122# # Chapter#4# EXERCISES'

Transcription

1 122 Chapter4 E4 1 EXERCISES' Assets = Liabilities + Stockholders'Equity (1) + 30, ,000 (2) 20, ,000 (3) + 9,000 +9,000 (4) + 8, ,000 (5) 5,500 5,500 (6) Total 41,000 9,000 32,000 Note: E4 2 Transactions(4),(5),and(6)areinitiallyrecordedintemporaryaccountsandareclosedintothe RetainedEarningsaccount,whichispartofstockholders'equity. Assets =Liabilities + Stockholders'Equity Accounts Notes Contributed Retained Cash + Receivable+ Land = Payable + Capital + Earnings (1) + 30, ,000 (2) 20, ,000 (3) + 9,000 +9,000 (4) +8, ,000 (5) 5,500 5,500 (6) Total 13,000 8,000 20,000 9,000 30,000 2,000 Note: Transactions(4),(5),and(6)areinitiallyrecordedintemporaryaccountsandareclosedintothe RetainedEarningsaccount,whichispartofstockholders'equity. E4 3 XCompany IncomeStatement FortheYearEnded Revenues... $ 8,000 Operatingexpenses... 5,500 Netincome... $ 2,500

2 E4 4 XCompany StatementofStockholders Equity FortheYearEnded ContributedRetained CapitalEarnings Beginningbalance$0$0 Netincome2,500 Dividends(500) Ownercontribution30,000 Endingbalance$30,000$2,000 XCompany BalanceSheet Asof Assets LiabilitiesandStockholders'Equity Cash... $ 13,000 Notespayable... $ 9,000 Accountsreceivable... 8,000 Contributedcapital... 30,000 Land... 20,000 Retainedearnings... 2,000 Totalliabilitiesand Totalassets... $41,000 stockholders'equity... $ 41,000 XCompany StatementofCashFlows FortheYearEnded Cashflowsfromoperatingactivities: Cashpaymentsforexpenses... $ (5,500) Cashflowsfrominvestingactivities: Purchaseofland... (20,000) Cashflowsfromfinancingactivities: Cashcontributionsfromowners... $30,000 Proceedsfrombankloan... 9,000 Paymentsofcashdividend... (500) Netcashflowfromfinancingactivities... 38,500 Netincreaseincash... $ 13,000 Beginningcashbalance... 0 Endingcashbalance... $ 13,000 Assets = Liabilities + Stockholders'Equity (1) +10, ,000

3 (2) +8, ,000 (3) 3, ,000 6,000 (4) +12, ,000 2,000 (5) (6) + 7, ,000 6,000 Total 25,600 13,000 12,600 CathedralEnterprises IncomeStatement FortheYearEnded ' Feesearned... $ 8,000 Expenses... (6,000) Gainonsaleofland... 1,000 Netincome... $ 3,000 CathedralEnterprises StatementofStockholders Equity FortheYearEnded ContributedRetained CapitalEarnings Beginningbalance$0$0 Netincome3,000 Dividends(400) Stockholdercontribution10,000 Endingbalance$10,000$2,600 CathedralEnterprises BalanceSheet Asof Assets LiabilitiesandStockholders'Equity Cash... $ 17,600 Misc.payable... $ 3,000 Receivables... 2,000 Longatermnote... 10,000 Land... 6,000 Contributedcapital... 10,000 Retainedearnings... 2,600 Totalliabilitiesand Totalassets... $25,600 stockholders'equity... $25,600 CathedralEnterprises StatementofCashFlows FortheYearEnded

4 Cashflowsfromoperatingactivities: Cashcollectedfromcustomers... $ 6,000 Cashpaidforexpenses... (3,000) Netcashincreasefromoperatingactivities... $ 3,000 Cashflowsfrominvestingactivities: Proceedsfromsaleofland... $ 7,000 Cashpaidforland... (2,000) Netcashincreasefrominvestingactivities... 5,000 Cashflowsfromfinancingactivities: Contributionsfromstockholders... $ 10,000 Dividendspaidtostockholders... (400) Netcashincreasefromfinancingactivities... 9,600 Increaseincash... $ 17,600 Beginningcashbalance... 0 Endingcashbalance... $ 17,600 Note:Eventhough$12,000worthoflandwaspurchasedonly$2,000isshownonthisstatementbecause thebalance($10,000)waspaidforwithapromisetopaycashinthefuture(loan).soonly$2,000ofcash wasusedthisyear. E4 6 E4 10 Account FinancialStatementAccountingEquation FlightEquipment BalanceSheet Assets PassengerRevenue IncomeStatement Owners Equity RetainedEarnings BalanceSheet Owners Equity NotesPayable BalanceSheet Liabilities InterestExpense IncomeStatement Owners Equity AccountsReceivableBalanceSheet Assets PrepaidExpenses BalanceSheet Assets AccountsPayable BalanceSheet Liabilities CommonStock BalanceSheet Owners Equity FuelExpense IncomeStatement Owners Equity OtherRevenues IncomeStatement Owners Equity ShortaTermInvestments BalanceSheet Assets DepreciationExpense IncomeStatement Owners Equity LandingFees IncomeStatement Owners Equity a. Assets =Liabilities + Stockholders'Equity Accounts Notes Contributed Retained Cash + Receivable+ Land = Payable + Capital + Earnings (1) + 12, ,000

