Financial statements are produced
Journal entries are posted to appropriate ledger accounts
An adjusted trial balance is prepared
A trial balance is constructed
Adjusting entries are prepared and posted
Closing entries are recorded in the journal and posted to the
ledger
A post-closing trial balance is prepared
Worksheet B-4.06You can either complete this problem by
manually redrawing (or cutting and pasting) the shapes, or you
can use the Excel file and simply drag and drop the flowchart
symbols into the correct sequence.
B-04.06
Excel includes a drawing feature that allows you to insert
various shapes into your spreadsheet
(Insert/Illustrations/Shapes). The insert tab includes a number
of predefined shapes, including standard flowchart symbols. In
older versions of Excel, symbols can be found under
View/Toolbars/Drawing.
Transactions are recorded in the journal
Financial statements are produced
Journal entries are posted to appropriate ledger accounts
An adjusted trial balance is prepared
A trial balance is constructed
Adjusting entries are prepared and posted
Closing entries are recorded in the journal and posted to the
ledger
A post-closing trial balance is prepared
B-4.07Traditions is an upscale university housing complex
providing all the amenities of private townhouse living, and a
full service 24-hour cafeteria for busy students. Prior to
recording any adjusting entries for 20X4, Traditions has
17. incurred and recorded total salary expense of $875,000 and total
rental revenue of $4,800,000.
As of December 31, 20X4, the company owes $15,000 of
additional salaries to employees, and accrued rent due from
residents amounts to $100,000.
On January 10, 20X5, Traditions paid salaries of $40,000
covering the amount due as of December 31, as well as
additional amounts relating to 20X5.
On January 15, 20X5, Traditions received rental payments for
$250,0000 covering the rents due as due of December 31, 20X4,
and additional amounts relating to the first half of January,
20X5.(a)Prepare the necessary year-end adjusting entries for
salaries and rent.(b)Determine the total salaries expense and
total rent revenue for 20X4.(c)Assuming the company uses
reversing entries, prepare necessary reversals for early
20X5.(d)Assuming the company used reversing entries, prepare
entries for January 10 and 15, 20X5.(e)Assuming the company
does not use reversing entries, prepare entries for January 10
and 15, 20X5.(f)Show how 20X5 salaries expense and rent
revenue will be the same, whether reversing entries are used or
not.
B-04.07
Worksheet B-4.07GENERAL
JOURNAL PageDateAccountsDebitCredit(a)Dec. 31Dec.
31(b)(c)Jan. 1Jan. 1(d)Jan. 10Jan. 15(e)Jan. 10Jan. 15(f)
B-4.08Liz Ross Corporation prepares a classified balance sheet
that includes the following traditional sections:Current
AssetsLong-term InvestmentsProperty, Plant &
EquipmentIntangiblesOther AssetsCurrent LiabilitiesLong-term
LiabilitiesStockholders' EquityIn which section of the classified
balance sheet would the following accounts appear? Some of the
accounts may not appear in the balance sheet.Note Payable (due
in 3 months)Accumulated DepreciationInvestment in
18. Government BondsAccounts ReceivableAccounts PayableLong-
term Receivable From EmployeeDividendsCapital
StockPatentSuppliesRetained Earnings (ending)Rent
ExpenseUnearned RevenuesIncome
SummaryEquipmentRevenuesPrepaid RentInterest
PayableRetained Earnings (beginning)Loan Payable (due in 5
years)
B-04.08
Worksheet B-4.08Note: The Excel spreadsheet includes a pick
list in column "c," making it easy to select your choice (just
click in the applicable cell). The first one is done as an
example, and you can select the "blank" item appearing last in
the pick list for those accounts that do not appear in the balance
sheet.Note Payable (due in 3 months)Current
LiabilitiesAccumulated DepreciationInvestment in Government
BondsAccounts ReceivableAccounts PayableLong-term
Receivable From EmployeeDividendsCapital
StockPatentSuppliesRetained Earnings (ending)Rent
ExpenseUnearned RevenuesIncome
SummaryEquipmentRevenuesPrepaid RentInterest
PayableRetained Earnings (beginning)Loan Payable (due in 5
years)
B-04.08
B-4.09Nkululeko J. Ntshanga owns a manganese ore mining
business in South Africa. He is interested in attracting
additional investors to obtain financing for planned expansion.
Some potential investors have expressed a concern that money
is really being sought to address liquidity problems being faced
by Nkululeko's company.
