(a)
Accounting Cycle: The accounting cycle refers to the entire process of recording the accounting transactions of an organization and then processing them. The accounting cycle starts when a transaction takes places and it ends at the time when these transactions are recorded in the financial statements of the company.
To Prepare: the
(a)
Explanation of Solution
Prepare the journal entries journal entries and adjusting entries for the transactions.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2017 | |||||
December | 1 | Equipment (1) | 16,800 | ||
Cash | 16,800 | ||||
(To record the purchase of equipment) | |||||
December | 2 |
| 825 | ||
| 825 | ||||
(To record the depreciation for the equipment sold ) | |||||
December | 2 | Cash | 3,500 | ||
Accumulated Depreciation-Equipment (2) | 2,625 | ||||
Equipment | 5,000 | ||||
Gain on Disposal of Plant Assets (3) | 1,125 | ||||
(To record the sale of equipment) | |||||
December | 15 |
| 5,000 | ||
Sales Revenue | 5,000 | ||||
(To record sales revenue earned) | |||||
December | 15 | Cost of Goods Sold | 3,500 | ||
Inventory | 3,500 | ||||
(To record the cost of goods sold) | |||||
December | 23 | Salaries and Wages Expense | 6,600 | ||
Cash | 6,600 | ||||
(To record salaries and wages expense paid in cash) | |||||
December | 31 |
| 3,500 | ||
Allowance for Doubtful Accounts | 3,500 | ||||
(To record the bad debt expense) | |||||
December | 31 | Interest Receivable | 600 | ||
Interest Revenue (5) | 600 | ||||
(To record the interest revenue earned) | |||||
December | 31 | Insurance Expense (6) | 2,400 | ||
Prepaid Insurance | 2,400 | ||||
(To record the insurance expense paid)) | |||||
December | 31 | Depreciation Expense (7) | 4,000 | ||
Accumulated Depreciation-Building | 4,000 | ||||
(To record the depreciation for the building ) | |||||
December | 31 | Depreciation Expense (8) | 9,900 | ||
Accumulated Depreciation-Equipment | 9,900 | ||||
(To record the depreciation for the equipment) | |||||
December | 31 | Depreciation Expense (9) | 250 | ||
Accumulated Depreciation-Equipment | 250 | ||||
(To record the depreciation for the equipment ) | |||||
December | 31 | Amortization Expense (10) | 1,000 | ||
Patent | 1,000 | ||||
(To record the amortization expense for patent ) | |||||
December | 31 | Salaries and Wages Expense | 2,200 | ||
Salaries and Wages Payable | 2,200 | ||||
(To record the adjusting entry for salaries and wages expense ) | |||||
December | 31 | Interest Expense (11) | 4,600 | ||
Interest Payable | 4,600 | ||||
(To record the adjusting entry for interest expense ) | |||||
December | 31 | Income Tax Expense | 15,000 | ||
Income Taxes Payable | 15,000 | ||||
(To record the adjusting entry for income tax expense.) |
Table (1)
Working Notes:
Calculate the total amount of equipment.
Calculate the amount of accumulated depreciation for equipment sold on December 2, 2017.
Calculate the amount of gain / (loss) on disposal of equipment.
Calculate the bad debt expense.
The allowance for doubtful accounts has already a balance of $500 and, the estimated uncollectible accounts receivable for the year end is $4,000.
Therefore, the bad debt expense for the year end would be adjusted to
Calculate the amount of interest revenue.
Calculate the amount of insurance expense.
Calculate the depreciation expense for building.
Calculate the amount of Depreciation expense on equipment.
Calculate the amount of Depreciation expense of equipment.
Calculate the amortization expense for patent purchased on January 1, 2017.
Calculate the amount of interest expense.
Explanation:
December 1: Record the purchase of equipment for cash
- Equipment is an asset and is increased by $16,800 due to purchase of equipment. Therefore, Equipment account is debited with $16,800.
