Question Details

ACCT/510 ACCT510 ACCT 510 CHAPTER 4 BRIEF EXERCISES PART 10

BRIEF EXERCISES


Ex. 176


The income statement of Gentry's Shoe Repair is as follows:
GENTRY’S SHOE REPAIR
Income Statement
For the Month Ended April 30, 2008
Revenue
Shoe Repair Revenue................................................................... $7,500
Expenses
Salaries Expense .......................................................................... $3,400
Depreciation Expense................................................................... 350
Utilities Expense............................................................................ 400
Rent Expense................................................................................ 600
Supplies Expense ......................................................................... 1,050
Total Expenses ...................................................................... 5,800
Net Income............................................................................................. $1,700
On April 1, the owner, Lee Gentry, had a capital balance of $12,900. During April, Gentry
withdrew $3,000 cash for personal use.
Instructions
(a) Prepare closing entries at April 30.
(b) Prepare an owner's equity statement for the month of April.

4 - 42 Test Bank for Accounting Principles, Eighth Edition



Ex. 177
Identify which of the following accounts would appear in a post- closing trial balance.
Accumulated Depreciation Jackson, Drawing
Depreciation Expense Service Revenue
Interest Payable Store Equipment


Ex. 178
The trial balances of Foley Company follow with the accounts arranged in alphabetic order.
Analyze the data and prepare (a) the adjusting entries and (b) the closing entries made by Foley
Company.
Trial Balances
Unadjusted Adjusted Post-Closing
Accounts Payable $10,000 $10,000 $10,000
Accounts Receivable 2,200 3,200 3,200
Accumulated Depreciation 13,000 17,000 17,000
Advertising Expense 0 16,300 0
Cash 60,000 60,000 60,000
Depreciation Expense 0 4,000 0
Equipment 75,000 75,000 75,000
Foley, Capital 82,200 82,200 102,400
Foley, Drawing 11,000 11,000 0
Prepaid Advertising 17,800 1,500 1,500
Prepaid Rent 15,000 11,000 11,000
Rent Expense 0 4,000 0
Service Revenue 96,000 105,000 0
Supplies 3,200 700 700
Supplies Expense 2,000 4,500 0
Unearned Revenue 23,000 15,000 15,000
Wages Expense 38,000 45,000 0
Wages Payable 0 7,000 7,000



Ex. 179
Indicate the proper sequence of the steps in the accounting cycle by placing numbers 1-8 in the
blank spaces.
____ a. Analyze business transactions.
____ b. Journalize and post adjusting entries.
____ c. Journalize and post closing entries.
____ d. Journalize the transactions.
____ e. Prepare a post-closing trial balance.
____ f. Prepare a worksheet.
____ g. Prepare financial statements.
____ h. Post to ledger accounts.



Ex. 180
Prepare the necessary correcting entry for each of the following.
a. A collection on account of $370 from a customer was credited to Accounts Receivable $730
and debited to Cash $730.
b. The purchase of supplies on account for $250 was recorded as a debit to Equipment $250
and a credit to Accounts Payable $250.



Ex. 181
An examination of the accounts of Shaw Company for the month of June revealed the following
errors after the transactions were journalized and posted.
1. A check for $750 from R. Linton, a customer on account, was debited to Cash $750 and
credited to Service Revenue, $750.
2. A payment for Advertising Expense costing $420 was debited to Utilities Expense, $240 and
credited to Cash $240.
3. A bill for $840 for Office Supplies purchased on account was debited to Office Equipment,
$480 and credited to Accounts Payable $480.
Instructions
Prepare correcting entries for each of the above assuming the erroneous entries are not
reversed. Explain how the transaction as originally recorded affected net income for the month of
June.


