Supplementals (2010 11)

[1]
Financial Accounting: Instructor: Turck (1)supplemental(pedal_rentals).doc

Lance Armstrong applied for and won a concession to rent bicycles in the local park during
the summer. During the month of June, Armstrong completed the following transactions for
his bicycle rental business:
June 2 Began business by placing $7,200 in a business checking account in the name of the
corporation and issued himself all 7,200 shares of Capital Stock.
3 Purchased supplies on open account for $150.
4 Purchased 10 bicycles for $2,500, paying $1,200 down and agreeing to pay the rest in 30 days.
5 Paid $2,900 in cash for a small shed to store the bicycles and to use for other operations.
8 Paid $400 in cash for shipping and installation costs to place the shed at the park entrance.
(Note: $400 is an additional cost of the shed.)
9 Hired a part-time assistant to help out on weekends at $7 per hour.
10 Paid a maintenance person $75 to clean the grounds.
13 For the first half of June, received $970 in cash for rentals.
17 Paid $150 for the supplies purchased on June 3.
18 Paid a $55 repair bill on bicycles.
23 Mailed an invoice to Microfish Inc. for $110 for bicycles rented for an employees’ company
picnic.
25 Paid the $100 monthly fee for June to the Park District for the right to operate the bicycle
concession in city park property.
27 For the second half of June, received $960 in cash for rentals.
29 Paid the assistant $240.
30a A physical review of supplies on June 30 reveals 20% of the June 3 Supplies are available for
use in July.
30b Declared and paid a dividend of $500.
1. Set up a simple accounting system for Pedal Rentals, Inc., similar to that of 215 Housekeepers.
o Use the following Accounts:
 Cash
 Accounts Receivable
 Supplies
 Equipment
 Accounts Payable
 Common Stock
 Retained Earnings
2. Record the transactions above into the simple accounting system.
3. Identify each change to Retained Earnings as one of the following:
o Concession Fee Expense
o Dividends
o Maintenance Expense
o Rental Revenue
o Repair Expense
o Supplies Expense
o Wages Expense
4. Calculate the June 30th balances the accounts in Pedal Rentals, Inc.’s accounting system.
(CkFigs: Cash = 3,510; Retained Earnings = $950)
5. Using good form, prepare General Purpose Financial Statements for the month. Do not prepare a Cash
Flow Statement.
FOCUS ON NOT “COOK-BOOKING” YOUR FINANCIAL STATEMENTS
[1]
[2]
Financial Accounting: Instructor: Turck (1)supplemental(pedal_rentals).doc
Pedal Rentals, Inc.

Accounting System ASSETS = LIABILITIES + OWNERS EQUITY
Accts Accts Common Retained Explain changes to
June Cash Receiv. Supplies Equip
=
Payable
+
Stock
+
Earnings Retained Earning
6/1 Beginning Balances
6/2 Started Business
6/3 Purch Supplies
6/4 Purch Bikes
6/5 Purch shed
6/8 Freight charges
6/9 No entry
6/10 Services cost
6/13 Performed services
6/17 Paid supplier on a/c
6/18 Services cost
6/23 Custom rental job
6/25 Parks & Rec fee
6/27 Performed services
6/29 Employee costs
6/30(a) Declared and Pd Div.
6/30(b) Used supplies in June
$150 × 80%
IMPORTANT: The ending balances on 6/30/05 will be the beginning balances on 7/1/2005!
[2]
[3]
Financial Accounting: Instructor: Turck (2)supplemental(randi_lawn_care).doc
Event Interpretation, Simple Accounting System & General Purpose Financial Statement
Randi had a tough time finding a summer job when she went home from college, so she decided to go
into business for herself mowing lawns. Randi’s Lawn Care, Inc.(RLC, Inc.) is the business name.
Randi’s corporation had the following economic events during the month of June.
June 1 Used $200 of her own money and RLC, Inc. borrowed $450 from Randi’s father for financing.
2 Rented a used pickup truck from an uncle for $85 per month. Paid for the first month’s use.
3 Rented a lawnmower ($75 per month), an edger ($50 per month), and a wheelbarrow ($10 per
month) at an equipment rental store. Paid only the June rental fees in full.
16 During the first two weeks, performed $528 of lawn-mowing services. Customers paid in cash.
Incidentally, RLC, Inc. paid $75 for 30 gallons of gasoline and paid $48 for various other supplies.
18 Received a $35 bill (on open account) for a newspaper advertisement that had appeared earlier in
the month. (RLC, Inc. will pay the bill when due on July 10.)
29 During the last half of the month, performed $507 of lawn-mowing services and collected the cash.
30a On Saturday, Randi mowed and trimmed lawn in front of HomeTownBank. HomeTownBank will
pay $75 for the service on Monday July, 2.
30b Randi physically counted the remaining inventory of supplies. The results of which include 24
gallons of gas and 1/3 of other supplies are still on-hand at the close of business on June 30..
30c RLC, Inc. paid back one third of the amount borrowed from Randi’s father plus $5 for interest.
30d RLC, Inc. declared and paid a dividend of $125 to the sole shareholder (i.e., Randi).
30e Randi mailed a $135 RLC Inc., check payable to the equipment rental store for July’s equipment
rental. For this event Randi will need to set up a new asset account titled Prepaid Rent.
Randi knows from taking an accounting class at college that the following accounts(listed in alphabetic
order) may be needed to keep track of her business activities.
ACCOUNTS: ASSET LIABILITY OWNER’S EQUITY
Accounts Payable
Accounts Receivable
Cash
Contributed Capital(a/k/a Common Stock)
Equipment
Note Payable—Dad (a/k/a Loan Payable)
Prepaid Rent (a/k/a Prepaid Expense)
Retained Earnings
Supplies
Required: (Neatness is critical)

1. In the chart above, identify the various accounts as ASSET, LIABILITY, or OWNER’S EQUITY
2. Set up a simple accounting system, similar to that of 215 Housekeepers (see lecture notes).
3. Record the economic events described above into the simple accounting system.
4. Identify each change to Retained Earnings as one of the following:
a. Advertising Expense
b. Dividend
c. Interest Expense
d. Lawn Care Income
e. Rent Expense
f. Supplies Expense
5. Calculate the June 30th account balances in Randi’s Lawn Care, Inc. accounting system.
(Ck Fig: Retained Earnings = $678)
6. Using good form, prepare General Purpose Financial Statements for the month. (i.e., Income
Statement, Statement of Owner Equity, and Balance Sheet)
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[4]
Financial Accounting: Instructor: Turck (2)supplemental(randi_lawn_care).doc
Randi’s Lawn Care Period of Measure:

Accounting System = +
Explain each change
= +
to Retained Earning
6/1 Beginning Balances
6/30 Ending Balances
IMPORTANT: The ending balances on 6/30/05 will be the beginning balances on __________!
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[5]
Financial Accounting Laslo Advertising Turck
During March, its 1st month of operations, Laslo Advertising Agency recorded the following transactions.
Instructions: 1) Reconstruct each transaction in General Journal form (include a short explanation)
Transaction (a) has been done for you.
2) Calculate the balance in each T-account.
Use your own paper for items 3) and 4).
3) Prove the equality of DEBITS and CREDITS by preparing a Trial Balance. (CkFig: 26,880)
4) Prepare financial statements. (Income Statement, Stmt of OE & Balance Sheet)
(CkFig: Net Income = $10,505)
5) Prepare the 3 Closing Entries in General Journal form
6) Post the 3 Closing Entries into the system of T-accounts
7) Prepare a Post-closing Trial Balance
Cash (#101) Accounts Payable (#201) Consulting Fees(#410)

a 5100 350 c 1600 b 3500 e
e 3500 600 f 7580 k
k 7580 175 h 1600 bal. 11080 bal.
l 1000 2400 i C1 11080
m 3300 700 j closed
bal. 16255
Loan Payable(#210) Advertising Fees(#420)
3300 m
2600 g
Accounts Receivable (#115) 3300 bal.
g 2600 1000 l 2600 bal.
C1 2600
bal. 1600 closed
Paid-in Capital(#310) Salary Expense(#510)

5100 a i 2400
3200 d
Office Supplies (#120) bal. 2400
c 350 8300 bal. 2400 C2
closed
bal. 350
Rent Expense(#520)
Retained Earnings or Deficit(#320) f 600
-0- bal.
13680 C1 bal. 600
Equipment (#150) C2 3175 600 C2
b 1600 C3 700 closed
d 3200 9,805 bal.
bal. 4800 Utilities Expense(#530)
h 175
Dividends(#330)
j 700 bal. 175
bal. 700 175 C2
700 C3 closed
closed
(3)Laslo_Advertising.xls [5] Laslo Advertising

File name: (3)Laslo_Advertising.xls
[6]
GENERAL JOURNAL PAGE 1

POST.
ACCOUNTS/ (EXPLANATIONS)
DATE REF. DEBIT CREDIT
1 2009 1
2 Mar a Cash 5,100.00 2
3 Paid-in Capital 5,100.00 3
4 (shareholder invested cash in corporation) 4
5 5
6 Mar b Equipment 1,600.00 6
7 Accounts Payable 1,600.00 7
8 (bought equipment on account) 8
9 9
10 Mar c Office Supplies 350.00 10
11 Cash 350.00 11
12 (bought office supplies with cash) 12
13 13
14 Mar d Equipment 3,200.00 14
15 Paid-in Capital 3,200.00 15
16 (shareholder invested equipment into company) 16
17 17
18 Mar e Cash 3,500.00 18
19 Consulting Fees 3,500.00 19
20 (provided services to customers) 20
21 21
22 Mar f Rent Expense 600.00 22
23 Cash 600.00 23
24 (paid rent for March) 24
25 25
26 Mar g A/R 2,600.00 26
27 Advertising Fees 2,600.00 27
28 (provided services on account) 28
29 29
30 Mar h Utilities Expense 175.00 30
31 Cash 175.00 31
32 (recorded and paid for March utilities) 32
33 33
34 Mar i Wages Expense 2,400.00 34
35 Cash 2,400.00 35
36 (made March payroll) 36
37 37
38 Mar j Dividends 700.00 38
39 Cash 700.00 39
40 (paid a dividend to shareholders) 40
41 41
42 42
43 43
44 44
[6]
Tab name: Laslo_General Journal(1)
File name: (3)Laslo_Advertising.xls
[7]

POST.
DATE DESCRIPTION REF. DEBIT CREDIT
1 2009 1
2 Mar k Cash 7,580.00 2
3 Consulting Fees 7,580.00 3
4 (provided services to customers) 4
5 5
6 Mar l Cash 1,000.00 6
7 A/R 1,000.00 7
8 (collected from customer on account) 8
9 9
10 Mar m Cash 3,300.00 10
11 Loan Payable 3,300.00 11
12 (borrowed money from the bank) 12
13 13
14 14
15 Mar 31 Closing Entries: 15
16 C1 Consulting Fees 11,080.00 16
17 Advertising Fees 2,600.00 17
18 Retained Earnings 13,680.00 18
19 (set revenues back to $-0-) 19
20 (close revenues to Retained Earnings) 20
21 21
22 22
23 C2 Retained Earnings 3,175.00 23
24 Salary Expense 2,400.00 24
25 Rent Expense 600.00 25
26 Utilities Expense 175.00 26
27 (set expenses back to $-0-) 27
28 (close expenses to Retained Earnings) 28
29 29
30 30
31 31
32 C3 Retained Earnings 700.00 32
33 Dividends 700.00 33
34 (set Dividends back to $-0-) 34
35 (close Dividends into Retained Earnings) 35
36 36
37 37
38 38
39 39
40 40
41 41
42 42
43 43
44 44
[7]
Tab name: Laslo_General Journal(2)
[8]
Financial Accounting: Instructor: Turck (4)supplemental(principles_questions).doc