- Cash is an asset and is decreased by $16,800 due to the amount paid on purchase of equipment. Therefore, Cash account is credited with $16,800.
December 2: Record Depreciation expense for the equipment sold.
- Depreciation expense is an expense, and it decreases the
stockholder’s equity by $825. Therefore, Depreciation expense – Equipment is debited with $825. - Accumulated depreciation is a contra asset with a normal credit balance. It is increased by $825 that decreases the value of assets by $825. Therefore, the Accumulated depreciation-Equipment account is credited with $825.
December 2: Sale of equipment
- Cash is an asset and increased by $3,500 due to sale of equipment. Therefore, Cash account is debited with $3,500.
- Accumulated depreciation-Equipment is a contra asset with a normal credit balance. Its decreased value increases the value of the asset by $2,625. Therefore, Accumulated depreciation-Equipment account is debited with $2,625.
- Equipment is an asset and decreased due to sale of equipment by $5,000. Therefore, Equipment account is credited with $5,000.
- Gain on disposal of Plant assets increases the revenue and thus the stockholders’ equity is increased by $1,125. Therefore, the Gain on disposal of plant assets account is credited with $1,125.
December 15: Record Sale of inventory on account
- Accounts Receivable is an asset and is increased by $5,000 due to the amount earned on sale of inventory. Therefore, Accounts Receivable account is debited with $5,000.
- Sales Revenue increases the revenue and thus the stockholders’ equity is increased by $5,000. Therefore, the Sales Revenue account is credited with $5,000.
December 15: Record cost of goods sold
- Cost of Goods Sold is a component of stockholders’ equity and it is increased that decreases the stockholders’ equity by $3,500. Therefore, Cost of Goods Sold account is debited with $3,500.
- Inventory is an asset and is decreased by $3,500 due to the sale of inventories. Therefore, Inventory account is credited with $3,500.
December 23: Record the salaries and wages expense paid in cash
- Salaries and Wages expense is an expense, and it decreases the stockholder’s equity by $6,600. Therefore, Salaries and Wages Expense is debited with $6,600.
- Cash is an asset and is decreased by $6,600 due to the amount paid for salaries and wages expense. Therefore, Cash account is credited with $6,600.
December 31:Record adjusting entry for bad debt expense.
- Bad debt expense is an expense, and it decreases the stockholder’s equity by $3,500. Therefore, Bad debt expense is debited with $3,500.
- Allowance for Doubtful Accounts is a contra asset with a normal credit balance. It is increased by $3,500 that decreases the value of assets by $3,500. Therefore, the Allowance for Doubtful Accounts account is credited with $3,500.
December 31: Record the adjusting entry for interest revenue accrued on notes receivable.
- Interest Receivable is an asset and is increased by $600 due to the interest earned on notes receivable. Therefore, Interest Receivable account is debited with $600.
- Interest Revenue increases the revenue and thus the stockholders’ equity is increased by $600. Therefore, the Interest Revenue account is credited with $600.
December 31: Record the adjusting entry for Insurance expense incurred.
- Insurance Expense is an expense, and it decreases the stockholder’s equity by $2,400. Therefore, Insurance Expense is debited with $2,400.
- Prepaid Insurance is an asset and is decreased by $2,400 due to the insurance amount that is incurred, is transferred to insurance expense. Therefore, Prepaid Insurance account is credited with $2,400.
December 31: Record Depreciation expense for building.
- Depreciation expense is an expense, and it decreases the stockholder’s equity by $4,000. Therefore, Depreciation expense – Building is debited with $4,000.
- Accumulated depreciation is a contra asset with a normal credit balance. It is increased by $4,000 that decreases the value of assets by $4,000. Therefore, the Accumulated depreciation-Building account is credited with $4,000.
December 31: Record Depreciation expense for equipment purchased in the previous year.
- Depreciation expense is an expense, and it decreases the stockholder’s equity by $9,900. Therefore, Depreciation expense – Equipment is debited with $9,900.
