CHAPTER 4

Completing the Accounting Cycle

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 4-1

The st= eps in using a worksheet are performed in the following sequence: (1) prepare a tr= ial balance on the worksheet, (2) enter adjustment data,
(3) enter adjusted balances, (4) extend adjusted balances to appropriate statement columns and (5) total the statement columns, compute net income (loss), and complete the worksheet. Filling in the blanks, the answers are = 1, 3, 4, 5, 2.

The solution to BRIEF EXERC= ISE 4-2 is on page 4-7.

BRIEF EXERCISE 4-3

	Income Statement		Balance S= heet
Account	Dr.	Cr.		Dr.	Cr.
Accumulated Depreciati= on	&nbs= p;	&nbs= p;		&nbs= p;	X
Depreciation Expense	X	&nbs= p;		&nbs= p;	&nbs= p;
N. Batan, Capital	&nbs= p;	&nbs= p;		&nbs= p;	X
N. Batan, Drawing	&nbs= p;	&nbs= p;		X	&nbs= p;
Service Revenue	&nbs= p;	X		&nbs= p;	&nbs= p;
Supplies	&nbs= p;	&nbs= p;		X	&nbs= p;
Accounts Payable	&nbs= p;	&nbs= p;		&nbs= p;	X

BRIEF EXERCISE 4-4

Dec. 31 Service R= evenue..........................................= ..... 50,000

&= nbsp; &nbs= p; Income Summary.............................= ......... &= nbsp; &nbs= p; 50,000

= 31 Income Summary..........................................= .... 31,000

&= nbsp; &nbs= p; Salaries Expense.............................= ......... &= nbsp; &nbs= p; 27,000

&= nbsp; &nbs= p; Supplies Expense.............................= ........ &= nbsp; &nbs= p; 4,000

= 31 Income Summary..........................................= .... 19,000

&= nbsp; &nbs= p; D. Swann, Capital......................= ................ &= nbsp; &nbs= p; 19,000

= 31 D. Swann, Capital= ..........................................= .... 2,000

&= nbsp; &nbs= p; D. Swann, Drawing......................= ............. &= nbsp; &nbs= p; 2,000

BRIEF EXERCISE 4-2

BRIEF EXERCISE 4-5

Salaries Expense		Income Summary	Service Revenue
27,000	(2) 27,000		(2) 31,000	(1) 50,000	(1) 50,000	50,000
			(3) 19,000
			50,000	50,000	<= /p>

Supplies Expense		D. Swann, Capital	D. Swann, Drawing
4,000	(2) 4,000		(4) 2,000	30,= 000	2,000&nb= sp;	(4) 2,000
				(3) 19,000
				Bal. 47,000

BRIEF EXERCISE 4-6

July 31 &= nbsp; Green Fee Revenue.........................= ................. 13,600

&= nbsp; &nbs= p; Income Summary.............................= ......... &= nbsp; &nbs= p; 13,600

31 Income Summary..........................................= .... 10,700

&= nbsp; &nbs= p; Salaries Expense.............................= .......... &= nbsp; &nbs= p; 8,200

&= nbsp; &nbs= p; Maintenance Expense.............................= . &= nbsp; &nbs= p; 2,500

Green Fee Revenue

Date	Explanation	Ref.	Debit	Credit	Balance
7/31	Balance			13,600	13,600
7/31	Closing entry		13,600		&nbs= p; 0

Salaries Expense

Date	Explanation	Ref.	Debit	Credit	Balance
7/31	Balance	<= /p>	8,200	<= /p>	8,200
7/31	Closing entry	<= /p>	<= /p>	8,200	0

BRIEF EXERCISE 4-6 (Continued)

Maintenance Expense

Date	Explanation	Ref.	Debit	Credit	Balance
7/31	Balance	<= /p>	2,500	<= /p>	2,500
7/31	Closing entry	<= /p>	<= /p>	2,500	0

BRIEF EXERCISE 4-7

The accounts that will appear in the post-closing trial balance are:

Accumulated Depreciation

N. Batan, Capital

Supplies

Accounts Payable

BRIEF EXERCISE 4-8

The prop= er sequencing of the required steps in the accounting cycle is as follows:

1. Analyze business transactions.

2. Journalize the transactions.

3. Post to ledger accounts.

4. Prepare a trial balance.

5. Journalize and post adjusting entries.

6. Prepare an adjusted trial balance.

7. Prepare financial statements.

8. Journalize and post closing entries.

9. Prepare a post-closing trial balance.

Filling in the blanks, the answers are 4, 2, 8, 7, 5, = 3, 9, 6, 1.