Required:
Use the 14 Accounting Principles discussed in Lecture Notes to justify your responses below:
Listed below are several statements that relate to financial accounting and reporting. Identify
the accounting principle that applies to each statement. (more than one answer may be
appropriate)
1. Sirius Satellite Radio Inc. files its annual and quarterly financial statements with SEC.
2. The notes to the financial statements report McDonKingBurger International, Inc.’s president
and majority shareholder travels on the corporate jet for business purposes only and does not
use the jet for personal use.
3. Jackson Manufacturing does not recognize Revenue for unshipped merchandise even though
the merchandise has been manufactured according to customer specifications.
4. Lady Fred Cosmetics expenses (i.e., writes-off) the cost of equipment over the useful life of
such equipment.
Identify the accounting principle that was violated in each of the following situations.
(more than one answer may be appropriate)
1. Astro Turf Company recognizes an expense, “Costs of Goods Sold”, for the reporting period
the product is manufactured instead of in the reporting period the product is delivered.
2. McCloud Drug Company owns a patent for a drug manufacturing process that it purchased
three years ago for $2 million. The chief accountant recently recorded a journal entry to
revalue the patent up to its “market value” of $8 million.
3. Prince Incorporated, a small publicly traded corporation pays the monthly mortgage on the
palatial estate of its president, Larry Crosswhite, and debits Miscellaneous Expense.
For each of the following situations, (1) indicate whether you agree or disagree with the
financial reporting practice employed and (2) state the accounting principle that is applied (if
you agree), or violated (if you disagree). (more than one answer may be appropriate)
1. Loser Corporation did not disclose that it was the defendant in a material lawsuit because the
trial was still in progress.
2. Alliant Semiconductor Corporation files quarterly and annual financial statements with the SEC.
3. Reliant Pharmaceutical Inc. paid rent in advance for the next two years on its office building
and charged the entire expenditure to Rent Expense.
4. Rockville Engineering credits the Revenue account after products have been shipped, even
though customers pay Rockville 50% of the sales price in advance.
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[9]
(5)supplemental(acorn_school).doc
Financial Accounting – Turck
Acorn Nursery School Corporation (ANSC): .
The Chart of Accounts is as follows:
ACORN NURSERY SCHOOL CORPORATION

CHART OF ACCOUNTS
ASSETS: OWNER’S EQUITY:
111 Cash 311 Capital Stock
113 Accounts Receivable 312 Retained Earnings
115 Supplies 313 Dividends
116 Prepaid Insurance
141 Equipment REVENUE:
411 Service Revenue
LIABILITIES:
211 Notes Payable EXPENSES:
212 Accounts Payable 511 Rent Expense
512 Gas and Oil Expense
513 Wages Expense
514 Utilities Expense
Acorn Nursery School Corporation

Trial Balance
January 31, 20xx
DEBIT CREDIT
Cash $ 1,870
Accounts Receivable 1,700
Supplies —
Prepaid Insurance —
Equipment 18,440
Notes Payable $15,000
Accounts Payable 1,640
Common Stock 4,000
Retained Earnings 1,370
Dividends —
Service Revenue —
Rent Expense —
Gas and Oil Expense —
Wages Expense —
Utilities Expense — —
$22,010 $22,010
Instructions start on the following page. Good luck, do your best.
[9]
[ 10 ]
(5)supplemental(acorn_school).doc
Acorn Nursery School Corporation (ANSC) (cont):
The following transactions were completed by ANSC during February.
February
2 Paid rent for the month, $270.
3 Paid for a one-year insurance policy, $290.
4 Received payments for February’s services provided to customers, $650.
5 Bought supplies on account from Duncan Office Supply, $85.
6 Ordered playground equipment.
8 Made payment to a vendor on open account, $170.
9 Received payments from customers for services provided in January, $1,200.
10 Billed regular customers for February services performed, but not yet paid for, $700.
11 Paid for supplies purchased on February 5.
13 Received the playground equipment ordered on Feb. 6. Paid cash, $1,000.
16 Paid part-time employees for their work through the first half of February, $230.
17 Purchased office equipment on account, $290.
19 Paid this month’s utility bill, $145.
22 Received payment from customers of $500. These customers were originally billed
on Feb. 10.
27 Received an invoice from the bus driver for gas expenses, $35. ANSC will pay invoice on
March 10.
28 Declared and paid a dividend of $110.
Instructions
1. Record the transactions for February in a General Journal starting on general journal page 17.
2. Post all February entries to the General Ledger.
3. At the end of the month, prepare a Trial Balance. Use your own paper.
4. Prepare General Purpose Financial Statements for the month of February. Use your own
paper.
5. Do not prepare Closing Entries at this time.
Two critical goals of General Purpose Financial Statements are to accurately

(1) report the economic reality of the results of operations (Income Statement) for the reporting
period (February) and
(2) report the economic reality of the financial position (Balance Sheet) at the end of the
reporting period (February 28).
6. Keeping goal (1) in mind,
a. which account on ANSC’s February Income Statement is understating reality?
b. to better reflect economic reality, list at least 2 accounts that should be accounted for
and listed on ANSC’s February Income Statement.
7. Keeping goal (2) in mind,
a. list at least 2 asset accounts that, as presented, are overstating economic reality.
b. to better reflect economic reality, name one additional liability account that should be
accounted for and listed on ANSC’s Balance Sheet as of February 28.
CkFigs: Cash balance $1,920; Net Income $670; Retained Earnings $1,930
[ 10 ]
File name: (5)supplemental(acorn_school).xls
[ 11 ]
NAME DATE CLASS Problem Set
GENERAL JOURNAL PAGE
POST.
ACCOUNTS/(EXPLANATIONS)
1 2009 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
41 41
42 42
[ 11 ]
Tab name: Acorn- General Journal (1)
[ 12 ]
POST.
ACCOUNTS/(EXPLANATIONS)
1 2009 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
41 41
42 42
[ 12 ]
Tab name: Acorn- General Journal (2)
[ 13 ]
GENERAL LEDGER
ACCOUNT CASH ACCOUNT NO. 111
POST. CURRENT BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT
Jan. 31 Balance Forward 1,870.00
CkFig: 2,350.00 2,300.00
ACCOUNT ACCOUNTS RECEIVABLE ACCOUNT NO. 113

CkFig: 700.00 1,700.00
ACCOUNT SUPPLIES ACCOUNT NO. 115

ACCOUNT PREPAID INSURANCE ACCOUNT NO. 116

[ 13 ]
Tab name: Acorn- Gen Ledger (1)
[ 14 ]
GENERAL LEDGER
ACCOUNT EQUIPMENT ACCOUNT NO. 141

ACCOUNT ACCOUNT NO.

ACCOUNT NOTES PAYABLE ACCOUNT NO. 211

ACCOUNT ACCOUNTS PAYABLE ACCOUNT NO. 212

CkFig: 255.00 410.00
ACCOUNT COMMON STOCK ACCOUNT NO. 311

ACCOUNT RETAINED EARNINGS ACCOUNT NO. 312

[ 14 ]
[ 15 ]
GENERAL LEDGER
ACCOUNT DIVIDENDS ACCOUNT NO. 313

ACCOUNT SERVICE REVENUE ACCOUNT NO. 411

CkFig: 1,350.00
ACCOUNT RENT EXPENSE ACCOUNT NO. 511

ACCOUNT GAS & OIL EXPENSE ACCOUNT NO. 512

ACCOUNT WAGES EXPENSE ACCOUNT NO. 513

ACCOUNT UTILITIES EXPENSE ACCOUNT NO. 514

[ 15 ]
[ 16 ]
Valente Delivery Company Financial Accounting: Instructor: Turck

Hints:
1. Read this document carefully, underline/circle important items.
2. Except Retained Earnings, each account balance is correctly stated.
3. “Unearned Document Income” is a liability account. (i.e., Unearned Revenue)
4. There were NO new owner investments in August.
Peter Valente operates a document delivery company. In the past (until August 1, 2008),
the accounting records were maintained by an outside accounting service. According to
those records, Valente’s Total Owner’s Equity balance was $81,500 at the close of
business on July 31, 2008. To save on expenses Valente decides to keep the records
himself. He manages to correctly record all August transactions, but he has significant
problems preparing the financial statements. His versions of the Income Statement and
Balance Sheet follow. Using the account balances contained in these financial
statements, prepare revised (corrected) general purpose financial statements, don’t forget
a Statement of Owner’s Equity, for the month of August.
Valente Delivery Company

Income Statement
For the month ended August 31, 2008
Revenue:
Common Stock 9,000
Unearned Document Income 6,000
Total revenues 15,000
Expenses:
Rent expense 3,100
Telephone expense 600
Delivery Equipment 5,400
Advertising expense 3,200
Utilities expense 300
Depreciation expense 1,500
Insurance expense 900
Dividends 6,000
Total expenses 21,000
Net Income (Loss) (6,000)
Valente Delivery Company

Balance Sheet
As of August 31, 2008
Assets: Liabilities:
Cash 3,900 Accounts Payable 2,400
Accounts Receivable 2,700 Delivery fee income 18,000
Prepaid Insurance 1,800 Accum. Depreciation 25,000
Prepaid Rent 4,200 Notes Payable 48,000
Office supplies 300 Total liabilities 77,200
Buildings 108,000
Land 36,000 Owner’s Equity
Salaries Expense 3,000 Retained Earnings 82,700
Total assets 159,900 Total liabilities & equity 159,900
(6)supplemental(correcting_financial_stmts).doc
[ 16 ]
[ 17 ]
Financial Accounting—Acctg _ _ _ (7)supplemental(AJEs).doc:

Instructor—Turck NAME use your own paper
Problem 1 (What is the reporting (i.e., measurement) period for Failwell? _____________)
Background Failwell has to complete its 2007 annual report in time for its annual stockholders’ meeting
scheduled for February 15, 2008. The following economic events must be properly accounted for before
financial statements can be finalized and published in the 2007 annual report. In other words, Failwell
needs to prepare end of year Adjusting Journal Entries 1 Assume Failwell does not issue monthly
financial statements and so no Adjusting Journal Entries have been prepared during the year. (include the
date for each journal entry)
1. Employees’ salaries amount to $15,000 per week (5-day work week). The last payday of 2007 was
on Monday, December 24. Payday is every other Monday and paychecks include pay for the most
recent Friday. The unadjusted balance in Salaries Expense is at $762,000.
a. Prepare the necessary AJE to accrue salaries owed but not paid as of 12/31/2007.
b. Prepare the explicit journal entry to record the first pay day in 2008 (i.e., January 7, 2008).
(hint: you will need a compound entry involving three accounts)
2. On November 1, 2007, Failwell debited Prepaid Rent when it paid its equipment rental of $6,000.
The payment represents rent costs for the months of November through January.
a. Reconstruct the explicit journal entry that was recorded back on November 1, 2007.
b. Prepare the necessary AJE to account for rent used during November and December.
3. On December 1, 2007, the company received $3,000 in cash from a tenant that is renting office space
in Failwell’s building. The cash receipt, representing rent for December, January February and
March, was balanced in the accounting system with a credit to Unearned Rent Revenue.
a. Reconstruct the explicit journal entry that was recorded back on December 1, 2007.
b. Prepare the necessary AJE to account for service provided to tenant during 2007.
4. On November 1, 2007, the company borrowed $100,000 from the bank. The loan contract requires
principal 2 and interest at a 10% annual 3 rate to be paid on April 30, 2008.
a. Reconstruct the explicit journal entry that would have been recorded back on November 1,
2007.
b. Prepare the necessary AJE to account for interest owed at 12/31/2007.
c. Try to prepare the April 30, 2008 necessary journal entry required at maturity of the loan.
(hint: you will need a compound entry involving four accounts)
1
Adjusting Journal Entries (almost) never include Cash. AJEs in this problem set will NOT include Cash.
2
Principal usually refers to the original amount borrowed.
3
Interest Rates are always stated in annual rates. Calculate the monthly or daily interest rates as follows:
(monthly interest rate = annual interest rate ÷ 12 mos) or (daily interest rate = annual interest rate ÷ 365 days)
1 || ] J | F | M | A | M | J | J | A | S | O | N |
| A | M | J | J | A | S | O | N | D[ 17
[ 18 ]

Problem 1 (continued)
5. On October 1, 2007, Failwell lent $60,000 to another company. A promissory note was signed stating
principal and interest at a 12% annual rate is due to be paid back on September 30, 2008.
a. Reconstruct the explicit journal entry that was recorded back on October 1, 2007.
b. Prepare the necessary AJE to account for interest earned during 2007.
c. Try to prepare the explicit September 30, 2008 journal entry required at maturity of the loan.
(hint: you will need a compound entry involving four accounts)
6. On August 1, 2007, Failwell collected $12,000 in Cash as advance payments from a customer for services
to be provided in the future. The $12,000 represents one year’s services and the entire amount was
credited directly to Unearned Revenue. Assume the balance in Unearned Revenue was $-0- before this
event.
a. Reconstruct the journal entry that would have been recorded back on August 1, 2007.
Setting up these T-accounts will prove beneficial for working out the correct AJE.
Unearned Revenue Service Revenue
Beg. Bal. Beg. Bal.
Aug. 1, 07 Unadj. Bal.
Unadj. Bal.
AJE AJE
Adj. Bal. Adj. Bal.
b. Prepare the necessary AJE to account for service provided to customer during 2007.
c. After posting the AJE, what would be the adjusted (i.e., reported) balance in Unearned Revenue?
7. Suppose instead of (6) above: On August 1, 2007, Failwell collected $12,000 in advance payments from
a customer for services to be provided in the future. The $12,000 represents one year’s services and the
entire amount was credited directly to Service Revenue.
a. Reconstruct the journal entry that was recorded back on August 1, 2007. (read #6 & #7 carefully)
Unearned Revenue Service Revenue
Beg. Bal. Beg. Bal.
Aug. 1, 07
Unadj. Bal. Unadj. Bal.
AJE AJE
Adj. Bal. Adj. Bal.
b. Prepare the necessary AJE dated 12/31/2007.