- Accumulated depreciation is a contra asset with a normal credit balance. It is increased by $9,900 that decreases the value of assets by $9,900. Therefore, the Accumulated depreciation-Equipment account is credited with $9,900.
December 31: Record Depreciation expense for equipment purchased on December 2, 2017.
- Depreciation expense is an expense, and it decreases the stockholder’s equity by $9,900. Therefore, Depreciation expense – Equipment is debited with $250.
- Accumulated depreciation is a contra asset with a normal credit balance. It is increased by $250 that decreases the value of assets by $250. Therefore, the Accumulated depreciation-Equipment account is credited with $250.
December 31: Record the adjusting entry for amortization expense for patents
- Amortization expense is an expense, and it decreases the stockholder’s equity by $1,000. Therefore, Amortization Expense is debited with $1,000.
- Patents is an intangible asset and is decreased by $1,000 due to amortization. Therefore, Patents account is credited with $1,000.
December 31: Record the adjusting entry for salaries and wages expense
- Salaries and Wages expense is an expense, and it decreases the stockholder’s equity by $2,200. Therefore, Salaries and Wages Expense is debited with $2,200.
- Salaries and Wages Payable is a liability and is increased by $2,200 due to salaries and wages expense accrued. Therefore, Salaries and Wages Payable account is credited with $2,200.
December 31: Record the adjusting entry for interest expense on notes payable
- Interest expense is an expense, and it decreases the stockholder’s equity by $4,600. Therefore, Interest Expense is debited with $4,600.
- Interest Payable is a liability and is increased by $4,600 due to interest expense accrued. Therefore, Interest Payable account is credited with $4,600.
December 31: Record the adjusting entry for income tax expense
- Income Tax expense is an expense, and it decreases the stockholder’s equity by $15,000. Therefore, Income Tax Expense is debited with $15,000.
- Income Tax Payable is a liability and is increased by $15,000 due to income tax expense accrued. Therefore, Interest Payable account is credited with $15,000.
(b)
To prepare: an adjusted
(b)
Explanation of Solution
Prepare an adjusted trial balance at December 31, 2017.
M Corporation | ||
Adjusted Trial Balance | ||
December 31, 2017 | ||
Accounts | Debit ($) | Credit ($) |
Cash | 2,100 | - |
Accounts Receivable | 41,800 | - |
Notes Receivable | 10,000 | - |
Interest Receivable | 600 | |
Inventory | 32,700 | |
Prepaid Insurance | 1,200 | - |
Land | 20,000 | - |
Buildings | 150,000 | - |
Equipment | 71,800 | - |
Patent | 8,000 | |
Allowance for Doubtful Accounts | - | 4,000 |
Accumulated Depreciation-Buildings | - | 54,000 |
Accumulated Depreciation-Equipment | - | 32,350 |
Accounts Payable | - | 27,300 |
Salaries and Wages Payable | - | 2,200 |
Notes Payable (due April 30, 2018) | - | 11,000 |
Interest Payable | - | 4,600 |
Notes Payable (due in 2023) | - | 35,000 |
Income Taxes Payable | - | 15,000 |
Common Stock | - | 50,000 |
Retained Earnings | - | 63,600 |
Dividends | 12,000 | - |
Sales Revenue | - | 905,000 |
Interest Revenue | - | 600 |
Gain on Disposal of Plant Assets | - | 1,125 |
Bad Debt Expense | 3,500 | - |
Cost of Goods Sold | 633,500 | - |
Depreciation Expense | 14,975 | - |
Insurance Expense | 2,400 | - |
Interest Expense | 4,600 | - |
Other Operating Expenses | 61,800 | - |
Amortization Expense | 1,000 | - |
Salaries and Wages Expense | 118,800 | - |
Income Taxes Expense | 15,000 | - |
Total | 1,205,775 | 1,205,775 |
Table (2)
Working notes:
Post the above journal entries and adjusting entries in part (a) into the T-accounts to determine the balances of the respective accounts.