BRIEF EXERCISE 4-9

1. Service Revenue..........................................= ......................... 780

&= nbsp; Accounts Receivable..........................= ......................... &= nbsp; 780

2. Accounts Payable ($1,750 – $1,570).............= .................... 180

&= nbsp; Store Supplies............................= ................................... &= nbsp; 180

BRIEF EXERCISE 4-10

DIAZ COMPAN= Y

Partial Bal= ance Sheet

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Current assets

Cash..........................................= ................................................... $15,400

Short-term investments.........................= ................................... &= nbsp; 6,700

Accounts receivable..........................= ....................................... = 12,500

Supplies..........................................= ............................................. &= nbsp; 5,200

Prepaid insurance...........................= .......................................... 3,600

&= nbsp; Total current assets......................= .................................... $43,400<= /u>

BRIEF EXERCISE 4-11

CL	Accounts payable	CL	Income tax payable
CA	Accounts receivable	LTI&nbs= p;	Investment in long-term bonds
PPE	Accumulated depreciation	PPE&nbs= p;	Land
PPE	Building	CA	Merchandise inventory
CA	Cash	IA = ;	Patent
IA = ;	Copyrights	CA	Supplies

*BRIEF EXERCISE 4-12

Nov. 1 &= nbsp; Salaries Payable.............................= .............................. 1,400

&= nbsp; &nbs= p; Salaries Expense.............................= .................... &= nbsp; 1,400

The balances after postin= g the reversing entry are Salaries Expense (Cr.) $1,400 and Salaries Payable $0.<= /p>

SOLUTIONS TO EXERCISES

EXERCISE 4-1

BRISCOE COMPANY

Worksheet

For the Month Ended June 30, 2008

&nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

Account Titles	Trial Balance	Adju= stments	Adj. Trial Balance	Inco= me Statement	Bala= nce Sheet
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	= Cr.=
Cash	2,320				2,320				2,320
Accounts Receivable	2,440				2,440				2,440
Supplies	1,880			1,580	300=				300=
Accounts Payable=		1,120				1,120				1,120
Unearned Revenue		240=	140=			100				100
Lenny Briscoe, Capital		3,600				3,600				3,600
Service Revenue		2,400		140=		2,540		2,540
Salaries Expense	560=		280=		840=	&n= bsp;	840=
Miscellaneous Expense	160	<= /span>			160=	&n= bsp;	160=
Totals	7,360	7,360				&n= bsp;
Supplies Expense			1,580		1,580	&n= bsp;	1,580
Salaries Payable			&nb= sp;	280<= /b>	&nb= sp;	280<= /b>	&nb= sp;	&nb= sp;	&nb= sp;	= 280
Totals			2,000	2,000	7,640	7,64= 0	2,580	2,540	5,060	5,100
Net Loss							&nb= sp;	40<= /span>	40<= /span>	&nbs= p;
Totals							2,580	2,580	5,100	5,100

EXERCISE 4-2

GOODE COMPA= NY

(Partial) W= orksheet

For the Mon= th Ended April 30, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

	Adjusted Tri= al Balance	Income Statement	Balance Sheet

Account Titles<= /o:p>	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Cash	13,752				13,752
Accounts Receivable<= o:p>	7,840				7,840
Prepaid Rent	2,280				2,280
Equipment=	23,050				23,050
Accum. Depreciation<= o:p>		4,921				4,921
Notes Payable		5,700				5,700
Accounts Payable		5,672				5,672
T. Goode, Capital		30,960				30,960
T. Goode, Drawing	3,650				3,650
Service Revenue=		15,590		15,590
Salaries Expense	10,840		10,840
Rent Expense	760		760
Depreciation Expense=	671		671
Interest Expense	57		57
Interest Payable	= ;	&n= bsp; 57	= ;	= ;	= ;	&n= bsp; 57
Totals	62,900	62,900	12,328	15,590	50,572	47,310
Net Income			3,262	= ;	= ;	3,262
Totals			15,590	15,590	50,572	50,572