c. After posting the AJE, what would be the adjusted (i.e., reported) balance in Unearned Revenue?
2 | A | M | J | J | A | S | O | N | D || J | F | M | A | M | J | J | A | S | O | N |
[ 18 ]
[ 19 ]

8. A three-year fire insurance policy was purchased on July 1, 2007, for $6,000. On July 1 the company
debited Prepaid Insurance for the entire amount.
a. Reconstruct the journal entry that was recorded back on July 1, 2007.
Prepaid Insurance Insurance Expense
Adj.Bal. Adj.Bal.

c. After posting the AJE, what would be the adjusted (i.e., reported) balance in Prepaid Insurance?
9. Suppose instead of (8) above: A three-year fire insurance policy was purchased on July 1, 2007, for
$6,000. On July 1 the company debited Insurance Expense for the entire amount.
a. Reconstruct the journal entry that was recorded back on July 1, 2007. (read #9 carefully)
Prepaid Insurance Insurance Expense
Adj.Bal. Adj.Bal.

c. After posting the AJE, what would be the adjusted balance in Prepaid Insurance?
10. Failwell depreciates its long-term assets on a straight-line basis. The unadjusted balance in
Accumulated Depreciation is $13,825. Details for the long-term assets appears in the table below. Note:
In the year of acquisition Failwell depreciates new long-term asset to the nearest whole month 4.
DATE OF USEFUL LIFE SALVAGE
ACQUISITION ITEM (in years) VALUE COST
4/1/2001 Building 30 $5,000 $50,000
12/10/2004 Machinery 10 -0- 24,000
6/3/2007 Computer Sys. 4 3,000 33,000
10/2/2007 Telephone Sys. 8 1,000 41,000
a. Determine the 2007 depreciation expense for each item. Show your calculations!
b. Prepare one Adjusting Journal Entry for the total you calculated in part a.
4
Examples: For a long-term asset placed in service on February 10, include February and depreciate 11 months in the first year. If
the asset is placed in service on February 18, then exclude February and depreciate over the remain 10 months in the first year.
[ 19 ]
[ 20 ]

11. Failwell started 2007 with $2,000 worth of supplies in the storeroom; the 1/1/2007 balance in the
Supplies account was appropriately at $2,000. During the year, $6,500 in supplies were purchased and
debited to the Supplies account. On 12/31/2007, counting supplies in the storeroom reveals that $3,250
remain on hand at year end.
a. Reconstruct a journal entry that represents the $6,500 worth of supplies purchases. (ignore date)
Supplies Supplies Expense
Beg. Bal. Beg. Bal.
11a)
AJE AJE
Adj.Bal. Adj.Bal.

c. After posting the AJE, what would be the adjusted (i.e., reported) balance in Supplies account?
d. After posting the AJE, what would be the adjusted balance in Supplies Expense account?
12. Suppose instead of (11) above: Failwell started 2007 with $2,000 worth of supplies in the storeroom;
the 1/1/2007 balance in the Supplies account was appropriately at $2,000. During the year, $6,500 in
supplies were purchased and debited to Supplies Expense. On 12/31/2007, counting supplies in the
storeroom reveals that $3,250 remain on hand at year end. (read this carefully)
a. Reconstruct a journal entry that represents the $6,500 worth of supplies purchases. (ignore date)
Supplies Supplies Expense
Beg. Bal.
12a)
Adj.Bal. Adj.Bal.

c. After posting the AJE, what would be the adjusted balance in Supplies account?
d. After posting the AJE, what would be the adjusted balance in Supplies Expense account?
[ 20 ]
[ 21 ]

Problem 2 -- See instructions on the next page.
HALES DELIVERY COMPANY
Unaudited Income Statement
For Year Ended December 31, 2004
Revenue:
Sales Revenue .................................................... $68,700
Expenses:
Salaries expense ................................................ $23,000
Insurance expense ............................................. 3,000
Rent expense ...................................................... 3,100
Supplies expense ............................................... 4,600
Advertising expense .......................................... 3,200
Depreciation expense ........................................ 1,500
Utilities expense ................................................. 300
Total expenses ................................................... 38,700
Net income (loss) .................................................. $ 30,000

Unaudited Statement of Changes in Owner's Equity
For Year Ended December 31, 2004
Common Retained Total
Stock Earnings O. E.
Beginning Owners’ Equity .............................. 19,000 27,500 46,500
New Owner Investments ................................. -0- n/a -0-
Net Income (loss)............................................. n/a $30,000 30,000
Dividends ......................................................... n/a (15,000) (15,000)
Ending Owners’ Equity ................................... 19,000 42,500 61,500

Unaudited Balance Sheet (classified format)
as of December 31, 2004
Assets
CURRENT ASSETS:
Cash ............................................................................ ................................ $ 3,900
Accounts receivable .................................................. ...................................... 2,700
Prepaid rent ................................................................ .................................... 4,200
Total Current Assets .................................................. ............................................... 10,800
PROPERTY, PLANT & EQUIPMENT:
Land, at cost ............................................................... .................................... 36,000
Buildings and Equipment, at cost ............................ ....... 113,400
Less: Accumulated Depreciation, B & E .................. ....... ( 30,900)
Buildings and Equipment, net ................................... .................... ........... 82,500
Property, Plant & Equipment..................................... ............................................... 118,500
Total assets ................................................................ ............................................... $129,300
Liabilities
CURRENT LIABILITIES:
Accounts payable....................................................... ... $ 12,400
Salaries Payable ......................................................... ........... 5,400
Short-term Loan Payable(due 4/30/2005) ................. ..... 50,000
Total Current Liabilities ............................................. ................................ $ 67,800
NON-CURRENT LIABILITIES ..................................... ............................... NONE
Total Liabilities ........................................................... ............................................... 67,800
Owners’ Equity
Common Stock ........................................................... .................... ............... 19,000
Retained Earnings ...................................................... .................... ........... 42,500
Total Owners’ Equity.................................................. .................... .......................... 61,500
Total liabilities and owners’ equity ........................... ............................................... $129,300
[ 21 ]
[ 22 ]

Problem 2
Hales Corporation has trouble applying the Revenue Recognition and Matching principles to its
accounting records and thus its preliminary Net Income contains material errors. You are a member of the
outside audit staff. During the course of your examination of the financial statements and accounting
records of the Hales Corporation for the year ended December 31, 2004, you discover the following:
a. Net income reported on the 2004 income statement is $30,000. This is before correcting for the
items listed below. See income statement on the previous page.
b. An insurance policy covering three years was purchased on January 1, 2004, for $3,000. The
entire amount was debited to Insurance Expense and no adjusting journal entry was made for
this item.
c. During 2004, the company received a $1,000 cash advance from a customer for services to be
performed in 2005. The $1,000 was credited to Sales Revenue. No AJE was made.
d. There were $-0- Supplies listed on the Balance Sheet in the asset section. However, you
discover that Supplies costing $750 were in the storeroom at December 31, 2004.
e. Hales borrowed $50,000 from a local bank on May 1, 2004. Principal and interest at 12% annual
rate will be paid on April 30, 2005. No accrual was made for interest.
Required Determine the proper amount of net income for 2004.

a. Preliminary Net Income $ 30,000
b.
c.
d.
e.
Corrected Net Income (CkFig) $ 27,750
[ 22 ]
[ 23 ]
(8)Butch's Paintball Distribution1.doc

Journalize, post to G/L, prepare Trial Balance and prepare partial Income Statement:
The following merchandising transactions were completed by Butch’s Paint Ball Distribution,
Inc.(BPBD) during April, which is their first month of operations after incorporating late in March. At
the beginning of April, the General Ledger of BPBD, Inc. contains a $9,000 debit in Cash and a $9,000
credit in Common Stock.
April
2 Purchase merchandise on account from Kill-Shot, Inc. $5,900, terms 2/10 n/30.
4 Sold merchandise on account $5,000; FOB destination, terms 2/10, n/30. The cost of the
merchandise sold was $4,000. (reserve at least 6 general journal rows for this transaction)
5 Paid $200 freight on April 4 sale.
6 Received credit from Kill-Shot, Inc. for merchandise returned $300.
11 Took advantage of cash discount and settled account with Kill-Shot, Inc.
13 Received collections in full, less discounts, from customers billed on April 4.
14 Purchased merchandise with cash $4,400.
16 Received refund from supplier on cash purchase of April 14, $500.
18 Purchased merchandise from Bobby Duke Sales, Inc. $4,200, FOB shipping point, terms 2/10,
n/30.
20 Paid freight on April 18 purchase, $100.
23 Sold merchandise for cash $6,400. The merchandise sold had a cost of $5,120. (reserve at
least 6 general journal rows for this transaction)
26 Purchased merchandise for cash $2,300.
27 Took advantage of cash discount and settled account with Bobby Duke Sales, Inc.
29 Made refunds to cash customers for defective merchandise $90. The returned merchandise
had originally cost $70 and was put back to available inventory for future resale. (How would
your entry differ if the returned merchandise was defective and could not be resold?)
30 Sold merchandise on account $3,700, terms n/30. The cost of the merchandise sold was
$3,000. (reserve at least 6 general journal rows for this transaction)
BPBD’s Chart of Accounts includes the following: (these are the only accounts you may use)
No. 101 Cash
No. 112 Accounts Receivable
No. 120 Merchandise Inventory (including incoming freight charges)
No. 201 Accounts Payable
No. 311 Common Stock
No. 401 Sales Revenue
No. 412 Sales Returns and Allowances
No. 414 Sales Discounts
No. 505 Cost of Goods Sold
No. 565 Freight-out.
Instructions
(a) Based on the Chart of Accounts, set up your General Ledger(G/L). I have already set up the Cash account
and the Common Stock account for you.
(b) Journalize the transactions using a perpetual inventory system. Assume BPBD accounts for cash
discounts using the Gross Method for discounts (i.e., text book method).
(c) Post the April transactions.
(d) At month-end, prepare a Trial Balance of the General Ledger.
(e) Prepare the Multi-step Income Statement for the month of April 2006. Assume Operating Expenses are
$1,100(including Freight-out); Nonoperating Items net to +$125; Income Tax rate is 40%.
(CkFig: Net Income = $1,131)
[ 23 ]
File name: (8)Butch's Paintball Distribution1.xls
[ 24 ]
NAME DATE CLASS
POST.
ACCOUNTS / (EXPLANATIONS)
1 2006 1
2 Mar 29 CASH 101 9,000.00 2
3 COMMON STOCK 311 9,000.00 3
4 (ISSUED STOCK CERTIFICATES FOR CASH CONTRIBUTIONS) 4
5 5
6 Apr 2 M/I 5,900.00 6
7 A/P 5,900.00 7
8 (PURCHASED MERCHANDISE ON ACCOUNT) 8
9 9
10 4 A/R 5,000.00 10
11 COGS 4,000.00 11
12 SALES REVENUE 5,000.00 12
13 M/I 4,000.00 13
14 (SOLD MERCHANDISE ON ACCOUNT) 14
15 15
16 5 FREIGHT OUT 200.00 16
17 CASH 200.00 17
18 (PD FREIGHT ON 4/4/06 SALE) 18
19 19
20 6 A/P 300.00 20
21 M/I 300.00 21
22 (RETURNED MERCHANDISE TO TUCKEE SUPPLY) 22
23 23
24 11 A/P (REDUCE IN FULL) 5,600.00 24
25 CASH ($5,600×98%) 5,488.00 25
26 M/I ($5,600×2%) 112.00 26
27 (REMIT PAYMENT W/IN DISCOUNT PERIOD) 27
28 28
29 13 CASH ($5,000×98%) 4,900.00 29
30 SALES DISCOUNTS ($5,000×2%) 100.00 30
31 A/R (REDUCE IN FULL) 5,000.00 31
32 (RECEIVED PAYMENT W/IN DISCOUNT PERIOD) 32
33 33
34 14 M/I 4,400.00 34
35 CASH 4,400.00 35
36 (PURCHASED MERCHANDISE WITH CASH) 36
37 37
38 16 CASH 500.00 38
39 M/I 500.00 39
40 (REC'D CASH REFUND ON 4/14 PURCHASE) 40
[ 24 ]
Tab name: General Journal (1)
[ 25 ]
NAME DATE CLASS
POST.
1 2006 1
2 APR 18 M/I 4,200.00 2
3 A/P 4,200.00 3
4 (PURCHASED MERCHANDISE ON ACCOUNT) 4
5 5
6 20 M/I 100.00 6
7 CASH 100.00 7
8 (PD FREIGHT ON 4/18/06 PURCHASE) 8
9 9
10 23 CASH 6,400.00 10
11 COGS 5,120.00 11
13 M/I 5,120.00 13
14 (SOLD MERCHANDISE & REC'D CASH) 14
15 15
16 26 M/I 2,300.00 16
17 CASH 2,300.00 17
18 (PURCHASED MERCHANDISE WITH CASH) 18
19 19
20 27 A/P (REDUCE IN FULL) 4,200.00 20
21 CASH ($4,200×98%) 4,116.00 21
22 M/I ($4,200×2%) 84.00 22
23 (REMIT PAYMENT W/IN DISCOUNT PERIOD) 23
24 24
25 29 SALES RETURNS AND ALLOW. 90.00 25
26 CASH 90.00 26
27 (ALLOWED CASH REFUNDS TO CUSTOMERS) 27
28 28
29 29 M/I 70.00 29
30 COGS 70.00 30
31 (RETURNED MERCHANDISE RETURNED TO STOCK) 31
32 32
33 30 A/R 3,700.00 33
34 COGS 3,000.00 34
36 M/I 3,000.00 36
37 (SOLD MERCHANDISE ON ACCOUNT) 37
38 38
39 39
40 40
[ 25 ]
[ 26 ]
NAME DATE CLASS
POST.
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
35 35
36 36
37 37
38 38
39 39
40 40
[ 26 ]
[ 27 ]
NAME DATE CLASS
GENERAL LEDGER
ACCOUNT CASH ACCOUNT NO. 101
POST. BALANCE
MAR 29 J1 9,000.00 9,000.00