5 (2) + 5, ,000 (3) 10, ,000 (4) 5,000 5,000 (5) + 10,000 +4, ,000 (6) 4,000 4,000 (7) + 2,800 3, (8) 2,200 2,200 Total 8,600 4,000 7,000 5,000 12,000 2,600 Ed'sLawnService IncomeStatement FortheYearEndedDecember31,2015 Revenue... $14,000 Rentexpense... (5,000) Miscellaneousexpense... (4,000) Lossonsaleofland... (200) Netincome... $ 4,800 Ed'sLawnService StatementofStockholders Equity FortheYearEndedDecember31,2015 ContributedRetained CapitalEarnings Beginningbalance,January1,2015$0$0 Netincome4,800 Dividends(2,200) Stockholdercontribution12,000 Endingbalance,December31,2015$12,000$2,600 Ed'sLawnService BalanceSheet AsofDecember31,2015 Assets LiabilitiesandStockholders'Equity Cash... $ 8,600 Notespayable... $ 5,000 Accountsreceivable... 4,000 Contributedcapital... 12,000 Land... 7,000 Retainedearnings... 2,600 Totalliabilitiesand Totalassets... $19,600 stockholders'equity... $ 19,600 Ed'sLawnService StatementofCashFlows FortheYearEndedDecember31,2015 Cashflowsfromoperatingactivities: Cashcollectedfromcustomers... $ 10,000 Rentpaymentsonlawnequipment... (5,000) Paymentofmiscellaneousexpenses... (4,000) Netcashincreasefromoperatingactivities... $ 1,000

6 Cashflowsfrominvestingactivities: Proceedsfromsaleofland... $ 2,800 Cashpaidforland... (10,000) Netcashdecreasefrominvestingactivities... (7,200) Cashflowsfromfinancingactivities: Stockholdercontributions... $ 12,000 Proceedsfrombankloan... 5,000 Dividendpayments... (2,200) Netcashincreasefromfinancingactivities... 14,800 Increaseincash... $ 8,600 Beginningcashbalance... 0 Endingcashbalance... $ 8,600 b. (1) Cash(+A)... 12,000 ContributedCapital(+SE)... 12,000 Collected(cash(from(stockholders. (2) Cash(+A)... 5,000 NotesPayable(+L)... 5,000 Borrowed(cash(from(bank. (3) Land(+A)... 10,000 Cash( A)... 10,000 Purchased(land. (4) RentExpense(E, SE)... 5,000 Cash( A)... 5,000 Incurred(and(paid(rent(expense. (5) Cash(+A)... 10,000 AccountsReceivable(+A)... 4,000 FeesEarned(R,+SE)... 14,000 Rendered(services. (6) MiscellaneousExpenses(E, SE)... 4,000 Cash( A)... 4,000 Incurred(and(paid(miscellaneous(expenses. (7) Cash(+A)... 2,800 LossonSaleofLand(Lo, SE) Land( A)... 3,000 Sold(land. (8) Dividends( SE)... 2,200 Cash( A)... 2,200 Declared(and(paid(cash(dividend. ' Cash AccountsReceivable

7 B.B. 0 B.B. 0 (1) 12,000 (3) 10,000 (5) 4,000 (2) 5,000 (4) 5,000 (5) 10,000 (6) 4,000 E.B. 4,000 (7) 2,800 (8) 2,200 E.B. 8,600 ' Land NotesPayable B.B. 0 B.B. 0 (3) 10,000 (7) 3,000 (2) 5,000 E.B. 7,000 E.B. 5,000 ' ContributedCapital RetainedEarnings* B.B. 0 B.B. 0 (1) 12,000 E.B. 12,000 E.B. 2,600 ' Dividends FeesEarned B.B. 0 B.B. 0 (8) 2,200 (5) 14,000 E.B. 2,200 E.B. 14,000 ' RentExpense MiscellaneousExpenses B.B. 0 B.B. 0 (4) 5,000 (6) 4,000 E.B. 5,000 E.B. 4,000 ' LossonSaleofLand B.B. 0 (7) 200 E.B. 200 *TheEndingBalanceintheRetainedEarningsaccountisderivedbythefollowingformula: BeginningBalance+Revenues Expenses Dividends. Foracheck,refertothestatementofretainedearnings. Ed'sLawnService IncomeStatement FortheYearEndedDecember31,2015 Revenue... $14,000 Rentexpense... (5,000) Miscellaneousexpense... (4,000) Lossonsaleofland... (200) Netincome... $ 4,800 Ed'sLawnService

8 StatementofStockholders Equity FortheYearEndedDecember31,2015 ContributedRetained CapitalEarnings Beginningbalance,January1,2015$0$0 Netincome4,800 Dividends(2,200) Stockholdercontribution12,000 Endingbalance,December31,2015$12,000$2,600 Ed'sLawnService BalanceSheet AsofDecember31,2015 Assets LiabilitiesandStockholders'Equity Cash... $ 8,600 Notespayable... $5,000 Accountsreceivable... 4,000 Contributedcapital... 12,000 Land... 7,000 Retainedearnings... 2,600 Totalliabilitiesand Totalassets... $19,600 stockholders'equity... $19,600 Ed'sLawnService StatementofCashFlows FortheYearEndedDecember31,2015 Cashflowsfromoperatingactivities: Cashcollectedfromcustomers... $ 10,000 Rentpaymentsonlawnequipment... (5,000) Paymentofmiscellaneousexpenses... (4,000) Netcashincreasefromoperatingactivities... $ 1,000 Cashflowsfrominvestingactivities: Proceedsfromsaleofland... $ 2,800 Cashpaidforland... (10,000) Netcashdecreasefrominvestingactivities... (7,200) Cashflowsfromfinancingactivities: Stockholdercontributions... $ 12,000 Proceedsfrombankloan... 5,000 Dividendpayments... (2,200) Netcashincreasefromfinancingactivities... 14,800 Increaseincash... $ 8,600 Beginningcashbalance... 0 Endingcashbalance... $ 8,600 E4 12 a. (1) Theentryistorecordrentincurredbutnotyetpaid. (2) Theentryistorecordtheexpirationofapreviouslypurchasedinsurancepolicy. (3) Theentryistorecordtheexpirationofaportionofafixedassetcost. (4) Theentryistorecordinterestrevenueearnedbutnotyetcollected. (5) Theentryistorecordtheearningofadeferredrevenue.

