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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Dominique Fouque owns and operates Dominique’s Doll House. She has a small shop in which she sells new and antique dolls. She is particularly well known for her collection of antique Ken and Barbie dolls. A completed spreadsheet for 20-3 is shown on page 610. Fouque made no additional investments during the year and the long-term note payable is due in 20-9. No portion of the long-term note is due within the next year. Net credit sales for 20-3 were $38,000, and receivables on January 1 were $3,000.

REQUIRED

  1. 1. Prepare a multiple-step income statement.
  2. 2. Prepare a statement of owner’s equity.
  3. 3. Prepare a balance sheet.
  4. 4. Compute the following measures of performance and financial condition for 20-3:
    1. (a) Current ratio
    2. (b) Quick ratio
    3. (c) Working capital
    4. (d) Return on owner’s equity
    5. (e) Accounts receivable turnover and average number of days required to collect receivables
    6. (f) Inventory turnover and the average number of days required to sell inventory
  5. 5. Prepare adjusting entries and indicate which should be reversed and why.
  6. 6. Open an Income Summary account. Post adjusting and closing entries (prepared in 7) to this account.
  7. 7. Prepare closing entries.
  8. 8. Prepare reversing entries for the adjustments where appropriate.

images

1.

To determine

Prepare a multiple income statement of DD.

Explanation

Multi-step income statement: The income statement represented in multi-steps with several subtotals, to report the income from principal operations, and separate the other expenses and revenues which affect net income, is referred to as multi-step income statement.

Prepare a multiple income statement of DD.

DD
Income Statement
For Year Ended December 31, 20-3
ParticularsAmountAmountAmountAmount
Revenue from Sales:    
Sales  $201,500  
Less: Sales returns and allowances  $6,100  
Net sales   $195,400
Less: Cost of goods sold:    
Opening merchandise inventory $31,300   
Opening estimated returns inventory $1,000   
Purchases$72,000    
Less: Purchases returns and allowances$750    
Net purchases$71,250    
Add: Freight in$1,200    
Cost of goods purchased $72,450   
Goods available for sale  $104,750  
Less: Endi...

2.

To determine

Prepare statement of owners’ equity of DD.

3.

To determine

Prepare a balance sheet of DD.

4.

To determine

Calculate the following measures of performance and financial condition for 20-3:

  1. (a) Current ratio
  2. (b) Quick ratio
  3. (c) Working capital
  4. (d) Return on owners’ equity
  5. (e) Accounts receivable and average collection period
  6. (f) Inventory turnover and average number of days required to sell inventory

6.

To determine

Open an income summary account, and post adjusting entries and closing entries in the income summary account.

7.

To determine

Prepare closing entries of DD.

8.

To determine

Prepare reversing entries for the adjustments where appropriate.

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