a.
Revenue: Commissions earned Expenses: Advertising Salaries expense Rent expense Depreciation expense Total expenses Net Income Supporting computations September Commissions: $144,000 - $128,000 = $16,000 ` Third Quarter Commissions: $144,000 - $90,000 = $54,000 $ 5,000 4,000 2,500 300 11,800 4,200 $ 13,000 12,000 7,500 900 33,400 20,600 $ 28,000 36,000 22,500 2,700 89,200 54,800 $ 16,000 $ 54,000 $ 144,000
$ $
$ $
$ $
b.
The balances in the revenue and expense accounts at September 30 represent the year to date. To determine revenue or expense for the month of September, the balance as of August 31 is subtracted from the September 30 balance. To determine the revenue or e
Revenue and expenses for the nine-month period ended September 30 are represented by the current balances in the accounts. No such computations are required for balance sheet accounts, because their balances describe financial position at a point in time, rather than c. If Guardian closed its accounts monthly, the current adjusted balances could be used in preparing financial statements for the month ended September 30. However, to prepare an income statement for the quarter ended September 30, it would be necessary to c
Ex. 5.3 a.
WILDERNESS GUIDE SERVICES, INC. Income Statement For the Year Ended December 31, 2007 Revenues: Guide revenue $ Expenses: Salary expense Camping supply Insurance expense Depreciation Interest expense Net Loss
102,000
105,000 (3,000)
WILDERNESS GUIDE SERVICES, INC. Statement of Retained Earnings For the Year Ended December 31, 2007 Retained earnings $ Less: Net loss Less: Dividends Retained earnings $
$ 70,000 60,000 $
$ $
$ $ $
b.
The company appears to be liquid. Cash and accounts receivable comprise 68% of the companys total assets. These highly liquid assets total $43,200, in comparison to $27,500 in liabilities coming due in the near future. However, given that its The company was not profitable in the current period as evidenced by the $3,000 net loss reported in the income statement. However, the $15,000 credit Retained Earnings balance reported in the companys adjusted trial balance is the balance carried forwa
c.
Ex. 5.5
a. WILDERNESS GUIDE SERVICES, INC. General Journal December 31, 2007 (1) 31 Guide Revenue 102,000 Income Summary To close Guide (2) 31 Income Summary Salary Expense Camping Supply Expense Insuranc e Expense Depreciat ion Expense: Equipme nt Interest Expense To close all expense (3) 31 Retained Earnings Income Summary To transfer net loss Retained Earnings $3,000 loss). (4) 31 Retained Earnings Dividend s To transfer Retained Earnings
Dec.
102,000
9,600
5,000
1,700
3,000 3,000
1,000 1,000
c.
The $11,000 Retained Earnings balance reported in the after-closing trial balance is $4,000 less than the $15,000 balance reported in the unadjusted trial balance. By subtracting both the net loss and dividends from the Retained Earnings balance in the u
70 Minutes, Strong
a. NEXT JOB, INC. General Journal December 31, 2007 (1) 31 Accounts Consultin g Services Revenue To record revenue (2) 31 Unearned Consultin g Services Revenue
To convert unearned
Dec.
25,000 25,000
15,000 15,000
(3) 31 Office Supplies Office Supplies To record offices (4) 31 Depreciation Accumul ated Depreciat ion: Office Equip. To record (5) 31 Rent Expense Prepaid Rent To record December (6) 31 Insurance Expense Unexpire d Insuranc e
500 500
1,000 1,000
1,200 1,200
250 250
To record portion of in December. (7) 31 Salaries Expense Salaries Payable To record accrued (8) 31 Interest Expense Interest Payable To record interest (9) Income Taxes Income Taxes Payable To record income
12,000 12,000
200 200
5,000 5,000
Accumulated depreciation: office equipment $ 25,000 Accounts payable 4,000 Notes payable (8-month) 60,000 Interest payable 800 Income taxes payable 14,000 Dividends payable 3,000 Salaries payable 12,000 Unearned consulting fees 7,000 Capital stock 200,000 Retaining earnings 40,000 Dividends 3,000 Consulting fees earned 540,000 Rent expense 15,900 Insurance expense 2,450 Office supplies expense 5,000 Depreciation expense: office equipment 12,000 Salaries expense 342,000 Utilities expense 4,800 Interest expense 3,200 Income taxes expense 50,000 Totals $ 905,800 $ 905,800
540,000
NEXT JOB, INC. Statement of Retained Earnings For the Year Ended December 31, 2007 Retained earnings Add: Net income Less: Dividends Retained earnings
$ $
PROBLEM 5.5B
Dec.
540,000 540,000
5,000
12,000
104,650 104,650
3,000 3,000
25,000 4,000 60,000 800 14,000 3,000 12,000 7,000 200,000 141,650 467,450
e.
Insurance expense Less: Total insurance expense Total expense Monthly insurance Monthly decrease $ $ $ $ 2,450 250 2,200 11 200 50
Monthly decrease
300
monthly
g. Accumulated Divided by monthly depreciation Total months company has been $ 25,000 1,000 25 monthly months
h. Interest expense Less: Total interest Total interest on Monthly interest $ $ $ 3,200 800 2,400 3 800
months monthly
70 Minutes, Strong
Dec.
250 250
(2) 31 Unearned Agency Agency Fees Earned To convert in December. (3) 31 Salaries Expense Salaries Payable
To record salary
2,500 2,500
1,360 1,360
December. (4) 31 Rent Expense Prepaid Rent To record prepaid (5) 31 Fees Receivable Agency Fees Earned To record revenue December. (6) 31 Office Supply Office Supplies To record office
600 600
3,000 3,000
370 370
(7) 31 Insurance Expense Unexpire d Insuranc e Policies To record portion of December. (8) 31 Interest Expense Interest Payable To record interest (9) 31 Income Taxes Income Taxes Payable
To record income taxes expense
125 125
45 45
700 700
Computations for each of the adjusting journal entries: 1. 2. 3. 4. 5. 6. 7. 8. 9. $15,000 (office equipment per trial balance) 60 months = $250 per month. Unearned agency fees to be reduced by the $2,500 amount earned in December. Salaries payable of $1,360 needs to be reported for salaries accrued at the end of $1,800 initial prepayment 3 months = $600 of rent expense incurred in December. Fees receivable to be increased by the $3,000 of accrued revenue in December. $900 (supplies per trial balance) - $530 (at 12/31) = $370 used in December. $750 initial prepayment 6 months = $125 of insurance expense incurred in $6,000 (note payable per trial balance) x 9% x 1/12 = $45 interest expense per $3,900 total income taxes expense - $3,200 (per trial balance) = $700 accrued in
113,355
52,000
480 1,500
Depreciation Rent expense Insurance expense Salaries expense Interest expense Income before taxes Income taxes Net income
TOUCHTONE TALENT AGENCY Statement of Retained Earnings For the Year Ended December 31, 2007 Retained earnings $ Add: Net income Less: Dividends Retained earnings $
$ 15,000 12,250 $
TOTAL LIABILITIES Stockholders' Capital stock Retained earnings TOTAL TOTAL LIABILITIES
18,305
$ $ $
42,925 480
1,500
3,000
6,700 1,300
26,000 45 3,900
(3) 31 Income Summary Retained Earnings To transfer net Retained Earnings $9,075). (4) 31 Retained Earnings Dividend s
To close dividends
9,075 9,075
800 800
e.
Accumulated depreciation: office Divided by monthly
Total months
g.
Insurance expense $ 1,300 Less: Total through December 500 Total expense $ 800 8 months Monthly insurance $ 100 monthly
expense January
Monthly increase
25 monthly
Ex. 5.4
a. TUTORS FOR RENT General Journal December 31, 2007 (1) 31 Tutoring Revenue Income Summary To close Tutoring (2) 31 Income Summary Salary Expense Supply Expense Advertisi ng Expense Depreciat ion Expense: Equipme nt Income Taxes Expense To close all expense (3) 31 Income Summary Retained Earnings To transfer net Retained Earnings $29,900). (4) 31 Retained Earnings Dividend s To transfer Retained Earnings
Dec.
96,000 96,000
1,000
11,600
29,900 29,900
2,000 2,000
c.
The $72,900 Retained Earnings balance reported in the after-closing trial balance is $27,900 more than the $45,000 balance reported in the unadjusted trial balance. By adding net income to the Retained Earnings balance in the unadjusted trial balance, an