To alleviate this concern Nkululeko provided the following
complete list of assets and liabilities of the company. The
currency unit is the South African Rand. Use this information
to determine the company's current assets, current liabilities,
working capital, current ratio, and quick ratio. Based on your
calculations, does it appear that the company is experiencing
19. liquidity problems?Accumulated DepreciationR
4,569,000Prepaid Rent45,800Note Payable (due in 3
months)100,000Accounts Receivable468,000Accounts
Payable255,000Patent3,000,000Cash790,000Supplies134,800Un
earned Revenues133,000Equipment8,777,600Interest
Payable45,000Loan Payable (due in 3 years)1,500,000
B-04.09
Worksheet B-4.09Current AssetsQuick AssetsCurrent
LiabilitiesAccumulated DepreciationR 4,569,000Prepaid
Rent45,800Note Payable (due in 3 months)100,000Accounts
Receivable468,000Accounts
Payable255,000Patent3,000,000Cash790,000Supplies134,800Un
earned Revenues133,000Equipment8,777,600Interest
Payable45,000Loan Payable (due in 3 years)1,500,000Working
Capital :Current Ratio:Quick Ratio:
B-04.09
I-4.01 Berry Corporation prepared the following preliminary
trial balance. The trial balance and other information was
evaluated by Delton Wiser, CPA. Delton has returned a list of
proposed adjustments that are necessary to facilitate preparation
of correct financial statements for the year ending December 31,
20X3.BERRY CORPORATIONTrial BalanceDecember 31,
20X3DebitsCreditsCash$ 30,540$ -Accounts
receivable45,000-Supplies7,000-Equipment244,500-
Accumulated depreciation-46,500Accounts payable-
12,700Unearned revenue-31,250Notes payable-80,000Capital
stock-100,000Retained earnings, Jan. 1-63,200Dividends12,000-
Revenues-289,800Wages expense214,600-Utilities
expense8,700-Selling expense41,610-Depreciation
expense12,000-Interest expense7,500-$ 623,450$
623,450Delton discovered that 40% of the unearned revenue
appearing in the trial balance had actually been earned as of the
end of the year.A physical count of supplies on hand revealed a
year-end balance of only $3,000.Unpaid and unrecorded
invoices for utilities for December amounted to $1,500.The last
payday was December 26. Employees are owed an additional
20. $3,900 that has not been recorded.Additional depreciation of
$3,100 needs to be recorded.(a)Prepare journal entries relating
to the adjustments.(b)Prepare an adjusted trial balance (you
might utilize a partial worksheet for this task, as shown in the
downloadable form).(c)Prepare an income statement and
statement of retained earnings for 20X3, and a classified
balance sheet as of the end of the year.(d)Berry's bookkeeper
argued with Delton that there was no need to record the
adjustments since they have no "net" effect on income.
Evaluate whether this observation is true of false, and comment
on the appropriateness of this logic.
I-04.01
Worksheet I-4.01 GENERAL
JOURNAL PageDateAccountsDebitCreditBERRY
CORPORATIONBERRY CORPORATIONWorksheet for
Adjusted Trial BalanceIncome StatementDecember 31, 20X3For
the Year Ending December 31, 20X3Trial
BalanceAdjustmentsAdjusted Trial
BalanceRevenuesDebitsCreditsDebitsCreditsDebitsCreditsServi
ces to customers$ -Cash$ 30,540-----ExpensesAccounts
receivable45,000-----Wages$ -Supplies7,000-----Utilities-
Equipment244,500-----Selling-Accumulated depreciation-$
46,500----Depreciation-Accounts payable-12,700----Supplies-
Utilities payable------Interest--Wages payable------Net income$
-Unearned revenue-31,250----Notes payable-80,000----Capital
stock-100,000----Retained earnings, Jan. 1-63,200----
Dividends12,000-----BERRY CORPORATIONRevenues-
289,800----Statement of Retained EarningsWages
expense214,600-----For the Year Ending December 31,
20X3Utilities expense8,700-----Selling expense41,610-----
Beginning retained earnings$ -Depreciation expense12,000----
-Plus: Net income-Supplies expense------$ -Interest
expense7,500-----Less: Dividends-$ 623,450$ 623,450$ -$
-$ -$ -Ending retained earnings$ -BERRY
CORPORATIONBalance SheetDecember 31,
20X3AssetsCurrent assetsCash$ -Accounts receivable-
21. Supplies-$ -Property, plant & equipmentEquipment$ -Less:
Accumulated depreciation--Total assets$ -LiabilitiesCurrent
liabilitiesAccounts payable$ -Utilities payable-Wages payable-
Unearned revenue-$ -Long-term liabilitiesNotes payable-Total
liabilities$ -Stockholders' equityCapital stock$ -Retained
earnings-Total stockholders' equity-Total liabilities and equity$
-
I-04.01(b)
I-04.01(c)(d)
I-4.02Examine the following trial balances, before and after
adjustment:CHESTERFIELD CORPORATIONTrial Balance and
Adjusted Trial BalanceDecember 31, 20X9Trial
BalanceAdjusted Trial BalanceDebitsCreditsDebitsCreditsCash$
166,890$ -$ 166,890$ -Accounts receivable87,654-107,654-
Supplies8,992-4,500-Prepaid rent6,0002,000-
Equipment145,700-145,700-Accumulated depreciation-37,660-
44,660Accounts payable-13,590-13,590Wages payable---
4,500Interest payable-1,500Unearned revenue-18,000-
12,000Notes payable-50,000-50,000Capital stock-225,000-
225,000Retained earnings, Jan. 1-89,119-
89,119Dividends40,000-40,000-Revenues-334,490-
360,490Wages expense276,123-280,623-Rent expense33,000-
37,000-Depreciation expense--7,000-Supplies expense--4,492-
Interest expense3,500-5,000-$ 767,859$ 767,859$ 800,859$
800,859(a) Determine and record the apparent adjusting
entries in journal entry format.(b) Prepare an income statement
for the year ending December 31, 20X9.(c) Prepare a statement
of retained earnings for the year ending December 31, 20X9.(d)
Prepare a classified balance sheet as of December 31, 20X9.
I-04.02
Worksheet I-4.02GENERAL
JOURNAL PageDateAccountsDebitCreditCHESTERFIELD
CORPORATIONIncome StatementFor the Year Ending
December 31, 20X9RevenuesServices to customers$ -
ExpensesWages$ -Rent-Depreciation-Supplies-Interest--Net
income$ -CHESTERFIELD CORPORATIONStatement of