APR 5 J1 200.00 8,800.00
11 J1 5,488.00 3,312.00
13 J1 4,900.00 8,212.00
14 J1 4,400.00 3,812.00
16 J1 500.00 4,312.00
20 J2 100.00 4,212.00
23 J2 6,400.00 10,612.00
26 J2 2,300.00 8,312.00
27 J2 4,116.00 4,196.00
29 J2 90.00 4,106.00
ACCOUNT ACCOUNTS RECEIVABLE ACCOUNT NO. 112
POST. BALANCE
APR 4 J1 5,000.00 5,000.00
13 J1 5,000.00 0.00
30 J1 3,700.00 3,700.00
ACCOUNT MERCHANDISE INVENTORY ACCOUNT NO. 120
POST. BALANCE
APR 2 J1 5,900.00 5,900.00

4 J1 4,000.00 1,900.00
6 J1 300.00 1,600.00
11 J1 112.00 1,488.00
14 J1 4,400.00 5,888.00
16 J1 500.00 5,388.00
18 J2 4,200.00 9,588.00
20 J2 100.00 9,688.00
23 J2 5,120.00 4,568.00
26 J2 2,300.00 6,868.00
27 J2 84.00 6,784.00
29 J2 70.00 6,854.00
30 J2 3,000.00 3,854.00
[ 27 ]
Tab name: Gen Ledger p. (1)
[ 28 ]
NAME DATE CLASS
GENERAL LEDGER
ACCOUNT ACCOUNTS PAYABLE ACCOUNT NO. 201
POST. BALANCE
APR 2 J1 5,900.00 5,900.00

6 J1 300.00 5,600.00
11 J1 5,600.00 0.00
18 J2 4,200.00 4,200.00
27 J2 4,200.00 0.00
ACCOUNT ACCOUNT NO.
POST. BALANCE
ACCOUNT COMMON STOCK ACCOUNT NO. 311
POST. BALANCE
MAR 29 J1 9,000.00 9,000.00
ACCOUNT ACCOUNT NO.
POST. BALANCE
[ 28 ]
[ 29 ]
NAME DATE CLASS
GENERAL LEDGER
ACCOUNT SALES ACCOUNT NO. 401
POST. BALANCE
APR 4 J1 5,000.00 5,000.00

23 J2 6,400.00 11,400.00
30 J2 3,700.00 15,100.00
ACCOUNT SALES RETURNS AND ALLOWANCES ACCOUNT NO. 412
POST. BALANCE
APR 29 J2 90.00 90.00
ACCOUNT SALES DISCOUNTS ACCOUNT NO. 414
POST. BALANCE
APR 13 J1 100.00 100.00
ACCOUNT COST OF GOODS SOLD ACCOUNT NO. 505
POST. BALANCE
APR 4 J1 4,000.00 4,000.00
23 J2 5,120.00 9,120.00
29 J2 70.00 9,050.00
30 J2 3,000.00 12,050.00
[ 29 ]
[ 30 ]
NAME DATE CLASS
GENERAL LEDGER
ACCOUNT FREIGHT OUT ACCOUNT NO. 644
POST. BALANCE
APR 5 J1 200.00 200.00
ACCOUNT ACCOUNT NO.
POST. BALANCE
ACCOUNT ACCOUNT NO.
POST. BALANCE
ACCOUNT ACCOUNT NO.
POST. BALANCE
[ 30 ]
[ 31 ]
(8)Butch's Paintball Distribution1.xls
NAME DATE CLASS
Butch's Paintball Distribution

Trial Balance
4/30/2006
CASH 4,106.00
A/R 3,700.00
M/I 3,854.00
A/P 0.00
COMMON STOCK 9,000.00
SALES REVENUE 15,100.00
SALES RETURNS AND ALLOWANCES 90.00
SALES DISCOUNTS 100.00
COST OF GOODS SOLD 12,050.00
FREIGHT OUT 200.00
24,100.00 24,100.00
Butches Paintball Distribution

Income Statement
for the month ended April 30, 2006
Sales, Gross 15,100.00

less: Sales Returns and Allowances (90.00)
Sales Discounts (100.00)
Net Sales 14,910.00
Cost of Goods Sold 12,050.00
Gross Profit 2,860.00
Operating Expenses 1,100.00
Operating Income 1,760.00
Net Nonoperating Items 125.00
Income before Income Tax Expense 1,885.00
Income Tax Expense 754.00
Net Income 1,131.00
[ 31 ]
[ 32 ]
Financial Accounting(Turck)—(9)supplemental(inventory).docName (use you own paper)
A) ALTERNATIVE INVENTORY METHODS --

Eve & Tori One-Item Gift Shop, Inc. began operations on December 1, 2008 1. The only inventory
transaction in 2008 was the purchase of inventory on December 10, 2008, at a cost of $20 per unit.
None of this inventory was sold in 2008. Relevant information is as follows:
Ending Inventory in Units

as of December 31, 2008, specifically identified 2 by purchase date:
December 10, 2008 100units 100units
as of December 31, 2009, specifically identified by purchase date:

December 22, 2009 100units
July 20, 2009 50units 150units
Transactions During calendar year 2009, the following purchases and sales were made:
Purchases __ Sales__
March 15,2009 300 units at $24 April 10, 2009 200 units
July 20, 2009 300 units at $25 August 20, 2009 300 units
September 4, 2009 200 units at $28 November 18, 2009 150 units
December 22, 2009 100 units at $30 Dec. 12, 2009 200 units
Assume units sold for $70 each.
Instructions:
1. Determine the number of Units available for sale and Cost of Goods Available for Sale for 2009.
2. Assume the company uses a Periodic system. Determine Ending Inventory, Cost of Goods Sold
and Gross Profit under following cost flow assumptions:
(a) FIFO (CkFig: CoGS = $20,900)
(b) LIFO (CkFig: CoGS = $22,100)
(c) Weighted-Average Cost (CkFig: CoGS = $21,505)
(d) Specific Identification (CkFig: CoGS = $21,050).
3. Assume the company uses a Perpetual system.
Determine Ending Inventory and Cost of Goods Sold under following cost flow assumptions:
(a) FIFO
(b) LIFO (CkFig: CoGS = $21,300)
(c) Weighted-Average Cost (CkFig: CoGS = $20,995).
(d) Specific Identification Short Answer: What critical information is missing from the problem
and prevents us from employing a combination perpetual-specific identification inventory method
for 2009? Hint: try to journalize Cost of Goods Sold on the April 10, 2009 sale.
4. In general journal form, prepare the required entries for July 20 and November 18 under the
following conditions: (a) Perpetural FIFO, (b) Perpetual LIFO, (c) Perpetual Weighted-Ave.
(d) If at all, how would your journal entries differ under Periodic?
Note: I am 97% confident of the check figures, but I do not guarantee them.
1
Warning: The reporting period for this problem is 2009. The assignment is to get
fairly stated year-end inventory and CoGS for 2009.
2
Do companies that can “specifically identify” inventory units, have to use
Specific Identification in published financial statements? No, they do not!
Presentation of Specific Identification is very rare in practice!
Use plenty of paper for this problem set. -1-
[ 32 ]
[ 33 ]

B) PHYSICAL INVENTORY COUNTS:
Theoretically, inventory should be included on only one firm’s balance sheet at any point in time.
Employees of Kahala Co. physically counted valued inventory items at year end December 31, 2008. The count totaled
$100,000. During examination of financial records, you obtained the additional information listed below. To arrive at a
fairly stated inventory balance as of December 31, 2008, determine whether the following items have been properly
accounted for, or whether the item should be added to or subtracted from the preliminary inventory count figure.
1. Goods in transit on Dec 31, 2008 from a supplier, with terms FOB shipping point, cost $2,000. These
items are not included in the preliminary $100,000 figure.
2. Merchandise costing $750 was ordered by Kahala on December 28, 2008, and was shipped the same day
to Kahala FOB shipping point. This merchandise arrived at Kahala on January 4 and is not included
in the preliminary $100,000 figure.
3. Kahala ordered $500 of goods on December 24, 2008. Those goods, shipped the same day to Kahala
FOB destination, arrived on January 2, 2009. They are not included in Kahala’s 2008 preliminary
figure.
4. On December 29, 2008, Kahala (consignee) received $1,500 of merchandise on consignment for Barney
(consignor). The merchandise was on hand at December 31 and was included in Kahala’s physical
inventory count.
(Note: According to GAAP, consigned goods should be included in the consignor’s ending
inventory.)
5. Kahala’s December 31 physical inventory count included $450 cost of merchandise set aside for
shipment to Paxon’s Radio Shop. Paxon had ordered the goods on December 23 and had enclosed a
30 percent of the $1,000 selling price as a down payment with the order.
6. Goods costing $400 were in Kahala’s warehouse at December 31, 2008 but were not included in ending
inventory. These goods had been ordered by Lester Company on December 22 and Kahala had
billed Lester $600, however, the goods were not shipped until January 1, 2009, because of an error
on the shipping dock.
7. Kahala’s December 31, 2008, inventory count included goods that had cost Kahala $1,200. Kahala
shipped these goods on consignment-basis to Gray Electronics on December 20, 2008.
8. On Dec. 31, 2008, Garvin Co. paid for goods and asked that they be delivered on Jan 2, 2009. These
goods cost Kahala $625, they were set aside and excluded from the physical count. Would your
accounting treatment for these goods change if the contract stated that the Garvin would pick up the
goods on Jan 2, 2009?
Using your own paper, set up a table similar to the one presented below:
Preliminary Physical Inventory $ 100,000 Comments:
1.
2.
3.
4.
5.
6.
7.
8.
Check Figure $ 102,275
Use plenty of paper for this problem set. 2

[ 33 ]
[ 34 ]
C1) GROSS PROFIT METHODSmith Distributors, Inc., supplies ice cream shops with various
toppings for making sundaes. On November 17, 2010, a pack of wild people escaped from a
weight-reduction spa broke into one section of the warehouse and ate all the toppings resulting in a
total loss of all toppings stored in that section. The company must provide its insurance company
with an estimate of the amount of inventory lost. The following information is available from the
company’s accounting records:
Required: Calculate the estimated cost of each of the toppings lost in the melee:
(show your work)
Fruit Marshmallow Chocolate
Toppings Toppings Toppings
Inventory, January 1, 2010 $ 20,000 $ 7,000 $ 3,000
Net purchases through Nov 17 150,000 36,000 12,000
Net sales through Nov. 17 200,000 55,000 20,000
Historical gross profit ratio 20% 30% 35%
ADDITIONAL CONSIDERATION:
The Gross Profit Ratio is, by definition, a Percentage of Sales (i.e., Net Sales = 100%). Sometimes,
though, information will instead provide a “percentage” measuring the “Markup on Cost.” In that case, the
“percentage” will be referred to as the Markup on Cost (percentage of cost, i.e., cost = 100%).
When I pay $60 for a skateboard that I plan to resell, I need to determine the price tag value. I always add
50% of the cost ($30) to the cost and that is my selling price. I would sell a $60 skateboard for $90. I
employed a 50% “Markup on Cost”. What “Gross Profit Percentage” is implied by a 50% Markup on
Cost?
Income Statement for one skateboard

for one skateboard sold as % of Sales
$
Sales Rev 90 ⇒ Sales % 100 %
CoGS 60 ⇒ CoGS % 66⅔%
$ %
Gross Profit 30 ⇒ Gross Profit 33⅓%
 Formula for converting “Markup on Cost %” to “Gross Profit Percentage”:

Markup on Cost% / (100% + Markup on Cost%) = Gross Profit Percentage
50% / (100% + 50%) = 33⅓%
Thus, a 50% Markup on Cost implies a Gross Profit Percentage of 33⅓%
 Formula for converting “Gross profit percentage” to “Markup on cost %”?