Cash is an asset with a normal debit balance.
Cash Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1, 2017 | Balance | 22,000 | December2, 2017 | Equipment | 22,000 | |
December 2 | Equipment | 3,500 | December 23 | Salaries and Wages Expense | 6,600 | |
December 31,2017 | Closing Balance | 2,100 | ||||
December 31,2017 | Total | 25,500 | December 31,2017 | Total | 25,500 | |
January 1, 2018 | Beginning Balance | 2,100 |
Table (3)
Accounts Receivable is an asset with a normal debit balance.
Accounts Receivable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1, 2017 | Balance | 36,800 | December 31,2017 | Closing balance | 41,800 | |
December 15 | Sales Revenue | 5,000 | ||||
December 31,2017 | Total | 41,800 | December 31,2017 | Total | 41,800 | |
January 1, 2018 | Beginning Balance | 41,800 |
Table (4)
Equipment is an asset with a normal debit balance.
Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1, 2017 | Balance | 60,000 | December 2 | Cash | 3,500 | |
December 2 | Cash | 16,800 | December 2 | Accumulated Depreciation | 2,625 | |
December 2 | Gain on Disposal | 1,125 | ||||
December 31,2017 | Closing balance | 71,800 | ||||
December 31,2017 | Total | 77,925 | December 31,2017 | Total | 77,925 | |
January 1, 2018 | Beginning Balance | 71,800 |
Table (5)
Depreciation Expense is a component of stockholders’ equity account with a normal debit balance.
Depreciation Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 2 | Accumulated Depreciation-Equipment | 825 | December 31 | Closing Balance | 14,975 | |
December 31 | Accumulated Depreciation-Buildings | 4,000 | ||||
December 31 | Accumulated Depreciation-Equipment | 9,900 | ||||
December 31 | Accumulated Depreciation-Equipment | 250 | ||||
December 31,2017 | Total | 14,975 | December 31,2017 | Total | 14,975 |
Table (6)
Gain on Disposal of Plant Assets is a component of stockholders’ equity account with a normal credit balance.
Gain on Disposal Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 2 | Closing Balance | 1,125 | December 1 | Balance | 1,125 | |
December 31,2017 | Total | 1,125 | December 31,2017 | Total | 1,125 |
Table (7)
Sales Revenue is a component of stockholders’ equity account with a normal credit balance.
Sales Revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 2 | Closing Balance | 905,000 | December 1 | Balance | 900,000 | |
December 15 | Accounts Receivable | 5,000 | ||||
December 31,2017 | Total | 905,000 | December 31,2017 | Total | 905,000 |
Table (8)
Cost of Goods Sold is a component of stockholders’ equity account with a normal debit balance.
Cost of Goods Sold Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 630,000 | December 31 | Ending Balance | 633,500 | |
December 15 | Inventory | 3,500 | ||||
December 31,2017 | Total | 633,500 | December 31,2017 | Total | 633,500 |
Table (9)
Inventory is an asset account with a normal debit balance.
Inventory Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 36,200 | December 15 | Cost of Goods Sold | 3,500 | |
December 31 | Ending Balance | 32,700 | ||||
December 31,2017 | Total | 36,200 | December 31,2017 | Total | 36,200 | |
January 1,2018 | Balance | 32,700 |
Table (10)
Salaries and Wages Expense is a component of stockholders’ equity account with a normal debit balance.
Salaries and Wages Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 110,000 | December 31 | Ending Balance | 118,800 | |
December 23 | Cash | 6,600 | ||||
December 31 | Salaries and Wages payable | 2,200 | ||||
December 31,2017 | Total | 118,800 | December 31,2017 | Total | 118,800 |
Table (11)
Bad Debt Expense is a component of stockholders’ equity account with a normal debit balance.