9 b. (1) Accrualadjustingentry (2) Costexpirationadjustingentry (3) Costexpirationadjustingentry (4) Accrualadjustingentry (5) Accrualadjustingentry E4 14 a. 12/31/15 WageExpense(E, SE)... 42,000* WagesPayable(+L)... 42,000 ( ( ( Incurred,(but(did(not(pay,(wages.( * $42,000=$70,000 (3daysinDecember 5daystotal) b. 1/2/16 WageExpense(E, SE)... 28,000 WagesPayable( L)... 42,000 Cash( A)... 70,000 ( ( ( Paid(wages.( c Total Wageexpense $42,000 $28,000 $70,000 Cashoutflowassociatedwithwages 0 70,000 70,000 d. ThepurposeoftheadjustingjournalentryonDecember31,2015istorecognizeaneconomiceventthat hasnotyetbeencapturedbyanexchangetransaction.theeconomiceventisthatthehurstcorporation consumedthebenefitsofitsemployees'labor,andindoingso,hasbecomeobligatedtoitsemployees. Hurst Corporation will not fulfill its obligation to its employees until the subsequent period when it actually pays the employees their wages. Consequently, an accrual adjusting entry is required on December31torecordthiseconomiceventinthecorrectaccountingperiod. E4 15 a Bookvalue,1/1/12... $856, Depreciationexpense... $214,000 Less:Accumulateddepreciation,12/31/ ,000 Bookvalue,12/31/12... $642, Bookvalue,1/1/12... $856, Depreciationexpense... $214, Depreciationexpense... $214,000 Less:Accumulateddepreciation,12/31/ ,000 Bookvalue,12/31/13... $428, Bookvalue,1/1/12... $856, Depreciationexpense... $214, Depreciationexpense... $214, Depreciationexpense... $214,000

10 Less:Accumulateddepreciation,12/31/ ,000 Bookvalue,12/31/14... $214, Bookvalue,1/1/12... $856, Depreciationexpense... $214, Depreciationexpense... $214, Depreciationexpense... $214, Depreciationexpense... $214,000 Less:Accumulateddepreciation,12/31/ ,000 Bookvalue,12/31/15... $ 0 b Total Depreciationexpense$214,000 $214,000 $214,000$214,000$856,000 Cashoutflowassociatedwith thepurchaseofthe$856, $856,000 equipment c. E4 16 Thepurposeoftheadjustingjournalentryattheendofeachperiodistorecognizetheeconomicevent of the portion of the fixed asset cost that expired during that year. Specifically, the purpose of the adjustingjournalentriesistoallocatethecostoftheequipmenttotheperiodsthatbenefitedfromthe equipment.sincetheequipmenthasausefullifeoffouryears,itisassumedthatitwillhelpgenerate revenuesforfouryears.thecostofafixedassetshouldbematchedwiththeperiodsinwhichthefixed assethelpsgeneraterevenues. a. Withcashabasisaccounting,cashinflowsandoutflowsarethecriticalevents.Acompanywillrecognize revenuewhenithascashinflows,andthecompanywillrecognizeexpenseswhenithascashoutflows. Sointhiscase,WashingtonForestProductswouldrecognizethefollowingexpensesundercashabasis accounting. Insuranceexpense $29,000 Suppliesexpense 27,000 Rentexpense 8,000 Withaccrualabasisaccounting,inflowsandoutflowsofassetsandliabilitiesarethecriticalevents.That is,acompanywillrecognizerevenuewhenithasaninflowofassetsoranoutflowofliabilitiesassociated withoperatingactivities.similarly,thecompanywillrecognizeexpenseswhenithasanoutflowofassets oraninflowofliabilitiesassociatedwithoperatingactivities. Considertherevenuesbeinggeneratedwhenthecompanyisentitledtocash.Thecompanycouldcollect thecashattheexactsametimeitbecomesentitledtothecash(whichisanassetaccount),thecompany couldexpecttocollectthecashafterithasbecomeentitledtothecash(whichwouldgiverisetoa receivable,anassetaccount)orthecompanycouldbecomeentitledtocashafterithadalreadycollected thecash(whichwouldresultinthecompanyreducingitsunearnedrevenue,aliabilityaccount).justas withrevenues,acompanycanconsumebenefitsatthreedifferentpointsintimerelativetothecash outflow.thecompanywouldconsumethebenefitatthesametimeitdisbursescash(whichisanasset account),thecompanycouldintendtodisbursethecashafterconsumingthebenefit(whichwouldgive risetoapayable,aliabilityaccount),orthecompanycouldconsumeabenefitforwhichithasalready disbursedthecash(whichwouldresultinthecompanyconsumingaprepaidexpense,anassetaccount). Becauseaccrualabasisaccountingisnotbasedontheinflowandoutflowofoneasset(i.e.,cash),accruala