EXERCISE 4-3

GOODE COMPA= NY

Income Stat= ement

For the Mon= th Ended April 30, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Revenues

Service revenue.............................= ............................ &= nbsp; &nbs= p; $15,590

Expenses

Salaries expense.............................= .......................... $10,840

Rent expense.............................= ................................. &= nbsp; 760

Depreciation expense.............................= .................. &= nbsp; 671

Interest expense.............................= ........................... 57

&= nbsp; Total expenses............................= ....................... &= nbsp; &nbs= p; 12,328

Net income..............................= ............................................ &= nbsp; &nbs= p; $ 3,262

GOODE COMPANY

Owner’= ;s Equity Statement

For the Mon= th Ended April 30, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

T= . Goode, Capital, April 1....................= ....................................... &= nbsp; $30,960

A= dd: Net income.................................................................= ....... &= nbsp; 3,262

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 34,222

L= ess: Drawings..............................................................= ............. &= nbsp; 3,650

T= . Goode, Capital, April 30...................= ...................................... &= nbsp; $30,572

GOODE COMPANY

Balance She= et

April 30, 2= 008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Assets

Current assets

Cash..........................................= ................................... &= nbsp; &nbs= p; $13,752

Accounts receivable..........................= ....................... &= nbsp; &nbs= p; 7,840

Prepaid rent................................= ................................ &= nbsp; &nbs= p; 2,280

&= nbsp; Total current assets......................= .................... &= nbsp; &nbs= p; 23,872

Property, plant, and equipment

Equipment..........................................= ......................... $23,050 &= nbsp;

Less: Accumulated depreciation.......................... 4,921 18,129

&= nbsp; Total assets..............................= .......................... &= nbsp; &nbs= p; $42,001

EXERCISE 4-3 (Continued)

GOODE COMPA= NY

Balance She= et (Continued)

April 30, 2= 008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Liabilities and Owner’s Equity

Current liabilities

Notes payable.............................= ................................................ $ 5,700

Accounts payable.............................= ......................................... &= nbsp; 5,672

Interest payable.............................= ............................................ 57

&= nbsp; Total current liabilities.................= ..................................... = 11,429

Owner’s equity

T. Goode, Capital......................= ................................................. 30,572

&= nbsp; Total liabilities and owner’s equity= ................................ $42,001<= /u>

EXERCISE 4-4

(a) Apr. 30 = Service Revenue.............................= .. 15,590

&= nbsp; &nbs= p; = Income Summary.............................= . &= nbsp; &nbs= p; 15,590

&= nbsp; 30 Income Summary...................................... 12,328

&= nbsp; &nbs= p; = Salaries Expense.............................= . &= nbsp; &nbs= p; 10,840

&= nbsp; &nbs= p; = Rent Expense.............................= ........ &= nbsp; &nbs= p; 760

&= nbsp; &nbs= p; = Depreciation Expense...................... &= nbsp; &nbs= p; 671

&= nbsp; &nbs= p; = Interest Expense.............................= .. &= nbsp; &nbs= p; 57

&= nbsp; 30 Income Summary...................................... 3,262

&= nbsp; &nbs= p; = T. Goode, Capital......................= ......... &= nbsp; &nbs= p; 3,262

&= nbsp; 30 T. Goode, Capital= ....................................... 3,650

&= nbsp; &nbs= p; = T. Goode, Drawing......................= ...... &= nbsp; &nbs= p; 3,650

(b)

	Income Su= mmary		T. Goode,= Capital
<= /p>	(2) 12= ,328	(1) = ; 15,590		(4) &nbs= p; 3,650	= ; 30,960
<= /p>	(3) &nbs= p; 3,262	<= /p>		<= /p>	(3) = 3,262
<= /p>	&nbs= p; 15,590	&nbs= p; 15,590		<= /p>	Bal. = ; 30,572