Bad Debt Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 0 | December 31 | Ending Balance | 3,500 | |
December 31 | Allowance for Doubtful Debts | 3,500 | ||||
December 31,2017 | Total | 3,500 | December 31,2017 | Total | 3,500 |
Table (12)
Allowance for Doubtful Accounts is a contra-asset account with a normal credit balance.
Allowance for Doubtful Accounts | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Ending Balance | 4,000 | December 31 | Balance | 500 | |
December 31 | Bad Debt Expense | 3,500 | ||||
December 31,2017 | Total | 4,000 | December 31,2017 | Total | 4,000 | |
January 1,2018 | Balance | 4,000 |
Table (13)
Interest Revenue is a component of stockholders’ equity account with a normal credit balance.
Interest Revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Ending Balance | 600 | December 1 | Balance | 0 | |
December 31 | Interest Receivable | 600 | ||||
December 31,2017 | Total | 600 | December 31,2017 | Total | 600 |
Table (14)
Interest Receivable is an asset account with a normal debit balance.
Interest Receivable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Balance | 0 | December 31 | Ending Balance | 600 | |
December 31 | Interest Revenue | 600 | ||||
December 31,2017 | Total | 600 | December 31,2017 | Total | 600 | |
January 1,2018 | Balance | 600 |
Table (15)
Insurance Expense is a component of stockholders’ equity account with a normal debit balance.
Insurance Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 0 | December 31 | Ending Balance | 2,400 | |
December 31 | Prepaid Insurance | 2,400 | ||||
December 31,2017 | Total | 2,400 | December 31,2017 | Total | 2,400 |
Table (16)
Prepaid Insurance is an asset account with a normal debit balance.
Prepaid Insurance Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Balance | 3,600 | December 31 | Insurance Expense | 2,400 | |
December 31 | Ending Balance | 1,200 | ||||
December 31,2017 | Total | 3,600 | December 31,2017 | Total | 3,600 | |
January 1,2018 | Balance | 1,200 |
Table (17)
Amortization Expense is a component of stockholders’ equity account with a normal debit balance.
Amortization Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 0 | December 31 | Ending Balance | 1,000 | |
December 31 | Patents | 1,000 | ||||
December 31,2017 | Total | 1,000 | December 31,2017 | Total | 1,000 |
Table (18)
Patents is an intangible asset account with a normal debit balance.
Patents Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Balance | 9,000 | December 31 | Amortization Expense | 1,000 | |
December 31 | Ending Balance | 8,000 | ||||
December 31,2017 | Total | 9,000 | December 31,2017 | Total | 9,000 | |
January 1,2018 | Balance | 8,000 |
Table (19)
Salary and Wages Payable is a liability account with a normal credit balance.
Salary and Wages Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Ending Balance | 2,200 | December 1 | Balance | 0 | |
December 31 | Salary and Wages Expense | 2,200 | ||||
December 31,2017 | Total | 2,200 | December 31,2017 | Total | 2,200 | |
January 1, 2018 | Balance | 2,200 |
Table (20)
Interest Expense is a component of stockholders’ equity account with a normal debit balance.
Interest Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 0 | December 31 | Ending Balance | 4,600 | |
December 31 | Interest Payable | 4,600 | ||||
December 31,2017 | Total | 4,600 | December 31,2017 | Total | 4,600 |
Table (21)
Interest Payable is a liability account with a normal credit balance.
Interest Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Ending Balance | 4,600 | December 1 | Balance | 0 | |
December 31 | Interest Expense | 4,600 | ||||
December 31,2017 | Total | 4,600 | December 31,2017 | Total | 4,600 | |
January 1, 2018 | Balance | 4,600 |
Table (22)
Income Tax Expense is a component of stockholders’ equity account with a normal debit balance.
Income Tax Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Balance | 0 | December 31 | Ending Balance | 15,000 | |
December 31 | Income Tax Payable | 15,000 | ||||
December 31,2017 | Total | 15,000 | December 31,2017 | Total | 15,000 |
Table (23)
Income Tax Payable is a liability account with a normal credit balance.
