ACCOUNTING

Problem 3-1

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sept. 1 Kawabata begins practice as a dentist and invests $22,010 cash.
2 Purchases dental equipment on account from Green Jacket Co. for $17,580.
4 Pays rent for office space, $803 for the month.
4 Employs a receptionist, Michael Bradley.
5 Purchases dental supplies for cash, $982.
8 Receives cash of $1,750 from patients for services performed.
10 Pays miscellaneous office expenses, $540.
14 Bills patients $7,290 for services performed.
18 Pays Green Jacket Co. on account, $3,740.
19 Withdraws $3,670 cash from the business for personal use.
20 Receives $1,080 from patients on account.
25 Bills patients $3,720 for services performed.
30 Pays the following expenses in cash: Salaries and wages $1,820; miscellaneous office expenses $93. (Record each separately.)
30 Dental supplies used during September, $420.

Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value.

Directions:

1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). (Post entries in the order displayed in the problem statement.)

2. Prepare a trial balance.

3. Prepare an income statement.

4. Prepare a statement of owner’s equity. (List items that increase owner’s equity first.)

5. Prepare an unclassified balance sheet. (List assets in order of liquidity.)

6. Close the ledger. (Post entries in the order displayed in the problem statement.)

7. Prepare a post-closing trial balance.

Problem 3-4

The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

BELLEMY FASHION CENTER TRIAL BALANCE NOVEMBER 30, 2014
Debit Credit
Cash $34,010
Accounts Receivable 37,390
Inventory 48,690
Supplies 9,190
Equipment 140,380
Accumulated Depreciation-Equipment $27,240
Notes Payable 54,690
Accounts Payable 52,190
Common Stock 93,690
Retained Earnings 11,690
Sales Revenue 766,200
Sales Returns and Allowances 4,200
Cost of Goods Sold 495,400
Salaries and Wages Expense 138,060
Advertising Expense 28,020
Utilities Expenses 15,940
Maintenance and Repairs Expense 12,100
Delivery Expense 16,700
Rent Expense 25,620
Totals $1,005,700 $1,005,700

Adjustment data:

1. Supplies on hand totaled $5,190.
2. Depreciation is $17,430 on the equipment.
3. Interest of $15,490 is accrued on notes payable at November 30.

Other data:

1. Salaries expense is 70% selling and 30% administrative.
2. Rent expense and utilities expenses are 80% selling and 20% administrative.
3. $30,000 of notes payable are due for payment next year.
4. Maintenance and repairs expense is 100% administrative.

Directions:

1. Journalize the adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

2. Prepare an adjusted trial balance.

3. Prepare a multiple-step income statement for the year. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

4. Prepare retained earnings statement for the year.

5. Prepare a classified balance sheet as of November 30, 2014. (List current assets in order of liquidity.)

6. Journalize the closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

7. Prepare a post-closing trial balance.

Problem 3-11

On January 1, 2014, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $91,614 cash. The new company, Arkansas Sales and Service, has the following transactions during January.

1. Pays $15,000 in advance for 3 months’ rent of office, showroom, and repair space.
2. Purchases 44 personal computers at a cost of $1,678 each, 10 graphics computers at a cost of $2,678 each, and 29 printers at a cost of $478 each, paying cash upon delivery.
3. Sales, repair, and office employees earn $14,214 in salaries and wages during January, of which $4,614 was still payable at the end of January.
4. Sells 34 personal computers at $2,728 each, 8 graphics computers for $3,778 each, and 19 printers for $678 each; $76,614 is received in cash in January, and $59,244 is sold on a deferred payment basis.
5. Other operating expenses of $10,014 are incurred and paid for during January; $3,614 of incurred expenses are payable at January 31.

Directions:

1. Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2. Using the transaction data above, prepare (1) a cash-basis balance sheet and (2) an accrual-basis balance sheet as of January 31, 2014. (List assets in order of liquidity.)

Problem 3-12

Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

COOKE COMPANY Worksheet For The Month Ended September 30, 2014
Trial Balance Adjusted Trial Balance
Debit Credit Debit Credit
Cash 38,490 38,490
Supplies 19,690 4,240
Prepaid Insurance 31,900 4,070
Land 86,050 86,050
Equipment 126,050 126,050
Accumulated Depreciation-Equipment 37,290 42,240
Accounts Payable 15,690 15,690
Unearned Service Revenue 3,190 710
Mortgage Payable 52,180 52,180
Common Stock 113,750 113,750
Retained Earnings, Sept. 1, 2014 2,000 2,000
Dividends 14,000 14,000
Service Revenue 284,550 287,030
Salaries and Wages Expense 108,510 108,510
Maintenance and Repairs Expense 31,590 31,590
Advertising Expense 9,400 9,400
Utilities Expenses 17,990 17,990
Property Tax Expense 18,490 21,370
Interest Expense 6,490   12,150
   Totals 508,650 508,650
Insurance Expense 27,830
Supplies Expense 15,450
Interest Payable 5,660
Depreciation Expense 4,950  
Property Taxes Payable   2,880
   Totals 522,140 520,140

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Directions :

1. Prepare a complete worksheet.

2. Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is due for payment in the next fiscal year.) (List current assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

3. Journalize the adjusting entries using the worksheet as a basis. (If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

4. Prepare a post-closing trial balance.

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