11 basisaccountingprovidesamuchbroadermeasureofrevenuesandexpensesthanprovidedbycasha basisaccounting.thus,inthecaseofwashingtonforestproducts,thedifferencebetweenitsexpenses under cashabasis accounting and under accrualabasis accounting is due to expenses being defined differentlyunderthetwoapproaches. b. Insurance: Endingbalance = Beginningbalance+Insurancepurchased Insuranceexpense = $0+$29,000 $20,000 = $9,000 Sincethecompanyacquiredmoreinsurancethanitusedduring2014,thecompanyexpectstoreceive future benefits from the remaining insurance. Consequently, the company has an asset, and the appropriateaccounttitleisprepaidinsurance. Supplies: Endingbalance = Beginningbalance+Suppliespurchased Suppliesexpense = $0+$27,000 $11,000 = $16,000 Sincethecompanyacquiredmoresuppliesthanitusedduring2014,thecompanyexpectstoreceive future benefits from the remaining supplies. Consequently, the company has an asset, and the appropriateaccounttitleissuppliesinventory. Rent: Endingbalance = Beginningbalance+Cashdisbursedforrent Rentexpense = $0+$8,000 $14,000 = $(6,000) Sincethecompanyincurredmoreexpensethanitdisbursedincashforrent,thecompanyexpectsto fulfill the remaining obligations in the future. Consequently, the company has a liability, and the appropriateaccounttitlewouldberentpayable. E4 21 a. WagesPayable WagesPayable WageExpense CashPaidforWages asof12/31/15 = asof12/31/14 + on2015inc.st. during2015 $17,000 = X + $39,000 $35,000 X = $13,000 b. PrepaidRent PrepaidRent CashPaidforRent RentExpenseon asof12/31/15 = asof12/31/14 + during2015 on2015inc.st. $15,000 = $12,000 + X $21,000 X = $24,000 c. AccountsRec. AccountsRec. SalesRevenue Cash Collected asof12/31/15 = asof12/31/14 + on2015inc.st. during2015 X = $14,000 + $45,000 $38,000 X = $21,000

12 P4 1 PROBLEMS' a. (1) Equipment(+A) ,000 Cash( A) ,000 ( ( Purchased(equipment.( (2) WageExpense(E, SE)... 30,000 Cash( A)... 30,000 ( ( Incurred(and(paid(wages.( (3) Cash(+A)... 15,000 AccountsReceivable( A)... 15,000 ( ( Collected(cash(from(customers.( (4) Cash(+A)... 16,000 AccountsReceivable(+A)... 8,000 FeesEarned(R,+SE)... 24,000 ( ( Rendered(services.( (5) InterestExpense(E, SE)... 10,000 NotePayable( L)... 40,000 Cash( A)... 50,000 ( ( Made(interest(and(principal(payment.( (6) AdvertisingExpense(E, SE)... 5,000 Cash( A)... 5,000 ( ( Purchased(advertising.( (7) Building(+A) ,000 Cash( A) ,000 LongaTermNotePayable(+L) ,000 ( ( Purchased(building.( (8) Cash(+A)... 35,000 Investments( A)... 20,000 GainonSaleofInvestments(Ga,+SE)... 15,000 ( ( Sold(investments.( P4 2 a. Soldservicesworth$28,000;received$7,000cashandanaccountreceivableforthebalanceof$21,000. AssetsIncreasedby$28,000andOwners Equityincreasedby$28,000viaincreaseinRetainedEarnings. b. Purchased$6,000worthofinventoryoncredit.AssetswouldincreaseandLiabilitieswouldincreaseby $6,000each. c. Paid $2,000 cash to suppliers on previously purchased inventory. Assets and liabilities would both decreaseby$2,000each.

13 P4 2 Concluded d. Purchasedequipmentworth$50,000bypaying$20,000cashandsigninganotepayableforthebalance of$30,000.assetsandliabilitieswouldgoupby$30,000each. e. Incurredandpaidrentof$1,200cash.Assetsandowners equitywouldgodownby$1,200each. f. g. P4 4 Collected$5,000cashfromthecustomersonaccountofpreviouslymadecreditsales.Noeffectonthe accountingequationasassetswouldincreaseanddecreasebythesameamount. Issuedcommonstockfor$25,000cash.AssetsandOwners Equitybothwouldgoupby$25,000. a. (1) Cash(+A)... 7,000 FeesEarned(R,+SE)... 7,000 ( ( Rendered(services.( (2) Cash(+A)... 3,000 AccountsReceivable( A)... 3,000 ( ( Collected(cash(from(customers(on(account.( (3) Liabilities( L)... 3,000 Cash( A)... 3,000 ( ( Made(payment(on(outstanding(liabilities.( (4) Long TermAssets(+A)... 6,000 NotePayable(+L)... 6,000 ( ( Purchased(long lived(assets.( (5) MiscellaneousExpenses(E, SE)... 4,000 Cash( A)... 4,000 ( ( Incurred(and(paid(miscellaneous(expenses.( (6) Dividends( SE) Cash( A) ( ( Declared(and(paid(dividends.(

14 P4 4 Continued b. Current Return Debt/Equity Transaction Ratio onequity Ratio 1. Increase Increase Decrease 2. NoEffect NoEffect NoEffect 3. Increase a NoEffect Decrease 4. NoEffect b NoEffect Increase 5. Decrease Decrease Increase 6. Decrease Increase c Increase a Assumingthatliabilitiesonbalancesheetarecurrent. b Assumingthenotepayableislongatermliabilityinnature. c. c AssumingthatreturnonequityiscomputedafterclosingDividendaccounttotheRetainedEarnings account. MorrisonHomeServices IncomeStatement FortheMonthEndedJanuary31,2015 Revenues... $ 7,000 Miscellaneousexpenses... 4,000 Netincome... $ 3,000 MorrisonHomeServices StatementofStockholders Equity FortheMonthEndedJanuary31,2015 CommonRetained StockEarnings Beginningbalance$10,000$8,000 Netincome3,000 Dividendsdeclared (800) Endingbalance$10,000$10,200 MorrisonHomeServices BalanceSheet January31,2015 Assets LiabilitiesandStockholders'Equity Cash... $ 12,200 Liabilities... $ 3,000* Receivables... 1,000 Notespayable... 6,000 Longatermassets... 16,000 Commonstock... 10,000 Retainedearnings... 10,200 Totalliabilitiesand Totalassets... $ 29,200 stockholders equity... $ 29,200 *Representsnontradenotespayable.

