Solutions for Exam 1 Review Problems PDF

Preview

Summary

Solutions for Exam Review problems...

Description

SOLUTIONS FOR EXAM 1 REVIEW PROBLEMS 1. a) Revenues * Minus expenses ** Net income

$418,500 (290,100) $ 128,400

* 299,600 + 118,900 = 418,500 ** 38,500 + 234,400 + 13,900 + 2,100 + 1,200 = 290,100 b) Supplies Accounts receivable Prepaid rent Equipment Accumulated depreciation Equipment, net Cash Inventory Total assets

$ 14,500 189,350 44,450 $195,950 (55,600) 140,350 187,100 105,050 $ 680,800

c) Accounts payable Income tax payable Note payable (9 month) Unearned revenue Interest payable Total current liabilities

$ 130,700 2,000 21,400 3,150 1,800 $ 159,050

d) Beginning retained earnings Plus: net income Minus: dividends Ending retained earnings

$ 491,300 128,400 619,700 (32,000) $ 587,700

e) Stockholders’ equity = Common Stock + Retained earnings = 20,400 + 587,700 = $608,100

2. Assets = Liabilities – Stockholders’ Equity (Solve using basic algebra where x is the missing piece of the accounting equation) a) Assets = Liabilities + Stockholders’ Equity +225,000 = (100,000) + x +100,000 +100,000 +325,000 = x ---> $325,000 increase b) Assets = Liabilities + Stockholders’ Equity x = +215,000 + (130,000) x = +85,000 ---> $85,000 increase c) Assets = Liabilities + Stockholders’ Equity (60,000) = x + 170,000 (170,000) (170,000) (230,000) = x ---> $230,000 decrease 3. Assets = Liabilities + Stockholders’ Equity, which can be expanded as: Assets = Liabilities + Common Stock + Retained Earnings At the beginning of the year: 70,000 = 40,000 + 5,000 + Retained Earnings (45,000) (45,000) + Retained Earnings 25,000 = Retained Earnings ---> $25,000 retained earnings at the beginning of the year Beginning retained earnings Plus: net income Minus: dividends Ending retained earnings

$ 25,000 55,000 (130,000 – 75,000) (20,000) $ 60,000

Stockholders’ equity = common stock + retained earnings = 5,000 + 60,000 = 65,000 4. a. b. c. d. e. f. g. h. i. j. k. l. m. n. o.

Balance Sheet (asset) Balance Sheet (asset) Balance Sheet (liability) Balance Sheet (stockholders’ equity) Income Statement (revenue) Income Statement (expense) Income Statement (revenue) Statement of Retained Earnings Balance Sheet (asset) Balance Sheet (liability) Income Statement and Statement of Retained Earnings Statement of Retained Earnings Balance Sheet (liability) Balance Sheet (asset) Statement of Retained Earnings and Balance Sheet (stockholders’ equity)

5.

Atlas, Inc. Income Statement For the year ended December 31, 2015

Service revenue Expenses: Commission expense Wage expense Utilities expense Supplies expense Depreciation expense Total expenses

$130,000 16,500 11,500 8,500 8,000 4,000 48,500

Net income

$81,500

Atlas, Inc Statement of Retained Earnings For the year ended December 31, 2015 Beginning balance Net income Dividends Ending balance

$120,000 81,500 (5,000) $196,500

Atlas, Inc. Balance Sheet At December 31, 2015 Assets Current Assets Cash Accounts receivable Office supplies Total current assets Land Building Less: accumulated depreciation - building Building, net Office equipment Less: accumulated depreciation – office equipm Office equipment, net Total assets Liabilities Current liabilities Accounts payable Interest payable Total current liabilities Notes Payable Total liabilities Stockholders' Equity Common Stock Retained earnings Total stockholders' equity Total liabilities and Stockholders' equity

$80,000 28,000 5,000 113,000 40,000 52,000 (6,000) 46,000 69,500 (4,000) 65,500 $264,500

$ 37,500 1,500 39,000 7,000 $46,000 22,000 * 196,500 218,500 $264,500

* Use the expanded accounting equation to determine amount of Common Stock: Assets = Liabilities + Common Stock + Retained Earnings 264,500 = 46,000 + Common Stock – 196,500, using basic algebra to solve for Common Stock: Common Stock = 264,500 – 46,000 – 196,500 Common Stock = 22,000 6.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

C G F D I B J E H A

7. 1. Credit 2. Debit 3. Debit 4. Debit 5. Debit 6. Credit 7. Credit 8. Debit

8. Debit + +

1. Insurance expense. 2. Accounts receivable.

Credit _ _

Normal Balance Debit . Debit .

3. Rent revenue.

-

+

Credit .

4. Retained earnings 5. Dividends

+

+ -

Credit . Debit .

6. Notes payable 7. Common Stock

-

+ +

Credit . Credit .

9.

The balance at the end of the month is a $100,000 credit, calculated as follows: Beginning Add: New note payable Minus: repayment of note payable Ending Notes Payable

$120,000 250,000 (270,000) $100,000 credit balance

Notes Payable 120,000 Beg. Balance Payments 270,000 250,000 Purchases ___________________________________ 100,000 End. Balance 10. The balance at the end of the month is $9,600 debit, calculated as follows:

Beginning Add: supplies purchased Minus: supplies used Ending Notes Payable

Beg. Bal.

Accounts Receivable 8,000 4,900

$8,000 6,500 (4,900) $9,600 debit balance

Amounts received from customers

Sales on account 6,500 ____________________________________ End. Bal. 9,600 |

11. a. b. c.

d. e. f. g. h. i. j. k. m.

Cash ......................................................................................... Common Stock ................................................................

25,000

Office Supplies ......................................................................... Accounts Payable ............................................................

500

Office Equipment ...................................................................... Cash ................................................................................ Notes Payable .................................................................

10,000

Accounts Receivable ................................................................ Service Revenue ..............................................................

4,000

Rent Expense ........................................................................... Cash ................................................................................

700

Accounts Payable ..................................................................... Cash ................................................................................

250

Advertising Expense ................................................................. Accounts Payable ............................................................

500

Cash ......................................................................................... Service Revenue ..............................................................

3,000

Prepaid Insurance..................................................................... Cash.................................................................................

3,600

Salaries and Wages Expense ................................................... Cash ................................................................................

2,500

Cash ......................................................................................... Accounts Receivable .......................................................

2,000

25,000 500 3,500 6,500 4,000 700 250 500 3,000 3,600 2,500

Cash..........................................................................................6,000 Unearned Revenue...........................................................

2,000 6,000

12.

a) $154,000 b) $154,000 The trial balance would be as follows: Miller Corporation Unadjusted Trial Balance For the Quarter Ended 9/30/16 Debit

Cash Accounts Receivable Prepaid Insurance Equipment Less: Accumulated Depreciation – equipment

Credit

$25,000 35,000 2,500 60,000 5,000

Accounts Payable

15,000

Unearned Revenue Notes Payable Common Stock Retained Earnings Dividends

10,000 20,000 30,000 24,000

Service Revenue Salaries Expense Utilities Expense Rent Expense

1,500 50,000 15,000 5,000 10,000 $154,000

_______ $154,000

13. a. 1. 2.

3. 4. 5.

6.

Unearned Revenue Service Revenue

1,000

Rent Expense Prepaid Rent ($48,000/12 = $4,000)

4,000

Accounts Receivable Service Revenue

2,900

Utilities Expense Accounts Payable

500

1,000 4,000

2,900 500

Supplies Expense 675 Supplies ($850 - $175 remaining = $675 used) Salaries and Wages Expense Salaries and Wages Payable

675

1,960 1,960

b. $44,000 Prepaid Rent Unadj. Bal. 48,000 4,000 Rent Expense for the month ___________________________________ End. Balance 44,000

c. $175 Supplies Unadj. Bal.

850

675 Supplies Expense for the month

____________________________________ End. Balance 175

14. 3/ 31/16

Adjusting Entries

A.

Store Supplies Expense Store Supplies

1,225

Depreciation Expense--Building Accumulated Depreciation–Building

2,500

Depreciation Expense–Store Equipment Accumulated Depreciation–Store Equipment

3,125

B. C. D.

2,500 3,125

Rent Expense Prepaid Rent ($1,500/6 months =$250 per month)

E.

F.

15.

1,225

a. b. c. d. e.

250 250

Unearned Revenue Service Revenue ($8,000 x .40 = $3,200)

3,200

Salaries and Wages Expense Salaries and Wages Payable

6,400

3,200

6,400

Assets overstated, expenses understated and net income overstated by $3,000. Liabilities understated, expenses understated and net income overstated by $400. Liabilities overstated, revenue understated and net income understated by $2,000. Assets overstated, expenses understated and net income overstated by $450. Assets understated, revenue understated and net income understated by $1,500.

16. a. Service Revenue Less: Office Supplies Expense Depreciation Expense Rent Expense Total Expenses Net Income

$ 6,500 $

600 3,000 1,900 5,500 $ 1,000

b. The closing entries would be as follows: Service Revenue Office Supplies Expense Depreciation Expense Rent Expense Retained Earnings

6,500

Retained Earnings Dividends

2,000

600 3,000 1,900 1,000 2,000

c. $16,700 Common Stock Retained Earnings (see below)

10,300 6,400 (see below)

Total Stockholders’ Equity

16,700

Retained Earnings Dividends

2,000

.

|

7,400

Balance before closing entries

| |

1,000 6,400

Net income Balance after closing entries

d. JACKSON FINANCIAL PLANNERS Post-Closing Trial Balance December 31, 2016 ____________________________________________________________________________ Debit Credit Cash ..................................................................................................... $ 17,400 Accounts Receivable ............................................................................ 2,200 Office Supplies ..................................................................................... 1,800 Office Equipment .................................................................................. 15,000 Accumulated Depreciation—Office Equipment ..................................... $ 4,000 Accounts Payable ................................................................................ 3,200 Unearned Revenue .............................................................................. 5,000 Notes Payable (due in two years).......................................................... 7,500 Common Stock...................................................................................... 10,300 Retained Earnings ................................................................................ ……. 6,400 $36,400 $36,400...