Income Tax Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31 | Ending Balance | 15,000 | December 1 | Balance | 0 | |
December 31 | Income Tax Expense | 15,000 | ||||
December 31,2017 | Total | 15,000 | December 31,2017 | Total | 15,000 | |
January 1, 2018 | Balance | 15,000 |
Table (24)
Accumulated Depreciation-Equipment is a contra asset account with a normal credit balance.
Accumulated Depreciation-Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 2, 2017 | Equipment | 2,625 | December 1, 2017 | Balance | 24,000 | |
December 31, 2017 | Ending Balance | 32,350 | December 31, 2017 | Depreciation expense | 825 | |
December 31, 2017 | Depreciation expense | 9,900 | ||||
December 31, 2017 | Depreciation expense | 250 | ||||
December 31,2017 | Total | 34,975 | December 31,2017 | Total | 34,975 | |
January 1, 2018 | Balance | 32,350 |
Table (25)
Accumulated Depreciation-Building is a contra asset account with a normal credit balance.
Accumulated Depreciation-Building Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 31, 2017 | Ending Balance | 54,000 | December 1, 2017 | Balance | 50,000 | |
December 31, 2017 | Depreciation expense | 4,000 | ||||
December 31,2017 | Total | 54,000 | December 31,2017 | Total | 54,000 | |
January 1, 2018 | Balance | 54,000 |
Table (26)
(c)
To prepare: the income statement of M Corporation for the year ended December 31, 2017.
(c)
Explanation of Solution
Prepare the income statement of M Corporation for the year ended December 31, 2017.
M Corporation | ||
Income Statement | ||
For the year ended December 31, 2017 | ||
Details | Amount ($) | Amount ($) |
Revenue | ||
Sales Revenue | – | 905,000 |
Less: Cost of Goods Sold | 633,500 | |
Gross Profit | 271,500 | |
Less: Operating Expenses | ||
Salaries and Wages Expense | 118,800 | |
Other Operating Expense | 61,800 | |
Depreciation Expense | 14,975 | |
Bad Debt Expense | 3,500 | |
Insurance Expense | 2,400 | |
Amortization Expense | 1,000 | |
Total Operating Expenses | (202,475) | |
Income from operations | 69,025 | |
Add: Other revenues and gains | ||
Gain on Disposal of Plant Assets | 1,125 | |
Interest Revenue | 600 | 1,725 |
Less: Other expenses and losses | ||
Interest Expense | (4,600) | |
Income before income taxes | 66,150 | |
Less: Income Tax Expense | (15,000) | |
Net Income | 51,150 |
Table (27)
(d)
To Prepare: a Balance Sheet of M Corporation for the year ending December 31, 2017.
(d)
Explanation of Solution
Prepare a Balance Sheet of M Corporation for the year ending December 31, 2017.
M Corporation | |||
Balance Sheet | |||
December 31, 2017 | |||
Assets | Amount ($) | Amount ($) | Amount ($) |
Current Assets | |||
Cash | 2,100 | ||
Accounts Receivable | 41,800 | ||
Less: Allowance for Doubtful Accounts | 4,000 | 37,800 | |
Notes Receivable | 10,000 | ||
Interest Receivable | 600 | ||
Inventory | 32,700 | ||
Prepaid Insurance | 1,200 | ||
Total Current Assets | 84,400 | ||
Property, Plant, and Equipment | |||
Land | 20,000 | ||
Building | 150,000 | ||
Less: Accumulated Depreciation | (54,000) | 96,000 | |
Equipment | 71,800 | ||
Less: Accumulated Depreciation | (32,350) | 39,450 | |
Total Property, Plant, and Equipment | 155,450 | ||
Intangible Assets | |||
Patents | 8,000 | ||
Total Assets | 247,850 | ||
Liabilities | Amount ($) | Amount ($) | |
Current Liabilities | |||
Notes Payable (due April 30, 2018) | 11,000 | ||
Accounts Payable | 27,300 | ||
Income Taxes Payable | 15,000 | ||
Interest Payable | 4,600 | ||
Salaries and Wages Payable | 2,200 | ||
Total Current Liabilities | 60,100 | ||
Long-term Liabilities | |||
Notes Payable (due in 2023) | 35,000 | ||
Total Liabilities | 95,100 | ||
Stockholders’ Equity | |||
Common Stock | 50,000 | ||
Retained Earnings | 102,750 | ||
Total Stockholders’ Equity | 152,750 | ||
Total Liabilities and Stockholders’ Equity | 247,850 |
Table (28)
Working notes:
Determine the ending balance of retained earnings from Retained Earnings Statement.