Gross Profit% / CoGS as percent of Net Sales = Markup on Cost
33⅓% / 66⅔% = 50%Markup on Cost
Be careful to note which way the percentage is being stated. If stated as “Markup on Cost”, then convert to
“Gross Profit Percentage”, then Gross Profit Method can be applied the usual way. See next problem.
Make your work clear and easy to follow! Use plenty of paper for this problem set. -3-
[ 34 ]
[ 35 ]
C2) GROSS PROFIT METHOD (CONTINUED) (convert “Mark-up on Cost%” to “GP%”)

GLM Lumber Company handles three principal lines of merchandise with these varying rates of
markup on cost:
Lumber 25%
Millwork 30%
Hardware and fittings 40%
On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber
stacked in the yard. To file a report of loss for insurance purposes, the company must know what
the inventories were immediately preceding the fire. No detail or perpetual inventory records of
any kind were maintained. The only pertinent information you are able to obtain are the following
facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.
Required: Submit your estimate of the inventory amounts immediately preceding the fire.
Show your work. Round percentage to one figure right of the decimal point. (XX.X%)
Lumber Millwork Hardware
Inventory, Jan 1, 2010 $ 250,000 $ 90,000 $ 45,000
Purchases to Aug. 18, 2010 1,500,000 375,000 160,000
Sales to Aug. 18, 2010 2,080,000 533,000 210,000
[ 35 ]
[ 36 ]

D) LOWER OF COST OR MARKET The unadjusted balance in the General Ledger for
Merchandise Inventory for T3 Corp on December 31, 2009 is $367,600. This balance is made up of
the following detail:
LCM
expert analysis
Part No. Quantity Cost per Unit Aggregate
Method
110 600 $ 90
111 1,000 60
112 500 80
113 200 170
120 400 205
121 1,600 16
122 300 240
Total ≅ $362,000
Required:
(a) Use arithmetic and confirm the detail inventory records agree with the General Ledger
Balance.
(b) Determine an adjusted inventory balance by applying “Lower of Cost or Market(LCM)”
analysis to the inventory using the “aggregate approach”. Your expert has provided you
with an approximation of market value as shown above. Propose the AJE if needed.
(c) Assume the auditor has asked you to do the LCM adjustment on an “item-by-item
approach” and that your expert delivered these per unit “replacement values” for your
Merchandise Inventory:
Replacement
Part No. Cost per Unit
110 $ 100
111 52
112 76
113 180
120 208
121 14
122 235
Use arithmetic and confirm the ending inventory after applying LCM on the “item-by-item
approach” should be $352,900. Propose the AJE if needed.
[ 36 ]
[ 37 ]
E1) RETAIL INVENTORY METHOD Suppose Home Improvement Store Inc.’s (HISI) largest
lender(creditor) has asked HISI for monthly financial statements as a condition attached to a new
loan dated May 31, 2010. In order to avoid costly monthly physical counts of inventory, HISI
management intends to use the retail inventory method to estimate Ending Inventory and Cost of
Goods Sold for each month starting with June. Using data available in its general ledger and
additional accounting records, show how HISI can estimate Cost of Goods Sold, Ending Inventory
and Gross Profit for June.
at Cost at Retail
Beginning Inventory, June 1, 2010 $ 60,000 $100,000
Net Purchases for June 287,200 460,000
Goods Avail for Sale (at cost & at retail respectively)
Net Sales for June $400,000
Home Improvement Store, Inc.

Income Statement
For month ended June 30, 2010
E2) RETAIL INVENTORY METHOD (continued) Suppose the President of HISI suspects the
Inventory Manager of theft (stealing inventory). After sending the Inventory Manager home for the
day, the President calls for a physical inventory on June 30, 2010. Inventory counters are instructed
to count 6/30/2010 inventory using retail value (i.e., each item of inventory will be counted at its
price tag value). The count results in a retail inventory valuation of $130,000. At cost value how
much inventory seems to be missing?
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Financial Accounting (10)supplemental(Receivables).doc

Instructor—Turck Use your own paper
Start each problem on a new sheet of paper
1. Compute the missing amounts for each of the following notes: (for easier calculations, assume 360 days per year)
Principal Annual Interest Rate Time Total Interest
(a) $17,000 10% 180 days ?
(b) ? 9% 120 days $450
(c) $60,000 ? 5 months $3,000
(d) $50,000 11% ? $1,375
Principal × Annual Rate × Fraction of Year = Interest in Dollars
2. Buck’s Best Coffee Company(BBCC), an importer of Columbian coffee, BBCC maintains a tight credit policy for
customers, but has a few regular customers and so makes some sales on account and manages the resulting receivables.
Average experience for the past three years has been as follows:
Total Cash Sales Credit Sales

Sales $350,000 $200,000 $150,000
Cost of Goods Sold 210,000
Bad Debt Expense 4,000
Additional Operating Expenses 61,000
Buck Anderson, the sole shareholder, is considering loosening the credit policy by accepting credit cards (VISA,
Mastercard). He expects to sell 10% more coffee by easing credit restrictions. Analysis suggests that ALL sales will be
via credit card. If BBCC switches to credit cards, Buck believes the business can save $2,000 on accounting and additional
operating expenses, however VISA and Mastercard will charge BBCC a 2% fee on credit-card sales.
Instructions (assume no income taxes):
1. Should Buck’s Best Coffee Company start accepting credit cards? (to answer the question, prepare income
statements under the present scenario and then under the credit card plan, then compare Net Income projections)
2. If Buck believes that credit card companies are planning to triple their fees, does your answer change?
3. Information related to Cicero Corp for 2008 is summarized below:

Total Credit Sales $2,000,000 (during 2008)
Actual Customer Accounts written off 36,000 (during 2008), including a $750 account on January 21, 2008
A/R, Gross 800,000 (as of 12/31/2008)
Instructions: unless otherwise indicated, assume each item is an independent situation

a. What amount of Bad Debts Expense will Cicero Corp. report for 2008 if it uses the specific charge-off method of
accounting for bad debts?
b. What are the weaknesses in using the specific charge-off method of reporting Bad Debts Expense?
c. Assume Cicero Corp. employs the theoretically better allowance method for recording Bad Debt Expense. Also
assume the January 1, 2008 balance in AFDA is $40,000. Did management overestimate or underestimate actual
write-offs for 2008? [
d. Assume Cicero Corp. employs allowance method for recording Bad Debt Expense. Prepare the journal entry on
January 21, 2008 required to write-off the $750 actual uncollectible account.
e. Assume that on the morning of Jan. 21, 2008 “A/R, Gross” is at $750,000 and that “AFDA” is still at $40,000.
(i) What is the Net A/R before the journal entry in (d)? Note: For the entry in (d) above you should have debited
“AFDA” and credited “A/R, Gross” for $750. (ii) What is the Net A/R after the journal entry in (d)?
f. End of Year 2008: Assume that Cicero Corp. reports Bad Debt Expense as 3% of credit sales. Cicero Corp. has a
12/31/08 unadjusted balance in AfDA of $4,000<cr>. (i) Prepare the necessary AJE. (ii)What dollar amount will
Cicero report as Bad Debt Expense for 2008?
g. Assume that Cicero Corp. reports AfDA based on 6% of A/R. Cicero Corp. has a 12/31/08 unadjusted balance in
AfDA of $4,000<cr>. (i) Prepare the necessary AJE. (ii) What dollar amount of Bad Debt Expense will Cicero
Corp. report for 2008?
h. Assume the same facts as in (g), except that actual accounts written off were $42,500 so there is an unadjusted
$2,500<dr> balance in AfDA. (i) Prepare the necessary AJE. (ii) What dollar amount of Bad Debts Expense will
Cicero Corp. report for 2008?
1
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4. ICHIRO COMPANY: Set up T-accounts for A/R, AFDA, & Bad Debt Expense
• Set-up: At the beginning of 2002, the balances for Accounts Receivable and Allowance for Doubtful Accounts were
$430,000 and $31,700, respectively. Set up T-accounts for A/R and AfDA now.
• Transactions: During 2002, credit sales were $3,200,000 and collections on account were $2,950,000. In addition,
$35,000 in uncollectible accounts were written off. Journalize these three transactions. Then post them to T-accounts.
• Summarize: Calculate balances in the T-accounts to determine the year-end balance of Accounts Receivable and the
unadjusted balance in Allowance for Doubtful Accounts.
• Adjustments: Based on the Note below, make the year-end Adjusting Journal Entry to record the Bad Debt Expense
for 2002.
• Financial Statements: Prepare the year-end balance sheet presentation for Accounts Receivable and Allowance for
Doubtful Accounts at the end of 2002 and at the end of 2001. (i.e., comparative balance sheets)
• 2003: On September 3, 2003, Alex Inc., a customer, filed for bankruptcy, and alerted Ichiro Co. that it would not be
paying the $750 due to Ichiro Co. Prepare the necessary journal entry.
Note: Management estimates the percentage of uncollectible credit sales to be 1.2 percent of total credit sales.
5. Mount Digital Co. reported the following information on its balance sheet as of December 31, 2008.
Accounts Receivable, gross $960,000
Less: Allowance for Doubtful Accounts 70,000
Accounts Receivable, net $890,000
During 2009, the company had the following transactions related to receivables.
A. Sales on Account $3,200,000
B. Sales returns and allowances 50,000
C. Collections of accounts receivable 2,800,000
D. Write-offs of accounts receivable deemed uncollectible 90,000
E. Recovery of bad debts previously written off (not included in C. above) 25,000
Instructions:
a. Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on
the collections of accounts receivable.
b. Start with the January 1, 2009, balances in A/R and AfDA, then post the entries to these two accounts (use T-
accounts), and determine year-end unadjusted balances.
c. Prepare the journal entry to record bad debts expense for 2009, assuming that an aging of A/R indicates that
uncollectible accounts are $100,000(i.e., calculated amount)
6. Assume Dunn-Pitts Inc., famous for its canned olives, completed the following selected transactions:
2008
Nov 1 Sold goods to Kroger, Inc., receiving a $24,000, three-month, 6% note.
Dec 31 Made an adjusting entry to accrue interest on the Kroger note.
Dec 31 Made an AJE to record Bad Debt Expense based on an aging of A/R. The aging analysis indicates that
$197,400 of A/R will not be collected. The unadjusted balance in Allow. for Doubtful Accts is $19,300<cr>.
2009
Feb 1 Collected the maturity value of the Kroger note.
Feb 23 Received a 90-day, 15%, $4,000 note from Bliss Co. for a past-due account
Mar 31 Sold the Bliss Co. note to U.S. Bank, receiving cash of $3,810.
Nov 16 Loaned $15,000 cash to McNeil, Inc., receiving a 90-day, 12% note.
Dec 31(a) Accrued the interest on the McNeil, Inc., note.
Dec 31(b) AJE to record Bad Debt Expense based on an aging of A/R. Management has calculated that $274,100 of
A/R will likely not be collected. The unadjusted balance in Allow. for Doubtful Accts is $23,000<dr>.
Instructions:
Prepare all necessary journal entries for years 2008 and 2009.
2
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7. Following are selected transactions, including all transactions affecting Allowance for Doubtful Accounts, for Garden
Company during the year 2000. The balance in Allowance for Doubtful Accounts as of January 1, 2000 is a $1,500 credit.
May 8 Garden Co. purchases 300 shares of Federal Express stock as a short-term investment as
available-for-sale securities at a cost of $40 per share plus $975 in broker fees.
July 14 Write off a $750 account receivable arising from a sale to Briggs Company 13 months ago.
(Garden Company uses the allowance method.)
July 30 Garden Company receives a $1,000, 3-month, 10% note from a product sale to Sumrell
Company. (assume Garden Company uses periodic inventory system)
Aug. 15 Receives $2,000 cash plus $10,000 note from Evans in exchange for merchandise that sells for
$12,000. The note is dated August 15, bears 12% interest, and matures in six months.
Sep. 2 Sells 100 shares of Federal Express at $47 per share and continues to hold the remaining 200
shares. The broker’s commission on this sale is $225.
Sep. 15 Receives $9,900 in exchange for discounting without recourse the $10,000 note (see August 15)
at the local bank.
Oct. 2 Purchases 400 shares of McDonald’s stock of $60 per share plus $1,600 in commission. The
stock is held as a short-term investment in available-for-sale securities.
Oct. 30 Garden Company receives payment on Sumrell note dated July 30.
Nov. 1 Made a $200 credit card sale with a 4% fee—the net cash proceeds will be received overnight
from the credit card company—and automatically deposited in company’s bank account
Nov. 5 Made a $500 credit card sale with a 5% fee—the payment from the credit card company is
received via check on Nov 7. Prepare the Nov. 7 entry also.
Nov. 15 Receives the full amount of $750 from Briggs Company that was previously written off on July
14. Record the bad debts recovery.
Nov. 20 Write off a $2,500 account receivable arising from a prior year sale to Owens’ Inc.
(1) Prepare journal entries to record these transactions on the books of Garden Company.
(2) Prepare the following:
A. AJE(a): Prepare an adjusting entry to accrue any Interest Income and Interest Receivable on the basis of
outstanding Notes Receivable. (if any)
B. AJE(b): Before any AJE(b) the Allowance for Doubtful Accounts shows a $1,000 debit balance. [confirm
this balance for yourself by posting AFDA entries to the General Ledger (there should be 3 entries to post)].
Has management over or under estimated the level of write-offs to Accounts Receivable for the year 2000?
Following the directions below, prepare two alternative adjusting journal entries for Bad Debt Expense on
December 31, 2000.
(i) AJE(b) (alternative 1) Balance Sheet Method:
Assume Bad Debt Expenses is estimated by an aging of Accounts Receivable. Based on analysis of
Accounts Receivable, management estimates $20,400 of the outstanding Account Receivable will never
be collected.
(ii) AJE(b) (alternative 2) Income Statement Method:
Assume Bad Debt Expenses is estimated by using the percent of Sale Revenue approach. Management
estimates Bad Debt Expense for the period is 1% of credit sales. Credit sales for the year amounted to
$2,000,000.
3
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8. At the end of the previous year, Falcetto had the following portfolio of short-term investments:
Available-for- No. of Cost per Market Value Total Holding Gain
Sale Securities Shares held Share Total Cost per Share Market or (Loss)
(incl. commission) Value
Federated, Inc. 300 $ 47.25 $ 14,175 $ 75.00 $ 22,500 $ 8,325
Nordstrom 400 31.00 12,400 31.00 12,400 -0-
The Gap 500 51.50 25,750 50.00 25,000 (750)
Total $ 52,325 $ 59,900 $ 7,575
Presented below are selected transactions related to Falcetto Company.