15 P4 4 Concluded MorrisonHomeServices StatementofCashFlows FortheMonthEndedJanuary31,2015 Cashflowsfromoperatingactivities: Cashcollectionsfromcustomers... $ 10,000 Paymentofexpenses... (4,000) Netcashincreaseduetooperatingactivities... $ 6,000 Cashflowsfrominvestingactivities... 0 Cashflowsfromfinancingactivities: Repaymentofliabilities... $ (3,000)* Dividendpayment... (800) Netcashdecreaseduetofinancingactivities... (3,800) Netincreaseincash... $ 2,200 Beginningcashbalance... 10,000 Endingcashbalance... $ 12,200 *Representsnontradenotespayable. d. MorrisonHomeServices StatementofCashFlows FortheMonthEndedJanuary31,2015 Cashfromoperatingactivities: Netincome... $ 3,000 Adjustments: Decreaseinaccountsreceivable... $ 3,000 Totaladjustments... 3,000 Netcashdue tooperatingactivities... $ 6,000 P4T5 (1) WageExpense(E,aSE)... 5 Cash(aA)... 5 ( ( Paid(employee(wages.( (2) Cash(+A) AccountsReceivable( A) ( ( Collected(cash(from(customers(on(account.( (3) Equipment(+A)... 5 Cash( A)... 5 ( ( Purchased(Equipment.( (4) Supplies(+A)... 2 Cash(aA)... 2

16 ( ( Purchased(Supplies.( (5) AccountsPayable( L)... 3 Cash( A)... 3 ( ( Paid(Cash(to(suppliers.( (6) InterestPayable( L)... 3 Cash( A)... 3 ( ( Paid(interest(accrued(in(previous(period.( (7) Cash(+A)... 9 AccountsReceivable(+A)... 9 Sales(R,+SE) ( ( Rendered(services.( (8) LongatermNotePayable(aL) Cash( A) ( ( Reduced(longFterm(debt.( (9) Cash(+A)... 5 CommonStock(+SE)... 5 ( ( Issued(stock.( (10)UnearnedRevenue(aL)... 3 Sales(R,+SE)... 3 ( ( Rendered(services.( (11)InterestExpenses(E, SE)... 1 InterestPayable(+L)... 1 ( ( Accrued(interest(expense.( (12)DepreciationExpense(E, SE)... 4 AccumulatedDepreciation( A)... 4 ( ( Depreciated(equipment.( (13)SuppliesExpense(E,aSE)... 5 Supplies(aA)... 5 ( ( Physical(count(of(supplies.( (14)Dividends(aSE)... 3 Cash( A)... 3 ( ( Declared(and(paid(dividends.( (15)RetainedEarnings( SE)... 3 Dividends(+SE)... 3 ( ( Closed(dividends(to(Retained(Earnings.( (16)Sales(aSE) WageExpense(+SE)... 5 InterestExpense(+SE)... 1 DepreciationExpense(+SE)... 4 SuppliesExpense(+SE)... 5

17 IncomeSummary(+SE)... 6 ( ( Closed(sales(and(expenses(to(Income(Summary.( (17)IncomeSummary( SE)... 6 RetainedEarnings(+SE)... 6 ( ( Closed(Income(Summary(to(Retained(Earnings.( TybeeCorporation IncomeStatement FortheMonthEndedJanuary31,2015 (inmillions) Sales...$ 21 SuppliesExpense... 5 DepreciationExpense... 4 InterestExpense... 1 WageExpense... 5 Netincome... $ 6 TybeeCorporation StatementofStockholders Equity FortheMonthEndedJanuary31,2015 (inmillions) CommonRetained StockEarnings Beginningbalance$20$12 Stockissuance5 Netincome6 Dividends (3) Endingbalance$25$15 TybeeCorporation BalanceSheet January31,2015 (inmillions) Assets LiabilitiesandStockholders'Equity Cash... $ 12 AccountsPayable... $1 AccountsReceivable InterestPayable... 1 Supplies... 3 UnearnedRevenue... 9 PrepaidInsurance Othershortatermpayables... 4 CurrentAssets CurrentLiabilities15 Equipment...55 LongatermNotePayable Less:Acc.Dep Land Commonstock Retainedearnings Totalliabilitiesand Totalassets... $ 90 stockholders equity... $90

18 TybeeCorporation StatementofCashFlows FortheMonthEndedJanuary31,2015 (inmillions) Cashflowsfromoperatingactivities: Cashcollectionsfromcustomers... $19 Cashpaidtosuppliers... (5) Cashpaidforinterest... (3) Cashpaidforexpenses... (5) Netcashincreaseduetooperatingactivities... $ 6 Cashflowsfrominvestingactivities: Cashpaidforequipment... (5) Netcashdecreaseduetoinvestingactivities... (5) Cashflowsfromfinancingactivities: Repaymentofliabilities... $ (15) Stockissuance... 5 Dividendpayment... (3) Netcashdecreaseduetofinancingactivities... (13) Netchangeincash... $ (12) Beginningcashbalance Endingcashbalance... $ 12 TybeeCorporation StatementofCashFlows FortheMonthEndedJanuary31,2015 (inmillions) Cashfromoperatingactivities: Netincome... $ 6 DepreciationExpense... 4 Adjustments: Decreaseinaccountsreceivable... $ 1 Decreaseinsupplies... 3 Decreaseinaccountspayable... (3) Decreaseininterestpayable... (2) Decreaseinunearnedrevenue... (3) Totaladjustments... (4) Netcashincrease(decrease)due tooperatingactivities... $6 Cashflowsfrominvestingactivities: Cashpaidforequipment... (5) Netcashdecreaseduetoinvestingactivities... (5) Cashflowsfromfinancingactivities: Repaymentofliabilities... $ (15) Stockissuance... 5 Dividendpayment... (3) Netcashdecreaseduetofinancingactivities... (13) Netchangeincash... $ (12)