4 - 46 Test Bank for Accounting Principles, Eighth Edition




Ex. 182
As Jeff Wills was doing his year-end accounting, he noticed that the bookkeeper had made errors
in recording several transactions. The erroneous transactions are as follows:
(a) A check for $700 was issued for goods previously purchased on account. The bookkeeper
debited Accounts Receivable and credited Cash for $700.
(b) A check for $380 was received as payment on account. The bookkeeper debited Accounts
Payable for $830 and credited Accounts Receivable for $830.
(c) When making the entry to record the year's depreciation expense, the bookkeeper debited
Accumulated Depreciation for $1,000 and credited Cash for $1,000.
(d) When accruing interest on a note payable, the bookkeeper debited Interest Receivable for
$200 and credited Interest Payable for $200.
Instructions
Prepare the appropriate correcting entries. (Do not reverse the original entries.)


Ex. 183
Jon Scott, CPA, was asked by Jeff Pine to review the accounting records and prepare the
financial statements for his upholstering shop. Jon reviewed the records and found three errors.
1. Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable $390
and a credit to Cash $390.
2. The purchase of supplies on account for $500 was debited to Equipment $500 and credited to
Accounts Payable $500.
3. Jeff withdrew $1,200 of cash and the bookkeeper debited Accounts Receivable for $120 and
credited Cash $120.
Instructions
Prepare an analysis of each error showing the
(a) incorrect entry.
(b) correct entry.
(c) correcting entry.

4 - 48 Test Bank for Accounting Principles, Eighth Edition


Ex. 184
Compute the dollar amount of current assets based on the following account balances.
Accounts Receivable $16,000
Accumulated Depreciation 27,000
Cash 24,000
Equipment 93,000
Prepaid Rent 7,000
Short-term Investments 15,000


Ex. 185
The financial statement columns of the worksheet for Audio Concepts at December 31, 2008, are
as follows:
AUDIO CONCEPTS
Worksheet
For the Year Ended December 31, 2008
Income Statement Balance Sheet
Accounts Debit Credit Debit Credit
Cash 15,000
Accounts Receivable 7,000
Supplies 4,000
Prepaid Insurance 6,000
Audio Equipment 209,000
Accumulated Depreciation—Audio Equipment 29,000
Accounts Payable 19,000
Note Payable 70,000
Salaries Payable 3,000
J. Green, Capital 112,000
J. Green, Drawing 14,000
Audio Revenue 123,000
Advertising Expense 21,000
Depreciation Expense 12,000
Insurance Expense 3,000
Rent Expense 17,000
Salaries Expense 42,000
Supplies Expense 6,000
Totals 101,000 123,000 255,000 233,000
Net Income 22,000 22,000
123,000 123,000 255,000 255,000
Instructions
(a) Calculate the balance of J. Green, Capital that would appear on a balance sheet at
December 31, 2008.
(b) Prepare a classified balance sheet for Audio Concepts at December 31, 2008 assuming the
note payable is a long-term liability.
Completing the Accounting Cycle 4 - 49


4 - 50 Test Bank for Accounting Principles, Eighth Edition

Ex. 186
The financial statement columns of the worksheet for Melton Company as of December 31, 2008
are as follows:
MELTON COMPANY
Worksheet
For the Year Ended December 31, 2008
Income Statement Balance Sheet
Accounts Debit Credit Debit Credit
Cash 20,000
Accounts Receivable 6,000
Supplies 4,500
Prepaid Insurance 7,000
Equipment 50,000
Accumulated Depreciation 4,800
Patents 7,500
Accounts Payable 23,500
Bonds Payable (due 2012) 18,000
Melton, Capital 46,000
Melton, Drawing 4,200
Service Revenue 25,400
Salaries Expense 5,200
Depreciation Expense 4,800
Insurance Expense 5,000
Interest Expense 3,500
Totals 18,500 25,400 99,200 92,300
Net Income 6,900 6,900
25,400 25,400 99,200 99,200
Instructions
Prepare a classified balance sheet for Melton Company.