Similar to Macys and Nordstrom, Falcetto maintains its own credit card; also
Falcetto accepts American Express.
Mar. 1 Sold $20,000 of merchandise to Potter Company, terms 2/10, n/30.
10 Received sufficient payment from Potter Company for balance due.
12 Accepted Juno Company’s $20,000 6-month, 5% note for balance due.
13 Made Falcetto Company credit card sales of $13,200.
15 Made American Express credit sales totaling $6,700. A 5% service
fee is charged by American Express. American Express will send
Cash soon.
30 Received payment in full from American Express Company less the 5%
service charge.
Apr. 11 Sold accounts receivable of $8,000 to Harcot Factor. Harcot Factor
assesses a service charge of 2% of the amount of receivables sold.
13 Received collections of $8,200 on Falcetto Company March 13 credit
card sales and added finance charges of 1.5% to the remaining
balances.
May 10 Wrote off as uncollectible $16,000 of accounts receivable.
Falcetto uses the percentage of sales basis to estimate bad debts.
July 16 A customer whose account was written off in May remits full payment
in the amount of $4,000, no additional payment is expected.
Aug. 12 Because of a temporary shortage of cash, Falcetto discounted the
Juno Note at U.S. Bank. The note is discounted with recourse. The
bank charges 6%(annual) discount rate. (please record the interest
earned by Falcetto over its holding period)
Aug. 12 Still short of cash, Falcetto sells 100 shares of Federated Inc.
for $75 each, less a 2% commission
Sep. 12 Juno defaulted on the note dated March 12. U.S. Bank charged
Falcetto a $150 default fee. Falcetto promptly paid the bank.
Sep. 15 In order to cover the cash shortage created by the Juno default,
Falcetto pledged $25,000 of Accounts Receivable as security for a
$24,000, six month 8% loan from Washington Mutual
Dec. 31 Prepare an AJE. Credit Sales for the year totaled $2,500,000 and
the bad debt percentage is 1% of total credit sales. At December
31, the balance in Allowance for Doubtful Accounts is credit of
$3,500.
Dec. 31 Accrue the interest owed on the Washington Mutual Loan.
Dec. 31 According to the Wall Street Journal, the market values at the
stock market close on December 31 for Federated, Nordstrom and The
Gap were $70, $30 and $49 per share, respectively.
Instructions: 1. Prepare the journal entries for the transactions.
2. In dollar terms, and based on your journal entries, how
happy or sad is the Income Statement for the year.
4
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Financial Accounting
Instructor—Turck Prepare your solutions neatly on your own paper.
(11)supplemental(PPE).docx Start each problem on a new sheet of paper.
1. DeLisa Company purchased equipment on January 1, 2008, for $44,000. The expected useful life of the equipment is 10
years or 100,000 units of production, and its residual value is $4,000. Under three depreciation methods, the annual
depreciation expense and the balance of accumulated depreciation at the end of 2008 and 2009 are as follows:
Method A Method B Method C

Annual Annual Annual
Deprec. Accum. Net Book Deprec. Accum Net Book Deprec. Accum. Net Book
Year Expense Deprec. Value Expense Deprec. Value Expense Deprec. Value
2008 $4,000 $4,000 $40,000 $8,800 $8,800 $35,200 $1,200 $1,200 $42,800
2009 4,000 8,000 36,000 7,040 15,840 28,160 5,600 6,800 37,200
Required:
1. Identify the depreciation method used in each method, and show the equation and computation for each. Hint: Equipment
produced 3,000 units and 14,000 units in 2008 and 2009 respectively. (Round to the nearest dollar).
2. Assume continued use of the asset through year 2010. Determine the annual depreciation expense, accumulated
depreciation, and book value of the equipment for 2010 under each method. In other words, construct a row for year 2010.
Assume 12,000 units of production in 2010.
3. Suppose the income tax authorities permitted a choice between Method A and Method B. Which method would you
recommend to DeLisa Company? Why?
4. Suppose DeLisa Company had been using Double-declining-balance method. On July 1, 2010, the company sold the
equipment for $27,000 cash. Record the depreciation expense up to the date of sale and then the sale of the equipment on
July 1, 2010. (i.e., you need two journal entries for this part.)
2. Cicero, Inc. a small manufacturing corporation, made the following

expenditures related to its 10-year old manufacturing facility:
1. The heating system was replaced at a cash cost of $300,000. The cost of the old system was not known. (assume this
expenditure qualifies as an Extraordinary Repair)
2. A new wing was added at a cost of $350,000. The new wing substantially increases the productive capacity of the
plant.
3. Monthly building maintenance was performed at an annual cost of $12,000.
4. All of the machinery on the assembly line in the plant was rearranged at a cost of $15,000. The rearrangement clearly
increases the productive capacity of the plant. Would your answer change if the corporation was Starbucks?
Required: Prepare journal entries to record each of the above expenditures.
NOTE: Cicero, Inc. has an asset called “Facility” in it General Ledger. Use account called Facility if you capitalize the entry.
3. Required: (assume no income taxes throughout this problem)
a) For items (i) -thru- (iii), determine the “cost” assigned to each asset (or expense) when purchased. And for item (iv),
determine the book value on January 1, 2010 (the first day of the current period).
b) For items (i, ii & iii), calculate the depreciation or other expense to be recorded for each asset in 2010.
c) For item (iv), calculate the gain or loss on the sale of the old truck. Don’t forget to record 2010 depreciation up to
date of sale.
d) Based on these events, what is the dollar impact to Operating Income for the year ended December 31, 2010?
e) Based on these events, what is the dollar impact to Net Income for the year ended December 31, 2010?
The following events took place at Sabado Painting Company during 2010:
i. On January 1, Sabado Co. bought a new truck for $14,000. He added a custom tool chest and side rack for ladders at a
cost of $4,800. The truck is expected to last four years and then be sold for $800. Assume the sale will include the
tool chest and ladders. Sabado Co. uses straight-line depreciation.
ii. On January 1, he purchased several items at an auction for $2,400. These items had fair market values as follows:
10 cases of paint trays and roller covers $ 200
Storage cabinets 600
Ladders and scaffolding 2,400
Sabado Co. will use all the paint trays and roller covers this year. The storage cabinets are expected to last nine years,
and the ladders and scaffolding for four years. Ignore salvage value.
iii. On February 1, Sabado Co. paid the city $1,500 for a three-year license to operate the business.
iv. On September 1, Sabado Co. sold an old truck for $4,800. The truck had cost $12,000 when it was purchased on
September 1, 2004. It had been expected to last eight years and have a salvage value of $800.
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Financial Accounting -2-

(11)supplemental(PPE).docx Start each problem on a new sheet of paper.
4. Record the following transaction: Synonyms: Trade-in Value = Trade-in Allowance = Fair Market Value
(A) On January 2, 2010, Gel, Inc., traded in old communication equipment with book value of $11,000 (cost of $96,000) for similar new
equipment with a fair market value $88,000. The seller gave Gel, Inc. a trade-in allowance of $7,500 on the old equipment, and Gel,
Inc. paid the remainder in cash. Assume this event has “commercial substance”.
(B) Bright Company recently traded in an smaller model coffee roaster for bigger customized model. The old model’s book value was
$180,000 (original cost of $300,000) and its fair market value was $170,000. Bright Company had to pay $50,000 cash to complete the
exchange. Assume this event has “commercial substance”.
(C) Assume the same facts as (A), except the trade-in allowance was $70,000.
(A) On January 2, 2010, Gel, Inc., traded in old communication equipment with book value of $11,000 (cost of $96,000) for similar
new equipment with a fair market value $88,000. The seller gave Gel, Inc. a trade-in allowance of $70,000 on the old equipment,
and Gel, Inc. paid the remainder in cash. Assume this event has “commercial substance”.
(D) Assume the same facts as (B), except the fair market value of the old equipment is $200,000.
(B) Bright Company recently traded in an smaller model coffee roaster for bigger customized model. The old model’s book value
was $180,000 (original cost of $300,000) and its fair market value was $200,000. Bright Company had to pay $50,000 cash to
complete the exchange. Assume this event has “commercial substance”.
(E) Assume the events referred to above do not have “commercial substance”, Prepare the journal entry for (A), (B), (C) and (D). If the
entry is unchanged based on assuming no commercial substance, then report “original journal entry is unchanged”.
5. Expenditures: Capitalizing versus Expensing:

On January 1, 2009, Newton Inc. purchased a building for $200,000 and a delivery truck for $20,000. Related to the building and
the truck, the following expenditures have been incurred during 2011 (Note: Newton Inc. maintains a control asset account called
Vehicle Fleet; within that account individual assets are accounted for separately):
• Required:
1. Journalize the original purchase.
2. Journalize the 12/31/2009 AJE for depreciation. The company uses straight-line method and depreciates the building
over 25 years and the truck over 5 years using 200% declining balance. Assume zero residual value for all assets.
(The company has one Accumulated Depreciation account: Accumulated Depreciation, Proprety, Plant &
Equipment.)
3. Determine whether each cost (a) thru (f) should be capitalized or expensed and record the journal entry for each.
(there is room for argument on these)
a) The building was painted at a cost of $5,000.
b) To eliminate leaking, new windows were installed at a cost of $10,000.
c) To allow an improved flow of production, a new conveyor system was installed at a cost of 40,000
d) The delivery truck was repainted with a new company logo at a cost of $1,000.
e) To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.
f) The truck’s engine was overhauled at a cost of $4,000.
6. (part 1) Girvin Exercise Company has recently purchased for $80,000 cash, a patent for the design of a new weight-lifting
machine. Although the patent gives legal protection for 20 years, the patent is expected to provide Girvin with a competitive
advantage for only eight years. Assuming the straight-line method of amortization, (a) make a journal entry to record the purchase
of the patent and (b) record an AJE to record amortization for year 1.
(part 2) After using the patent for four years, Girvin learns at a trade-show that another company has designed a much better
machine. On the basis of this new information, Girvin decides to revise the useful life to a total of six years; and starting with year
5, amortize the remaining cost of the patent over the two remaining years of useful life. Prepare the year 5 AJE for patent
amortization.
(part 3) Assume the facts in part 2, except Girvin sells the patent to a less informed competitor on December 31, year 4. The
proceeds on the sale are Cash of $24,000 and a 7%, 3-year promissory note for $19,000. Record the journal entry to record the
sale of the patent.
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(12)supplemental(current_liabilities).doc Start each problem on a new sheet of paper.
EXERCISES
1. (Accounts and Notes Payable)
The following are selected 2007 transactions of Palmeiro Corporation.
Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records
purchases gross and uses a periodic inventory system. Payment is due Oct 1.
Palmeiro finds itself short of cash on October 1. Assume the following independent alternatives:
Oct. 1a Issued a $125,000, 12-month, 12% note to Ripken in payment of account.
Oct. 1b Borrowed $125,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $142,000
note.
Instructions
(a) Prepare journal entries for the selected transactions above.
(b) Prepare adjusting entries at December 31. (Use straight-line amortization of the discount.)
(c) Compute the total net liability (i.e., carrying value) to be reported on the December 31 balance sheet
for:
(1) the interest-bearing note.
(2) the zero-interest-bearing note. (Use straight-line amortization of the “Discount on N/P”.)
2. (Short-term Notes Payable) Johnson Company issued a 3-month note dated May 1, 2007, for cash.
The face value of the note is $12,000.
Instructions
Assume the note is interest bearing at an annual rate of 8%, which is considered a reasonable rate:
(a) Prepare the journal entries for May 1 and at maturity assuming Johnson prepares financial statements
only annually at calendar year end.
(b) instead of (a) assume Johnson Co. prepares financial statements on a monthly basis. Prepare the
necessary AJEs dated May 31, June 30, July 31 and the entry for maturity on the due date.
Assume the note is a non-interest bearing note.(c) the note is noninterest-bearing and the “effective”
interest rate for similar financing is 8% per annum. Johnson received cash equal to the present value
of the note at the date of issuance.
(CkFig: loans proceeds = $11,765 rounded to the nearest dollar)
(Hint: to calculate $11,765 you need to use a substitution technique you learned in algebra)
(d) determine the “bank discount rate” applied to the noninterest-bearing note.
3. (Warranties) Incaviglia Company began selling photo-copiers in 2007. Incaviglia sold 400 photo-
copiers in 2007 for $3,000 apiece and included a free one-year service warranty with each machine.
Assume the sales occurred evenly through the year. Service on each machine during the warranty period
is expected to average $330. During 2007, $24,000 in actual warranty claims have been paid out with
cash.
Instructions
(a) Prepare three journal entries to 1) record the sale of the copiers(assume periodic); 2) the actual
warranty costs; and 3) the Dec. 31 AJE.
(b) On the basis of the entries in (a) above, what will Incaviglia report for Estimated Warranty Liabilitiy
as of 12/31/2007?
(c) On the basis of the entries in (a) above, what will Incaviglia report for Warranty Expense for the year
ended 12/31/2007?
(d) On the basis of the data above, assume the warranty costs can not be reasonably estimated, prepare the
appropriate entries.
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(12)supplemental(current_liabilities).doc Start each problem on a new sheet of paper.
4. (Financial Statement Impact of Liability Transactions)

Presented below is a list of transactions. Unless otherwise indicated, assume all transactions are independent
events.
1. Purchased inventory for $80,000 on account (assume perpetual system is used).

2. Issued an $80,000 note payable in payment on account (see item 1 above).
3. Recorded accrued interest on the note from item 2 above.
4. Borrowed $100,000 from the bank by signing a 6-month, $112,000, noninterest-bearing note.
5. Recognized 4 months’ interest expense on the note from item 4 above.
6. Deposited cash of $75,260 from cash sales which include 6% sales tax.
7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various
amounts withheld.
8. Recorded employer’s payroll taxes.
9. Accrued this period’s newly earned employee vacation time.
10. For the most recent pay-period, $1,500 was paid to vacationing employees.
11. Recorded a contingent loss on a lawsuit the company will probably lose; amount is estimable.
12. Accrued warranty expense to match this period’s Sales Revenue.
13. Incurred and paid a portion of the warranty costs that were accrued in item 12 above.
Instructions
Set up a table using the format shown below and analyze the effect of the 13 transactions on the financial statement
categories indicated. Number 1 is done for you as an example. Include the dollar amounts of the increases(I) and
decreases(D). Note: Not enough information to determine dollar amounts for 3., 8., 9., 11., 12. and 13.
Use the following code: ↑= Increase ↓= Decrease NE: No effect

# Assets Liabilities Owners’ Equity Net Income
1 ↑ $80,000 ↑ $80,000 NE NE
2
5. (Payroll & Payroll Tax Entries) The payroll of Grich Company for September 2008 is as follows.
 Gross payroll was $960,000;
 Included in the Gross payroll is $220,000 that is exempt from Social Security tax because it
represented amounts paid in excess of $102,000 for the year to certain employees;
 Similarly, the amount paid to employees in excess of $7,000 for the year was $800,000;
 Income taxes in the amount of $180,000 were withheld;
 Similarly withheld was $18,000 in union dues;
 F.I.C.A. tax is 7.65% on an employee’s wages to $102,000 and 1.45% in excess of $102,000;
 The state unemployment tax is 5.4%, but Grich Company is allowed a credit of 4.2% by the state for
its stable work force (i.e., low employee turnover experience). Use 1.2% as the tax rate;
 The federal unemployment tax rate is 0.8% after state credit;
Instructions
Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are
recorded separately. (CkFigs: Credit to Cash = $702,200; Debit to Payroll Tax Expense = 63,000)
-2-
[ 45 ]
[ 46 ]
(13)supplemental(bonds).doc Start each problem on a new sheet of paper.
1. (a) Determine whether the bond will issue at (i) par, (ii) with a premium, or (iii) with a
discount. (b) Calculate the present value of a $1 million bond issue under each of the following
independent situations (round table factors to the 4th place after the decimal point). (c)
Journalize each bond issue (assume the bonds issue on authorization date of May 1, 2009):
Maturity Interest Paid Stated Rate Effective (market) Rate Ck Fig
a. 10 years Annually 10% 10% ≅ $1,000,000
b. 10 years Annually 10% 12% ≅ $887,020
c. 10 years Semiannually 10% 12% ≅ $885,295
d. 10 years Semiannually 12% 10% ≅ $1,124,632
e. 20 years Semiannually 12% 10% ≅ $1,171,546
f. 20 years Semiannually 12% 12% ≅ $1,000,000
2. NOC Inc. issued 9% bonds, dated January 1, 2010 with a face amount of $500,000. The bond
matures at the end of 2013 (4 years). For bonds of similar risk and maturity the market yield was
10%. Interest is paid semiannually on June 30 and December 31. (round table factors to the 4th
place after the decimal point)
Required:
a. Determine NOC’s semiannual cash payments as stipulated in this bond obligation.
b. Determine the price of the bonds at January 1, 2010. CkFig: ≈$483,842 (±$20)
c. Prepare the journal entry to record their issuance by NOC Inc. on January 1, 2010. Use
$483,842 as the loan proceeds.
d. Construct an interest amortization schedule using the effective interest amortization.
e. Using the effective interest method (i.e., not the straight-line method.), prepare the
journal entry to record interest on June 30, 2010 and Dec. 31, 2010.
CkFig: Interest Expense $24,192.10 and $24,276.70 respectively.
f. Prepare the two necessary journal entries on December 31, 2013.
3. The balance sheet of Yakima Lake Computers as of December 31, 2009, included bonds with
a stated rate of 12.25% and having a face amount of $90 million. The bonds had been issued in
2002 and had a Carrying Value of $87 million at December 31, 2009. On January 1, 2010,
Yakima Lake Computers called and retired 1/3 the bonds before their scheduled maturity at the
call price of 102.
Required:
1) Prepare the journal entry by Yakima Lake Computer to record the redemption of the
bonds at January 1, 2010. CkFig: Loss on retirement = $1,600,000
2) Assume all the same facts, except the bond had a Carrying Value of $93 million on
December 31, 2009. Journalize the retirement entry.
-1-
[ 46 ]
[ 47 ]
Financial Accounting—Acctg _ _ _ (14)supplemental(equity).doc

Instructor—Turck NAME___________________
(Prob 1) (Recording the Issuances of Common Stock) During its first year of operations, Pride Corporation had the
following transactions pertaining to its common stock.
Apr. 26 Issued 15,000 shares for cash at $4.50 per share.
May 11 Issued 10,000 shares to attorneys to satisfy a $48,000 invoice for
services received to help the company to incorporate.
(the debit in this entry is not an asset account)
Aug. 1 Issued 20,000 shares for cash at $5 per share.
Nov. 1 Issued 10,000 shares for cash at $7 per share.
Instructions
(a) Prepare the journal entries for these transactions, assuming that
the common stock has a par value of $1 per share.
(b) Prepare the journal entries for these transactions, assuming that
the common stock is no par with a stated value of $3 per share.
(Prob 2)(Recording the Issuance of Common and Preferred Stock) Envy Gas Corporation was organized on June 1, 2007.
It is authorized to issue 100,000 shares of 5%, $100 par value preferred stock, and 1,750,000 shares of no par common stock
with a stated value of $1 per share. The following stock transactions were completed during the first year.
June 15 Issued 165,000 shares of common stock for cash at $5 per share.
June 30 Issued 25,000 shares of preferred stock for cash at $102 per share.
Aug. 15 Issued 20,000 shares of common stock for a factory building. The asking price of
the factory building was $150,000; the appraised value of the factory building was $140,000.
Sept. 1 Issued 200,000 shares of common stock for cash at $7 per share.
Oct. 1 Issued 5,000 shares of common stock to attorneys in payment of their bill
of $40,000 for services rendered in helping the company organize.
Oct. 15 Issued 25,000 shares of common stock for cash at $8.50 per share.
Nov. 1 Issued 6,000 shares of preferred stock for cash at $104 per share.
Instructions
1) Calculate the amount of annual dividend assigned to one share of preferred stock.
2) When does a preferred shareholder know that his or her limited right to an annual dividend will be granted each year?
3) Prepare the journal entries to record the above transactions.
(Prob 3) (Purchase Land using Corporate Stock) Twenty thousand shares reacquired (i.e., Treasury Stock) by Gluttony
Land Inc. for $153 per share were exchanged for land that has an appraised value of $3,600,000. At the time of the exchange
the common stock was trading at $176 per share on an organized exchange.
Instructions
(a) Prepare the journal entry to record the acquisition of land.
(b) Briefly identify the possible alternatives (including those that are totally
unacceptable) for quantifying the cost of the land, and briefly support your choice.
(Prob 4) (Stock Issuances and Repurchase) Anger Corporation is authorized to issue 250,000 shares of $1 par value common
stock. During 2007, Anger Corporation took part in the following selected transactions.
1. Issued 55,000 shares of stock at $76 per share, less costs related to the issuance of the stock totaling $27,000.
2. Issued 10,000 shares of stock for land appraised at $815,000. The stock was actively traded on a national
stock exchange at approximately $78 per share on the date of issuance.
3. Purchased 6,000 shares of treasury stock at $74 per share. These treasury shares were originally issued in
2003 at $46 per share.
Instructions
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3.
(Prob 5) (Preferred Stock Presentation, Dividends and Disclosure) Greed Corporation has 30,000 shares of $75 par value,
10%, preferred stock and 150,000 shares of $1 par value common stock outstanding at December 31, 2007.
Instructions
Answer the questions in each of the following independent situations.
(a) If the preferred stock was issued at $83 per share, how should the preferred stock be reported in the stockholders’ equity
section?
(b) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2003, what are the
dividends in arrears that should be reported on the December 31, 2007, balance sheet? How and where should these
dividends in arrears reported?
[ 47 ]
[ 48 ]
Financial Accounting Alpha Royal Financials

Instructor - Turck
Alpha Royal
Balance Sheets
at
Dec. 31, 2005 Dec. 31, 2006

Cash 100,000 220,000
Accounts Receivable, net 350,000 600,000
Inventory 800,000 1,200,000
Prepaid Expenses 50,000 30,000
Land 750,000 1,000,000
Buildings & Equipment 2,500,000 3,000,000
Accum. Depreciation (500,000) (700,000)
4,050,000 5,350,000
Accounts Payable 420,000 760,000

Accrued Liabilities 130,000 70,000
Bonds Payable 1,000,000 520,000
Owners' Equity
Paid-in-Capital 1,000,000 2,000,000
Retained Earnings 1,500,000 2,000,000
4,050,000 5,350,000
Alpha Royal
Income Statement
For the year ended Dec. 31, 2006
Sales, net 8,000,000

Expenses:
Cost of Sales 4,800,000
Depreciation Expense 200,000
Additional S,G & A expenses 2,300,000
Net Income 700,000
Required: Prepare a Statement of Cash Flow

For the period ending Dec 31, 2006
1. Direct Method
2. Indirect Method
CkFig: Operating Cash Flow = $550,000