19 P4 8 Beginningcashbalance Endingcashbalance... $ 12 a. SuppliesExpense(E, SE)... 55,000 SuppliesInventory( A)... 55,000 ( Adjusted(for(supplies(used.( b. RentExpense(E, SE)... 2,400 RentPayable(+L)... 2,400 ( Incurred,(but(did(not(pay,(rent.( c. UnearnedServiceRevenues( L)... 12,000 FeesEarned(R,+SE)... 12,000 ( Rendered(services(for(cash(collected(in(advance.( d. DepreciationExpense(E, SE)... 50,000 AccumulatedDepreciation( A)... 50,000 ( Depreciated(fixed(assets(for(2011.( e. InterestExpense(E, SE) InterestPayable(+L) ( Incurred,(but(did(not(pay,(interest.( f. AdvertisingExpense(E, SE)... 28,000 AdvertisingPayable(+L)... 28,000 ( Incurred,(but(did(not(pay,(advertising.( g. InsuranceExpense(E, SE) PrepaidInsurance( A) ( Adjusted(for(expiration(of(prepaid(insurance.( P4 9 (1) RentExpense(E, SE)... 2,700 PrepaidRent( A)... 2,700 ( Adjusted(for(expiration(of(prepaid(rent.( (2) InsuranceExpense(E, SE) PrepaidInsurance( A) ( Adjusted(for(expiration(of(prepaid(insurance.( (3) DepreciationExpense(E, SE)... 2,400 AccumulatedDepreciation( A)... 2,400 ( Depreciated(fixed(assets.( (4) SalaryExpense(E, SE)... 1,200 SalariesPayable(+L)... 1,200 ( Incurred,(but(did(not(pay,(salaries.( (5) UnearnedRevenues( L) FeesEarned(R,+SE) ( Rendered(services(for(cash(collected(in(advance.(

20 P4 17 a. AllTaaccounts for P4 17 appear in this section. Transactions are keyed to numbers in parentheses, adjustingjournalentriesarekeyedtolowercaseletters,andclosingentriesarekeyedtouppercase letters. Cash AccountsReceivable MerchandiseInventory B.B. 170,000 B.B. 188,000 B.B. 200,000 (1a) 350,000 (3) 400,000 (1a) 1,350,000 (5) 850,000 (2) 820,000 (1b) 700,000 (5) 850,000 (6) 870,000 (10) 72,000 (7) 37,000 (8) 148,000 (9) 120,000 (11) 50,000 (12) 50,000 E.B. 9,000 E.B. 616,000 E.B. 320,000 InterestReceivable NotesReceivable SuppliesInventory B.B. 0 B.B 0 B.B. 40,000 (10) 72,000 (4) 110,000 (f) 1,620 (b) 110,000 E.B. 1,620 E.B. 72,000 E.B. 40,000 PrepaidInsurance PrepaidAdvertising LongTTermInvestments B.B. 74,000 B.B. 0 B.B. 160,000 (12) 50,000 (7) 30,000 (a) 44,400 (c) 25,000 E.B. 29,600 E.B. 25,000 E.B. 180,000 Equipment Accum.Depr. Equipment Machinery B.B. 480,000 B.B. 98,000 B.B. 950,000 (g) 48,000 E.B. 480,000 E.B. 146,000 E.B. 950,000 Accum.Depr. Machinery Patent AccountsPayable B.B. 230,000 B.B. 75,000 B.B. 220,000 (6) 870,000 (2) 820,000 (g) 47,500 (g) 12,500 E.B. 277,500 E.B. 62,500 E.B. 170,000 WagesPayable Op.Exp.Payable InterestPayable B.B. 73,000 B.B. 0 B.B. 0 (3) 73,000 (e) 43,000 (d) 6,000 (h) 3,361 E.B. 43,000 E.B. 6,000 E.B. 3,361 ShortTTermNotesPayable MortgagePayable BondsPayable B.B. 0 B.B. 300,000 B.B. 500,000 (4) 110,000 E.B. 110,000 E.B. 300,000 E.B. 500,000

21 P4 17 Continued CommonStock RetainedEarnings Dividends B.B. 500,000 B.B. 416,000 B.B. 0 (9) 120,000 (11) 50,000 (C) 50,000 (B) 243,859 (C) 50,000 E.B. 620,000 E.B. 609,859 E.B. 0 Sales InterestRevenue GainonSaleofInvestment B.B. 0 B.B. 0 B.B. 0 (1a) 1,700,000 (7) 7,000 (f) 1,620 (A)1,700,000 (A) 1,620 (A) 7,000 E.B. 0 E.B. 0 E.B. 0 CostofGoodsSold WageExpense B.B. 0 B.B. 0 (1b) 700,000 (3) 327,000 (e) 43,000 (A) 700,000 (A) 370,000 E.B. 0 E.B. 0 OperatingExpense MiscellaneousOp.Expense InsuranceExpense B.B. 0 B.B. 0 B.B. 0 (d) 36,000 (8) 148,000 (c) 25,000 (d) 6,000 (d) 36,000 (a) 44,400 (A) 42,000 (A) 87,000 (A) 44,400 E.B. 0 E.B. 0 E.B. 0 SuppliesExpense Depr.Expense Equipment Depr.Expense Machinery B.B. 0 B.B. 0 B.B. 0 (b) 110,000 (g) 48,000 (g) 47,500 (A) 110,000 (A) 48,000 (A) 47,500 E.B. 0 E.B. 0 E.B. 0 AmortizationExpense InterestExpense IncomeSummary B.B. 0 B.B. 0 (g) 12,500 (h) 3,361 (A) 12,500 (A) 3,361 (B) 243,859 (A) 243,859 E.B. 0 E.B. 0 b. EntriesarepostedtotheTaaccountsinPart(a). (1a)Cash(+A) ,000 AccountsReceivable(+A)... 1,350,000 Sales(R,+SE)... 1,700,000 ( ( ( Made(sales.( (1b)CostofGoodsSold(E, SE) ,000 MerchandiseInventory( A) ,000 ( ( ( Recorded(cost(of(inventory(sold.(