AEx. 187
Reisner Company prepared the following adjusting entries at year end on December 31, 2007:
(a) Interest Expense ........................................................................... 200
Interest Payable ................................................................... 200
(b) Unearned Revenue....................................................................... 1,500
Service Revenue.................................................................. 1,500
(c) Insurance Expense ....................................................................... 1,200
Prepaid Insurance ................................................................ 1,200
(d) Interest Receivable ....................................................................... 100
Interest Revenue.................................................................. 100
(e) Supplies Expense ......................................................................... 250
Supplies................................................................................ 250
(f) Wages Expense............................................................................ 3,000
Wages Payable .................................................................... 3,000
In an effort to minimize errors in recording transactions, Reisner Company utilizes reversing
entries.
Instructions
Prepare reversing entries on January 1, 2008, for the adjusting entries given where appropriate.

4 - 52 Test Bank for Accounting Principles, Eighth Edition




aEx. 188
On December 31, 2008 the adjusted trial balance of the Dixon Personnel Agency shows the
following selected data:
Commission Receivable, $7,000
Commission Revenue, $70,000
Interest Expense, $10,500
Interest Payable, $2,500
Utilities Expense, $4,800
Accounts Payable, $2,400
Analysis indicates that adjusting entries were made for (a) $7,000 of employment commission
revenue earned but not billed, (b) $2,500 of accrued but unpaid interest, and (c) $2,400 of utilities
expense accrued but not paid.
Instructions
(a) Prepare the closing entries at December 31, 2008.
(b) Prepare the reversing entries on January 1, 2009.
(c) Enter the adjusted trial balance data in T-accounts. Post the entries in (a) and (b) and rule
and balance the accounts.
(d) Prepare the entries to record (1) the collection of the accrued commission on January 8, (2)
payment of the utility bill on January 10, and (3) payment of all the interest due ($3,000) on
January 15.
(e) Post the entries in (d) to the temporary accounts.
(f) What is the interest expense for the month of January 2009?



4 - 54 Test Bank for Accounting Principles, Eighth Edition

aEx. 189
Transaction and adjustment data for Gore Company for the calendar year end is as follows:
1. December 24 (initial salary entry): $12,000 of salaries earned between December 1 and
December 24 are paid.
2. December 31 (adjusting entry): Salaries earned between December 25 and December 31 are
$2,000. These will be paid in the January 8 payroll.
3. January 8 (subsequent salary entry): Total salary payroll amounting to $7,000 was paid.
Instructions
Prepare two sets of journal entries as specified below. The first set of journal entries should
assume that the company does not use reversing entries, and the second set should assume that
reversing entries are utilized by the company.
Assume no reversing entries Assume reversing entries
(a) Initial Salary Entry
Dec. 24
(b) Adjusting Entry
Dec. 31
(c) Closing Entry
Dec. 31
(d) Reversing Entry
Jan. 1
(e) Subsequent Salary Entry
Jan. 8
Completing the Accounting Cycle 4 - 55



4 - 56 Test Bank for Accounting Principles, Eighth Edition

COMPLETION STATEMENTS
190. The first step in preparing a worksheet is to prepare a ______________ from the general
ledger accounts.
191. The account balances appearing in the adjusted trial balance columns are extended to the
______________ columns and the ______________ columns.
192. The process of transferring net income (or loss) for the period to Owner's Capital is
accomplished by making ______________ entries.
193. At the end of an accounting period, all revenue and expense accounts are closed to a
temporary account called ______________.
194. The Owner's Drawing account is closed to the ______________ account at the end of the
accounting period.
195. After all closing entries have been journalized and posted, the final step in the accounting
cycle is to prepare a ______________ trial balance.
196. The preparation of a ______________ and ______________ entries are two optional
steps in the accounting cycle.
197. Two permanent accounts that are part of the stockholder's equity in a corporation are
______________ and ______________.
198. The four major classifications of assets in a classified balance sheet are:
________________, ________________, ________________ and ________________.
199. The ______________ of a company is the average time that it takes to purchase
inventory, selll it on account, and then collect cash from customers.
200. Assets that do not have a physical substance yet often are very valuable are called
______________ assets.
201. Liabilities are generally classified as either ______________ or ______________ on a
classified balance sheet.