M Corporation | |
Retained Earnings statement | |
For the year ended December 31, 2017 | |
Details | Amount ($) |
Beginning Balance of Retained Earnings | 63,600 |
Add: Net Income for the year | 51,150 |
Total Retained Earnings | 114,750 |
Less: Dividends | (12,000) |
Ending balance of Retained Earnings | 102,750 |
Table (29)
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Chapter 9 Solutions
FINANCIAL ACCT.:TOOLS...-WILEYPLUS PKG.
- Shannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800arrow_forwardSunland Inc. reported income from continuing operations before taxes during 2017 of $817,900. Additional transactions occurring in 2017 but not considered in the $817,900 are as follows. 1. The corporation experienced an uninsured flood loss in the amount of $99,000 during the year. 2. At the beginning of 2015, the corporation purchased a machine for $68,400 (salvage value of $11,400) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2015, 2016, and 2017, but failed to deduct the salvage value in computing the depreciation base. 3. Sale of securities held as a part of its portfolio resulted in a loss of $61,900 (pretax). 4. When its president died, the corporation realized $140,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $45,650 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $104,710 before…arrow_forwardOn January 1, 2011, Chicaga Furniture purchased a new delivery truck The company paid $65,000 for the truck, $12,000 for an annual insurance policy and $1,300 for a motor vehicle license. The truck has an estimated residual value of $5,000 at the end of its useful life and Chicago Furniture uses the double-declining-balance method for other similar assets. At what net amount will Chicago Furniture record the truck on its statement of financial position at December 31, 2011?arrow_forward
- On January 1, 2017, Sheridan Company had a balance of $417,000 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year. The goodwill had an indefinite life. During 2017 , the company had the following transactionsarrow_forwardDumb Company’s year-end is December 31, 2015 and the 2015 financial statements were authorized for issue on March 31, 2016. The entity had the following events: On February 1, 2016, the entity determined that the total cost of an equipment purchased is P3,700,000. The equipment was purchased on November 21, 2015 but unrecorded on December 31, 2015. On March 15, 2016, the entity discovered that the 2015 depreciation expense was overstated by P470,000. On March 20,2016, the entity issued P100,000 ordinary shares at par of P10 per share. On March 27, 2016, the entity filed a case against another entity for present infringement. Legal counsel assessed that it is probable that the entity will win the case for an amount of P550,000. What amount should be replaced as adjusting events on December 31, 2015arrow_forwardThe following information applies to the questions displayed below.] On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $312,000. The machine is expected to last five years and have a salvage value of $56,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the double-declining-balance method. (Enter all amounts positive values.)arrow_forward