Financing Cash Flow = $320,000
(15)supplemental(cashflow_statement_data).xlsx
[ 48 ]
[ 49 ]
Instructor - Turck
Bridgestone Company
Balance Sheets
at
Dec. 31, 2005 Dec. 31, 2006
Cash 56,000 64,000

Prepaid expenses 7,000 8,000
Inventory 105,000 95,000
Land 120,000 120,000
Buildings & equipment 384,000 400,000
Accumulated Depreciation (183,000) (186,000)
Total Assets 560,000 570,000

Accrued Liabilities 22,000 11,000
Notes Payable, long term - 57,000
Paid in Capital (Common Stock) 342,000 350,000
Retained Earnings 130,000 97,000
Total liabilities & equity 560,000 570,000
Bridgestone Company
Income Statement
Sales Revenue, net 822,000

Cost of Goods Sold (507,600)
Operating Expenses (including $4,000 dep exp.) (224,400)
Income from operations 90,000
Gain on sale of equipment 2,300
Net Income 92,300
Additional information: Bridgestone sold a piece of equipment.

the book value at time of sale was $7500.
Required: Prepare a Statement of Cash Flow

For the period ending Dec 31, 2006
1. Direct Method
2. Indirect Method
CkFig: Operating cash flow = $83,000
Financing cash flow = $(60,300)
[ 49 ]
[ 50 ]
Cramer Financials
The Cramer Corp.
Comparative Balance Sheets
as of December 31,
change
2010 2009 in acct bal.
Current Assets:
Cash 3,900 15,000
Inventory 10,000 5,000
Prepaid Rent 4,000 2,000
Total Current assets 28,900 27,000
Non-current Assets:
Notes Receivable 8,000 0
Land 30,000 30,000
Plant and Equipment 116,000 60,000
Accumulated Depreciation -15,000 -10,000
Plant and Equip, net 101,000 50,000
Total Non-current assets 139,000 80,000
Total Assets 167,900 107,000
Current Liabilities:
Unearned Revenue 5,000 7,000
Income Tax Payable 1,500 2,000
Dividends Payable 900 0
Accrued wages payable 10,000 13,000
Total Current Liabilities 47,900 30,000
Non-current Liabilities:
Bonds Payable, net 40,000 0
Total Liabilities: 87,900 30,000
Owners' Equity:
Paid-in Capital(Common Stock) 70,000 70,000
Retained Earnings 10,000 7,000
Total Owners' Equity 80,000 77,000
Total Liabs. and Equity 167,900 107,000
The Cramer Corp.

Income Statement
Net Sales 100,000
Gross Profit 27,000
Operating Expenses (includes $8,000 dep exp) 23,000
Operating Income 4,000
Gain on Sale of Equipment 5,000
Pretax Accounting Income 9,000
Provision for Income Taxes 5,000
Net Income 4,000
Also, Cramer Corp sold a used piece of equipment receiving

$4,000 cash down and a note in the amount of $8,000 for the balance.
Required: Prepare Statements of Cash Flow.
Ck Fig: $ 11,000.00 = Operating Cash Flow
$ 39,900.00 = Financing Cash Flow
[ 50 ]
[ 51 ]
Financial Accounting Fancy Flavors, Inc

Instructor--Turck
Prepare the Cash Flow Statements for September then October (Direct and Indirect).
Fancy Flavors
Comparative Balance Sheets
as of 8/31/2007 9/30/2007 10/31/2007
ASSETS
CASH 200,000 264,500 260,000
A/R, net 50,000 65,000 62,000
Merch Inventory 15,000 30,000 27,000
Suppy Inventory 15,000 10,000 11,500
Prepaid rent 40,000 20,000 25,000
Prepaid insurance 0 1,000 0
Equipment 600,000 660,000 660,000
Less: A/D (10,000) (19,500) (30,500)
TOTAL ASSETS 910,000 1,031,000 1,015,000
LIABILITIES & EQUITY

A/P 70,000 65,000 71,000
Wages Payable 20,000 21,000 20,500
Taxes Payable 5,000 4,000 5,100
Interest Payable 1,500 1,600 1,400
Dividends Payable 20,000 0 10,000
Bank Loan Payable 600,000 645,900 568,500
Common Stock 138,500 138,500 138,500
Retained Earnings 55,000 155,000 200,000
TOTAL LIAB'IES & EQUITY 910,000 1,031,000 1,015,000
Fancy Flavors
Income Statements
For months ending: 9/30/2007 10/31/2007
Net Revenues 600,000 625,000
Less Expenses:
Cost of Goods Sold 200,000 208,000
Insurance exp 5,000 5,000
Rent exp 20,000 21,000
Depreciation exp 11,000 11,000
Interest exp 6,600 7,500
Wages exp 180,000 190,000
Supplies exp 20,000 19,000
TOTAL EXPENSES 442,600 461,500
Other gains and losses (3,000) 0
Net Income before Income tax expense 154,400 163,500
Income tax expense 30,000 31,000
NET INCOME 124,400 132,500
NOTE #1: In September, equipment with an original cost of $90,000 and

accumulated depreciation of $1,500 was sold for Cash.
NOTE #2: In September, equipment costing $150,000 was purchased
during the month. A bank loan of $45,900 was used along with
$104,100 in cash.
[ 51 ]
[ 52 ]
Instructor: Turck
Statement of Cash Flows
RazzleDazzle, Inc.
Income Statement
For the year ended June 30, 2011
Sales revenue, net 400,000
Gross Profit 160,000
Selling, General and Administrative Expense* 120,000
Interest Expense 15,000
Loss on sale of land 700
Loss on sale of plant assets 10,000
Total expenses and losses 145,700
Income before Income Taxes 14,300
Income tax expense 5,000
Net Income 9,300
* includes depreciation expense of $80,000
RazzleDazzle, Inc.
Comparative Balance Sheet
as of June 30 2011 2010 change
Cash 25,000 40,000 (15,000)
Accounts receivable, net 80,000 69,000 11,000
Inventory 75,000 50,000 25,000
Prepaid expenses 2,000 18,000 (16,000)
Total current assets 182,000 177,000
Land 60,000 150,000 (90,000)
Plant and Equipment 575,000 500,000 75,000
Accumulated depreciation (310,000) (250,000) (60,000)
Total Long-term assets 325,000 400,000
Total Assets 507,000 577,000
Accounts payable 145,000 140,000 5,000

Other accrued liabilities 50,000 45,000 5,000
Income taxes payable 5,000 15,000 (10,000)
Total current Liabilities 200,000 200,000
Long-term bank loan payable 75,000 150,000 (75,000)
Common Stock 25,000 25,000 -
Paid-in Capital in excess of Par Value 75,000 75,000 -
Retained Earnings 132,000 127,000 5,000
Total stockholers' equity 232,000 227,000
Total liabilities and stockholders' equity 507,000 577,000
Dividends were declared and paid during the year. New plant assets were
purchased for $125,000 in cash during the year. A parcel of land was sold.
Plant assets were sold, the book value of the plant assets sold was $30,000.
A portion of the bank loan was repaid.
Required: Prepare the Cash Flow Statement
CkFigs: Operating Cash Flow 80,000
Investing Cash Flow (15,700)
[ 52 ]
[ 53 ]
Financial Accounting Advanced Problem

Instructor--Turck
STP, Inc. STP, Inc.

Balance Sheets Income Statement
as of December 31, 2008 and 2007 For the Year Ended December 31, 2008
12/31/08 12/31/07 change

Assets:
Current Assets: Sales, net $ 30,000
Cash $ 2,750 $ 2,500 250 Less: Cost of Goods Sold (10,500)
Accounts Receivable, net 6,000 4,750 1,250 Gross Profit $ 19,500
Inventory 12,500 13,000 (500) Operating expenses:
Prepaid rent 1,000 750 250 Salaries expense $ 7,500
Total current assets $ 22,250 $ 21,000 Rent expense 900
Long-term investments $ -0- $ 2,500 (2,500) Depreciation expense 2,300 (10,700)
Property, Plant and Equipment: Operating income $ 8,800
Equipment $ 15,500 $ 10,000 5,500 Other income (expenses and losses):
Buildings 31,250 23,750 7,500 Interest expense $ (2,000)
Less Accumulated depreciation on plant Loss on sales of equipment (500)
and equipment (10,050) (10,000) (50) Gain on sale of investments 500 (2,000)
Total Property, Plant and Equipment $ 36,700 $ 23,750 Net income before income taxes $ 6,800
Total assets $ 58,950 $ 47,250 Less: Income taxes expenses (350)
Net income $ 6,450
Liabilities:
Current liabilities:
Salaries Payable $ 500 $ 750 (250)
Dividends Payable 750 1,000 (250)
Accounts Payable 1,250 2,000 (750)
Short-term notes payable 3,250 2,250 1,000
Total current liabilities $ 5,750 $ 6,000
Long-term notes payable 8,750 7,500 1,250 Additional information for 2008:
Total liabilities $ 14,500 $ 13,500 (a) purchased inventory by issuing a $1000 short term promisory note to the vender.
(b) purchased equipment costing $3,750; paid 1/3 in cash and
Stockholders' equity: issued a five-year interest-bearing note for the balance.
Contributed capital: (c) purchased equipment costing $6,250 by issuing 3500 shares
Capital stock, $1 par value $ 20,000 $ 16,000 4,000 of common stock.
Contributed capital in excess of par 17,500 14,000 3,500 (d) constructed an addition to a building; paid cash.
Total contributed capital $ 37,500 $ 30,000 (e) paid a $1,250 long-term note by issuing 500 shares of common stock.
Retained Earnings 6,950 3,750 3,200 (f) sold investments for cash.
Total stockholders' equity $ 44,450 $ 33,750 (g) paid cash dividends.
Total liabilities and stockholders' equity $ 58,950 $ 47,250 (h) sold equipment that originally cost $4,500 and was half depreciated
at the time of sale. (the equipment had no estimated salvage value)
(15)supplemental(cashflow_statement_data).xlsx STP Inc.(Data)
[ 53 ]

Supplementals (2010 11)

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[1]

Financial Accounting: Instructor: Turck (1)supplemental(pedal_rentals).doc

Financial Accounting: Instructor: Turck (1)supplemental(pedal_rentals).doc

Pedal Rentals, Inc.

Financial Accounting: Instructor: Turck (2)supplemental(randi_lawn_care).doc

Required: (Neatness is critical)

Financial Accounting: Instructor: Turck (2)supplemental(randi_lawn_care).doc

Randi’s Lawn Care Period of Measure:

6/30 Ending Balances

Cash (#101) Accounts Payable (#201) Consulting Fees(#410)

Paid-in Capital(#310) Salary Expense(#510)

(3)Laslo_Advertising.xls [5] Laslo Advertising

GENERAL JOURNAL PAGE 1

2 Mar a Cash 5,100.00 2

3 Paid-in Capital 5,100.00 3

4 (shareholder invested cash in corporation) 4

6 Mar b Equipment 1,600.00 6

7 Accounts Payable 1,600.00 7

8 (bought equipment on account) 8

10 Mar c Office Supplies 350.00 10

12 (bought office supplies with cash) 12

14 Mar d Equipment 3,200.00 14

15 Paid-in Capital 3,200.00 15

16 (shareholder invested equipment into company) 16

18 Mar e Cash 3,500.00 18

19 Consulting Fees 3,500.00 19

20 (provided services to customers) 20

22 Mar f Rent Expense 600.00 22

24 (paid rent for March) 24

26 Mar g A/R 2,600.00 26

27 Advertising Fees 2,600.00 27

28 (provided services on account) 28

30 Mar h Utilities Expense 175.00 30

32 (recorded and paid for March utilities) 32

34 Mar i Wages Expense 2,400.00 34

36 (made March payroll) 36

38 Mar j Dividends 700.00 38

40 (paid a dividend to shareholders) 40

GENERAL JOURNAL PAGE 2

2 Mar k Cash 7,580.00 2

3 Consulting Fees 7,580.00 3

4 (provided services to customers) 4

6 Mar l Cash 1,000.00 6

8 (collected from customer on account) 8

10 Mar m Cash 3,300.00 10

11 Loan Payable 3,300.00 11

12 (borrowed money from the bank) 12

15 Mar 31 Closing Entries: 15

16 C1 Consulting Fees 11,080.00 16

17 Advertising Fees 2,600.00 17

18 Retained Earnings 13,680.00 18

19 (set revenues back to $-0-) 19

20 (close revenues to Retained Earnings) 20

23 C2 Retained Earnings 3,175.00 23

24 Salary Expense 2,400.00 24

25 Rent Expense 600.00 25

26 Utilities Expense 175.00 26

27 (set expenses back to $-0-) 27

28 (close expenses to Retained Earnings) 28

32 C3 Retained Earnings 700.00 32

34 (set Dividends back to $-0-) 34

35 (close Dividends into Retained Earnings) 35