22 P4 17 Continued (2) MerchandiseInventory(+A) ,000 AccountsPayable(+L) ,000 ( ( ( Purchased(inventory(on(account.( (3) WageExpense(E, SE) ,000 WagesPayable( L)... 73,000 Cash( A) ,000 ( ( ( Paid(wages.( (4) SuppliesInventory(+A) ,000 Short TermNotesPayable(+L) ,000 ( ( ( Purchased(supplies(by(note.( (5) Cash(+A) ,000 AccountsReceivable( A) ,000 ( ( ( Collected(cash(from(customers.( (6) AccountsPayable( L) ,000 Cash( A) ,000 ( ( ( Made(payment(to(suppliers.( (7) Cash(+A)... 37,000 Long TermInvestments( A)... 30,000 GainonSaleofInvestment(Ga,+SE)... 7,000 ( ( ( Sold(investment.( (8) MiscellaneousOperatingExpense(E, SE) ,000 Cash( A) ,000 ( ( ( Incurred(and(paid(expenses.( (9) Cash(+A) ,000 CommonStock(+SE) ,000 ( ( ( Issued(common(stock.( (10)NotesReceivable(+A)... 72,000 AccountsReceivable( A)... 72,000 ( ( ( Accepted(a(note(in(payment(of(an(open(account.( (11)Dividends( SE)... 50,000 Cash( A)... 50,000 ( ( ( Declared(and(paid(a(cash(dividend.( (12)Long TermInvestments(+A)... 50,000 Cash( A)... 50,000 ( ( ( Purchased(investments.(

23 122 Chapter4 P4 17& Continued& c. Unadjusted&Trial& & & & & Adjusted&Trial& & & & & Final&Trial& Balance& & & Adjusting&Entries& & & Balance& & &&&&Closing&Entries& & & Balance& Account& Dr.& Cr.& Dr.& Cr.& Dr.& Cr.& Dr.& Cr.& Dr.& Cr.& Cash 9,000 9,000 9,000 AccountsRec. 616, , ,000 InterestRec. (f) 1,620 1,620 1,620 MerchandiseInv. 320, , ,000 SuppliesInventory 150,000 (b) 110,000 40,000 40,000 PrepaidInsurance 74,000 (a) 44,400 29,600 29,600 PrepaidAdvert. (c) 25,000 25,000 25,000 NotesReceivable 72,000 72,000 72,000 LJTInvestments 180, , ,000 Equipment 480, , ,000 Accum.Depr. Equip. 98,000 (g) 48, , ,000 Machinery 950, , ,000 Accum.Depr. Mach. 230,000 (g) 47, , ,500 Patent 75,000 (g) 12,500 62,500 62,500 AccountsPayable 170, , ,000 WagesPayable (e) 43,000 43,000 43,000 InterestPayable (h) 3,361 3,361 3,361 Oper.Exp.Payable (d) 6,000 6,000 6,000 SJTNotesPayable 110, , ,000 MortgagePayable 300, , ,000 BondsPayable 500, , ,000 CommonStock 620, , ,000 RetainedEarnings 416, ,000 (C) 50,000 (B) 243, ,859 Dividends 50,000 50,000 (C) 50,000 Sales 1,700,000 1,700,000 (A) 1,700,000 InterestRevenue (f) 1,620 1,620 (A) 1,620 GainonInvestment 7,000 7,000 (A) 7,000 CostofGoodsSold 700, ,000 (A) 700,000 WageExpense 327,000 (e) 43, ,000 (A) 370,000 OperatingExp. (d) 42,000 42,000 (A) 42,000 MiscellaneousOp.Exp. 148,000 (c&d)61,000 87,000 (A) 87,000 InsuranceExp. (a) 44,400 44,400 (A) 44,400 SuppliesExp. (b) 110, ,000 (A) 110,000 InterestExp. (h) 3,361 3,361 (A) 3,361 AmortizationExp. (g) 12,500 12,500 (A) 12,500 Depr.Exp. Equip. (g) 48,000 48,000 (A) 48,000 Depr.Exp. Mach. (g) 47,500 47,500 (A) 47,500 IncomeSummary (B) 243,859 (A) 243,859 Total 4,151,000 4,151, , ,381 4,300,481 4,300,481 2,002,479 2,002,479 2,785,720 2,785,720

24 P4 17& Continued& d. EntriesarepostedtotheT accountsinpart(a). (a) InsuranceExpense(E, SE)... 44,400 PrepaidInsurance( A)... 44,400 Adjustedforexpirationofprepaidinsurance. (b) SuppliesExpense(E, SE) ,000 SuppliesInventory( A) ,000 Adjustedforsuppliesused. (c) PrepaidAdvertising(+A)... 25,000 MiscellaneousOperatingExpense(E, SE)... 25,000 Recognizedadvertisingtobeusedinsubsequentperiods. (d) OperatingExpense(E, SE)... 6,000* OperatingExpense(E, SE)... 36,000 MiscellaneousOperatingExpense(E, SE)... 36,000* Op.Exp.Payable(+L)... 6,000 Incurred,butdidnotpay,andreclassify. * $6,000=($3,500permonth 12months) $36,000misc.exp.payment (e) WageExpense(E, SE)... 43,000 WagesPayable(+L)... 43,000 Incurred,butdidnotpay,wages. (f) InterestReceivable(+A)... 1,620* InterestRevenue(R,+SE)... 1,620 Earned,butdidnotcollect,interest. * $1,620=$72, /12 (g) DepreciationExpense Equipment(E, SE)... 48,000 DepreciationExpense Machinery(E, SE)... 47,500 AmortizationExpense(E, SE)... 12,500 AccumulatedDepreciation Equipment( A)... 48,000 AccumulatedDepreciation Machinery( A)... 47,500 Patent( A)... 12,500 Amortizedfixedandintangibleassets. (h) InterestExpense(E, SE)... 3,361* InterestPayable(+L)... 3,361 Incurred,butdidnotpay,interest. * $3,361=$110, /360

25 P4 17& Continued& e. ClosingentriesarepostedtotheT accountsinpart(a). (A) Sales... 1,700,000 InterestRevenue... 1,620 GainonSaleofInvestment... 7,000 IncomeSummary ,859 CostofGoodsSold ,000 WageExpense ,000 OperatingExpense... 42,000 Misc.OperatingExpense... 87,000 InsuranceExpense... 44,400 SuppliesExpense ,000 InterestExpense... 3,361 AmortizationExpense... 12,500 DepreciationExpense Equipment... 48,000 DepreciationExpense Machinery... 47,500 ClosedrevenuesandexpensesintoIncomeSummary. (B) IncomeSummary ,859 RetainedEarnings ,859 ClosedIncomeSummaryintoRetainedEarnings. (C) RetainedEarnings... 50,000 Dividends... 50,000 ClosedDividendsintoRetainedEarnings. a. J.D.F.Company IncomeStatement FortheYearEndedDecember31,2015 Revenues: Sales... $ 1,700,000 Interestrevenue... 1,620 Gainonsaleofinvestment... 7,000 Totalrevenues... $1,708,620 Operatingexpenses: Costofgoodssold... $700,000 Wageexpense ,000 Operatingexpense... 42,000 Miscellaneousoperatingexpense... 87,000 Insuranceexpense... 44,400 Suppliesexpense ,000 Amortizationexpense... 12,500 Depreciationexpense Equipment... 48,000 Depreciationexpense Machinery... 47,500 Totaloperatingexpenses... $ 1,461,400 Interestexpense... 3,361 Totalexpenses... 1,464,761 Netincome... $ 243,859

26 P4 17& Continued& J.D.F.Company StatementofRetainedEarnings FortheYearEndedDecember31,2015 Retainedearningsbalance,January1, $ 416,000 Plus:Netincome ,859 Less:Dividendsdeclared... (50,000) Retainedearningsbalance,December31, $ 609,859 J.D.F.Company BalanceSheet December31,2015 Assets Currentassets: Cash... $ 9,000 Accountsreceivable ,000 Interestreceivable... 1,620 Inventory ,000 Suppliesinventory... 40,000 Prepaidinsurance... 29,600 Prepaidadvertisingexpenses... 25,000 Notesreceivable... 72,000 Totalcurrentassets... $1,113,220 Longcterminvestments ,000 Fixedassets: Equipment... $ 480,000 Less:Accumulateddepreciation ,000 Netbookvalueofequipment... $ 334,000 Machinery... $ 950,000 Less:Accumulateddepreciation ,500 Netbookvalueofmachinery ,500 Totalfixedassets... 1,006,500 Patent... 62,500 Totalassets... $ 2,362,220 Liabilities&Stockholders'Equity Currentliabilities: Accountspayable... $ 170,000 Wagespayable... 43,000 Interestpayable... 3,361 Operatingexpensepayable... 6,000 Shortctermnotespayable ,000 Totalcurrentliabilities... $ 332,361 Longctermliabilities: Mortgagepayable... $ 300,000 Bondpayable ,000 Totallongctermliabilities ,000 Commonstock ,000 Retainedearnings ,859 Totalliabilities&stockholders'equity... $ 2,362,220

27 P4 17& Continued& J.D.F.Company StatementofCashFlows(DirectMethod) FortheYearEndedDecember31,2015 Cashflowsfromoperatingactivities: Collectionsfromcustomersoncashsales... $ 350,000 Collectionfromcustomersonopenaccounts ,000 Paymentsforwages... (400,000) Paymentstosuppliersonopenaccount... (870,000) Paymentformisc.oper.exp... (148,000) Netcashincrease(decrease)dueto operatingactivities... $ (218,000) Cashflowsfrominvestingactivities: Proceedsfromsaleofinvestment... $ 37,000 Purchaseofinvestment... (50,000) Netcashincrease(decrease)dueto investingactivities... (13,000) Cashflowsfromfinancingactivities: Proceedsfromissuanceofcommonstock... $ 120,000 Paymentofdividends... (50,000) Netcashincrease(decrease)dueto financingactivities... 70,000 Decreaseincashbalance... $(161,000) Beginningcashbalance ,000 Endingcashbalance... $ 9,000

28 P4 17& Concluded& b.j.d.f.company & & StatementofCashFlows(IndirectMethod) FortheYearEndedDecember31,2015 Cashflowsfromoperatingactivities: Netincome... $ 243,859 Adjustments: Depreciationexpense Equipment... $ 48,000 Depreciationexpense Machinery... 47,500 Amortizationexpense... 12,500 Gainonsaleofinvestments... (7,000) Increaseinaccountsreceivable... (428,000) Increaseininterestreceivable... (1,620) Increaseinmerchandiseinventory... (120,000) Increaseinprepaidadvertising... (25,000) Increaseinnotesreceivable... (72,000) Decreaseinprepaidinsurance... 44,400 Decreaseinaccountspayable... (50,000) Decreaseinwagespayable... (30,000) Increaseinoperatingexp.payable... 6,000 Increaseinshortctermnotespayable ,000 Increaseininterestpayable... 3,361 Totaladjustments... (461,859) Netcashincrease(decrease)dueto operatingactivities... $ (218,000) Cashflowsfrominvestingactivities: Proceedsfromsaleofinvestment... $ 37,000 Purchaseofinvestment... (50,000) Netcashincrease(decrease)dueto investingactivities... (13,000) Cashflowsfromfinancingactivities: Proceedsfromissuanceofcommonstock... $ 120,000 Paymentofdividends... (50,000) Netcashincrease(decrease)dueto financingactivities... 70,000 Decreaseincashbalance... $ (161,000) Beginningcashbalance ,000 Endingcashbalance... $ 9,000