- Tibra Inc.'s trial balance TBAcontained the following accounts at December 31, 2021, the end of company's fiscal year. Accounts …… …… …… …… …… …… …… Balances ($) Accumulated Depreciation-Building…. …… 123000 Accumulated Depreciation-Equipment….…. 36000 Additional Paid in Capital-Common Stock.. 220000 Auditors Fee …. …. …. …. …. …. ….. ….. ….. .. 207000 Buildings…. …. …. …. …. …. ….. ….. ….. ….. ... 406000 Cash …. …. …. …. …. …. ….. ….. ….. ….. ….. …. 148220 Common Stock ($2 each)…. …. …. …. …. ….. 104000 Cost of Goods Sold …. …. …. …. ….. …. ….… 1086000 Equipment …. …. …. …. …. …. ….. ….. ….. ….. 202000 Interest Expense …. …. …. …. …. …. ….. ….. …. 23100 Loss on Sale of Property …. …. …. …. …. …. 7530 Merchandise Inventory …. …. ……. …. …. …. 235000 Mortgage Loan …. …. …. …. …. …… …. …. …. 102000 Rent Revenue …. …. …. …. …. …. … …. …. …. 51000 Retained Earnings …. …. …. …. …… …. …. …. 51700 Salaries and Wages Expense …. …. …. …. …. 108000 Sales …. …. …. …. …. …. ….. ….. ……. …. …. ….…arrow_forwardOn March 15, 2014, Rex Company paid property taxes of P180,000 on the factory building for calendar year 2014. On April 1, 2014, the entity made P300,000 in unanticipated ordinary repairs to plant equipment. What total amount of these expenses should be included in the quarterly income statement ending June 30, 2014?arrow_forwardThe following accounts were taken from the trial balance of Cole Company as of December 31, 2015: sales 70,000$ Inventory 23,000 Interest Revenue 3,000$ Advertising Expense 1,500 Equipment 52,000$ Selling Expense 7,500 Accumulated Depreciation - Equipment 9,600 Interest Expense 2,000 Given the information below, make the necessary adjusting entries. The equipment has an estimated useful life of 10 years and a salvage value of $4,000. Depreciation is calculated using the straight-line method. 2.Of selling expense, $1,500 has been paid in advance. 3.Interest of $800 has accrued on notes receivable. 4.Of advertising expense, $440 was incorrectly debited to Selling Expense.arrow_forward
- On January 1, 2019, the Accumulated Depreciation – Machinery account of a particular company showed a balance of P 370,000. At the end of 2014, after adjusting entries were posted, it showed a balance of P 395,000. During 2014, one of the machines which cost P125,000 was sold for P60,500 cash. This resulted in a loss of P4,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2019? (This problem earns you a five-point bonus if your answer is correct) a. 25,000 c. 85,500 b. 60,000 d. 93,500arrow_forwardThe following information is available for the first three years of operations for Cooper Company: Year Taxable Income 2017 $500,000 2018 375,000 2019 400,000 On January 2, 2017, heavy equipment costing $800,000 was purchased. The equipment had a life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below: Tax Depreciation 2017 2018 2019 2020 Total $264,000 $360,000 $120,000 $56,000 $800,000 The enacted tax rates are 40% for all years. Instructions Determine the deferred tax (asset) or liability at the end of 2017.arrow_forwardDon Quixote, owner of Stable Rides started the business on 1 July 2016.At the start of the business, he had land and buildings at the value of R250 000 and purchased three vehicles at R60 000 each.Stable Rides did not buy or sell any vehicles during the first three financial years. The accumulated depreciation on vehicles as at 1 July 2019 was R104 062.50. Depreciation on vehicles is calculated at 25% p.a . on the diminishing balance method. The following applies to the financial year ended 30 June 2020. * On 1 December 2019 Stable Rides sold one vehicle for R20 000 on credit. The vehicle was purchased on 1 July 2016.The vehicle was purchased on 1 July 2016.The vehicle is depreciated at the rate of 25% p.a. on the diminishing balance method. REQUIRED: PREPARE THE FOLLOWING LEDGER ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2020. ROUND OFF TO 2 DECIMAL PLACES. * CLOSE OFF ACCOUNTS* 1} ASSET DISPOSAL 2}ACCUMULATED DEPRECIATION: VEHICLES 3}VEHICLESarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning