Good to Go Auto Products distributes automobile parts to service stations and repair shops. The adjusted
INSTRUCTIONS
- 1. Prepare a classified income statement for the year ended December 31, 2019. The expense accounts represent warehouse expenses, selling expenses, and general and administrative expenses.
- 2. Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the period.
- 3. Prepare a classified
balance sheet as of December 31, 2019. The mortgage payable extends for more than one year.
ACCOUNTS
Analyze: What percentage of total operating expenses is attributable to warehouse expenses?
1.
Show the Classified Income Statement.
Explanation of Solution
Classified Income statement: The classified income statement is a financial statement that shows the revenues, expenses with various classifications and sub-totals. The classified income statement is used for complex income statement as its more easily understandable.
Prepare the classified income statement:
Company GGAP | ||||
Income Statement | ||||
Year Ended December 31, 2019 | ||||
Particulars | Amount ($) | Amount ($) | Amount ($) | Amount ($) |
Operating Revenue | ||||
Sales | $1,110,300 | |||
Less: Sales Returns and Allowances | $8,400 | |||
Net Sales | $1,101,900 | |||
Cost of Goods Sold | ||||
Merchandise Inventory, January 1, 2019 | $131,400 | |||
Purchases | $463,000 | |||
Freight In | $9,800 | |||
Delivered Cost of Purchases | $472,800 | |||
Less: Sales Returns and Allowances | $13,650 | |||
Purchases Discount | $9,240 | $22,890 | ||
Net Delivered Cost of Purchases | $449,910 | |||
Total Merchandise Available for sale | $581,310 | |||
Less: Merchandise Inventory, closing | $128,500 | |||
Cost of Goods Sold | $452,810 | |||
Gross Profit on Sales | $649,090 | |||
Operating Expenses | ||||
Warehouse Expenses | ||||
Warehouse Wages Expense | $108,600 | |||
Warehouse Supplies Expense | $5,800 | |||
Depreciation Expense — Warehouse Equipment | $3,400 | |||
Total Warehouse Expense | $117,800 | |||
Selling Expenses | ||||
Salaries Expense—Sales | $151,700 | |||
Travel Expense | $24,000 | |||
Delivery Expense | $37,425 | |||
Total Selling Expense | $213,125 | |||
General and Administrative Expenses | ||||
Salaries Expense—Office | $85,000 | |||
Office Supplies Expense | $1,220 | |||
Insurance Expense | $9,875 | |||
Utilities Expense | $8,000 | |||
Telephone Expense | $3,280 | |||
Payroll Taxes Expense | $31,600 | |||
Building Repair Expense | $3,700 | |||
Property Taxes Expense | $16,400 | |||
Uncollectible Accounts Expense | $3,580 | |||
Depreciation Expense - Building | $5,600 | |||
Depreciation Expense - Office Equipment | $1,620 | |||
Total General and Admin. Expenses | $169,875 | |||
Total Operating Expenses | $500,800 | |||
Income from Operations | $148,290 | |||
Other Income | ||||
Interest Income | $580 | |||
Other Expense | ||||
Interest Expense | $4,000 | |||
Net Non-operating expenses | $3,420 | |||
Net income for the year | $144,870 |
Table (1)
2.
Show the Statement of Owner's equity.
Explanation of Solution
Statement of owner's’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.
Prepare the Statement of owner's’ equity:
Company GGAP | ||
Statement of Owner's Equity | ||
Year Ended December 31, 2019 | ||
Particulars | Amount ($) | Amount ($) |
CB Capital, January 1, 2019 | $326,870 | |
Net income for the year | $144,870 | |
Deduct - Withdrawals | $70,650 | |
Increase in Capital | $74,220 | |
CB Capital, December 31, 2019 | $401,090 |
Table (2)
3.
Show the Classified Balance Sheet and compute the total operating expenses percentage related to the warehouse expenses.
Explanation of Solution
Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections, and sub-sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets. Liabilities are classified into two sections current and long-term. Stockholders’ equity comprises of common stock and retained earnings. Thus, the classified balance sheet includes all the elements under different sections.
Prepare the classified balance sheet:
Company GGAP | |||
Balance Sheet | |||
December 31, 2019 | |||
Particulars | Amount ($) | Amount ($) | Amount ($) |
Assets | |||
Current Assets | |||
Cash | $99,000 | ||
Petty Cash Fund | $600 | ||
Notes receivable | $15,000 | ||
Accounts receivable | $140,200 | ||
Less: Allowance for Doubtful Debts | $3,800 | $136,400 | |
Merchandise Inventory | $128,500 | ||
Interest Receivable | $150 | ||
Prepaid expenses | |||
Warehouse Supplies | $3,300 | ||
Store Supplies | $700 | ||
Prepaid insurance | $4,640 | $8,640 | |
Total Current Assets | $388,290 | ||
Plant and Equipment | |||
Land | $16,000 | ||
Building | $107,000 | ||
Less: Accumulated Depreciation | $16,700 | $90,300 | |
Warehouse Equipment | $19,800 | ||
Less: Accumulated Depreciation | $9,500 | $10,300 | |
Office Equipment | $9,400 | ||
Less: Accumulated Depreciation | $3,900 | $5,500 | |
Total Plant and Equipment | $122,100 | ||
Total Assets | $510,390 | ||
Liabilities and Owner's Equity | |||
Current Liabilities | |||
Notes Payable | $15,000 | ||
Accounts payable | $56,900 | ||
Interest Payable | $400 | ||
Total Current Liabilities | $72,300 | ||
Long Term Liabilities | |||
Mortgage payable | $20,000 | ||
Loans Payable | $17,000 | ||
Total Long-Term Liabilities | $37,000 | ||
Total Liabilities | $109,300 | ||
Owner's Equity | |||
CR Capital | $401,090 | ||
Total Liabilities and Owner's Equity | $510,390 |
Table (3)
Operating expenses: The expenses which are incurred in day-to-day business activities but not directly allied with the production of goods and service are called operating expenses. They are classified under three big categories: “administrative expenses, selling expenses, and general expenses”. The operating expenses exclude the financing expenses.
Compute the Operating expenses percentage:
The total operating expenses percentage related to the warehouse expenses is 23.52%.
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Chapter 13 Solutions
COLLEGE ACCOUNTING-ACCESS
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- The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2.Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3.Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4.Prepare an unadjusted trial balance as of July 31, 2019.arrow_forward
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