EXERCISE 4-4 (Continued)

= &nb= sp; = Post-Closing Trial Balance

= &nb= sp; = &nb= sp; April 30, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

<= /p>

Debit

Credit

Cash..........................................= .............................. $13,752

Accounts Receivable..........................= ................ &= nbsp; 7,840

Prepaid Rent................................= ......................... &= nbsp; 2,280

Equipment..........................................= ................... 23,050

Accumulated Depreciation........................= ........ &= nbsp; &nbs= p; $ 4,921

Notes Payable.............................= .......................... &= nbsp; &nbs= p; 5,700=

Accounts Payable.............................= ................... &= nbsp; &nbs= p; 5,672=

Interest Payable.............................= ...................... &= nbsp; &nbs= p; &= nbsp; 57

T. Goode, Capital......................= ........................... &n= bsp; = ; 30,572

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; $46,922 &nb= sp; $46,922

EXERCISE 4-5

(a) Accounts Receivable..........................................= &= nbsp; 600

&= nbsp; Service Revenue.............................= ............. &= nbsp; &nbs= p; &= nbsp; 600

Insurance Expense.............................= ................ &= nbsp; 400

&= nbsp; Prepaid Insurance...........................= ............ &= nbsp; &nbs= p; &= nbsp; 400

Depreciation Expense.............................= ............ &= nbsp; 900

&= nbsp; Accumulated Depreciation........................= &= nbsp; &nbs= p; &= nbsp; 900

Salaries Expense.............................= .................... &= nbsp; 500

&= nbsp; Salaries Payable.............................= .............. &= nbsp; &nbs= p; &= nbsp; 500

EXERCISE 4-5 (Continued)

(b)		Income Statement	Balance Sheet

		Dr.	Cr.	Dr.	Cr.
	Accounts Receivable			X
	Prepaid Insurance			X
	Accum. Depreciation				X
	Salaries Payable				X
	Service Revenue		X
	Salaries Expense	X
	Insurance Expense	X
	Depreciation Expense	X

EXERCISE 4-6

(a) Accounts Receivable—$25,000 ($34,000 – $9,000).

Supplies—$2,000 ($7,000 – $5,000).

Accumulated Depreciation—$22,000 ($12,000 + $10,000).

Salaries Payable—$0 No liability recorded until adjustments are made.

Insurance Expense—$6,000 ($26,000 – $20,000).

Salaries Expense—$44,000 ($49,000 – $5,000).

(b) Accounts Receivable..........................................= ........ 9,000

&= nbsp; Service Revenue.............................= .................... &= nbsp; &nbs= p; 9,000

Insurance Expense.............................= ........................ 6,000

&= nbsp; Prepaid Insurance...........................= .................... &= nbsp; &nbs= p; 6,000

Supplies Expense.............................= .......................... 5,000

&= nbsp; Supplies..........................................= ...................... &= nbsp; &nbs= p; 5,000

Depreciation Expense.............................= ................... 10,000

&= nbsp; Accumulated Depreciation........................= ........ &= nbsp; &nbs= p; 10,000

Salaries Expense.............................= ........................... 5,000

&= nbsp; Salaries Payable.............................= ..................... &= nbsp; &nbs= p; 5,000

EXERCISE 4-7

(a) Service Revenue..........................................= ........... &= nbsp; 4,064

&= nbsp; Income Summary.............................= ................. &= nbsp; &nbs= p; 4,064

Income Summary.............................= ....................... &= nbsp; 3,828

&= nbsp; Salaries Expense.............................= ................. &= nbsp; &nbs= p; 1,344

&= nbsp; Miscellaneous Expense.............................= ..... &= nbsp; &nbs= p; 256

&= nbsp; Supplies Expense.............................= ................ &= nbsp; &nbs= p; 2,228

Income Summary.............................= ....................... &= nbsp; 236

&= nbsp; Emil Skoda, Capital......................= ..................... &= nbsp; &nbs= p; 236

Emil Skoda, Capital......................= ........................... &= nbsp; 300

&= nbsp; Emil Skoda, Drawing......................= .................. &= nbsp; &nbs= p; 300

(b) = &nb= sp; = EMIL SKODA COMPANY

= &nb= sp; = Post-Closing Trial Balance

= &nb= sp; = For the Month Ended June 30, 2008

Account Titles

Debit

Credit

Cash..........................................= ................................. &= nbsp; $3,712

Accounts Receivable..........................= .................... &= nbsp; 3,904

Supplies..........................................= .......................... &= nbsp; 480

Accounts Payable.............................= ...................... &= nbsp; &nbs= p; $1,792

Salaries Payable.............................= ......................... &= nbsp; &nbs= p; 448

Unearned Revenue.............................= .................... &= nbsp; &nbs= p; 160

Emil Skoda, Capital......................= ........................... &= nbsp; = ; 5,696

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; $8,096 $8,096

EXERCISE 4-8

(a) &= nbsp; &nbs= p; &= nbsp; &nbs= p; General Journal

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; J15

Date	Account Titles	Ref.	Debit	Credit
July 31	Commission Revenue........................	404	65,000
	Rent Revenue...........................= ............	429	&= nbsp; 6,500
	&= nbsp; Income Summary.......................	350		71,500

31	Income Summary...........................= .....	350	74,600
	&= nbsp; Salaries Expense.......................	720		55,700
	= ; Utilities Expense......................... <= /span>	732		14,900
	= = ; Depreciation Expense..............	711		4,000
	=
31	= B. J. Apachi, Capital...................= .........	301	3,100
	= = ; Income Summary.......................	350		3,100
	=
31	= B. J. Apachi, Capital...................= .........	301	16,000
	= = ; B. J. Apachi, Drawing................=	306		16,000

(b)

&= nbsp; &nbs= p; &= nbsp; &nbs= p; B. J. Apachi, Capital &= nbsp; &nbs= p; &= nbsp; No. 301

Date	Explanation	Ref.	Debit=	Credit	Balance
July= 31	Balance				45,200
31	Close net loss	J15	3,100		42,100
31	Close drawing	J15	16,000		26,100

&= nbsp; &nbs= p; &= nbsp; &nbs= p; Income Summary = &nb= sp; = No. 350

Date	&nbs= p;	Explanati= on	&nbs= p;	Ref.	&nbs= p;	Debit	&nbs= p;	Credit	&nbs= p;	Balance
July 31	<= /p>	Close revenue	<= /p>	J15	<= /p>	<= /p>	<= /p>	71= ,500	<= /p>	71,500
31	<= /p>	Close expenses	<= /p>	J15	<= /p>	74,600	<= /p>		<= /p>	(3,100)
31	<= /p>	Close net loss	<= /p>	J15	<= /p>	<= /p>	<= /p>	<= span style=3D'mso-spacerun:yes'> 3,100	<= /p>	0

EXERCISE 4-8 (Continued)

&= nbsp; &nbs= p; &= nbsp; &nbs= p; APACHI COMPANY

= &nb= sp; = Post-Closing Trial Balance

= &nb= sp; = &nb= sp; July 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

<= /p>

Debit

Cre= dit

Cash..........................................= .............................. $14,840

Accounts Receivable..........................= ................ &= nbsp; 8,780

Equipment..........................................= ................... 15,900

Accumulated Depreciation........................= ........ &= nbsp; &nbs= p; $ 7,400

Accounts Payable.............................= ................... &= nbsp; &nbs= p; 4,220

Unearned Rent Revenue........................= ............. &= nbsp; &nbs= p; 1,800

B. J. Apachi, Capital.....................= ........................ &n= bsp; = ; 26,100

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; $39,520 $39,520

EXERCISE 4-9

(a) = &nb= sp; = APACHI COMPANY

= &nb= sp; = &nb= sp; Income Statement

= &nb= sp; = For the Year Ended July 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

Revenues

&= nbsp; Commission revenue.............................= ..... &= nbsp; &nbs= p; $65,000

&= nbsp; Rent revenue.............................= .................... &= nbsp; &nbs= p; 6,500

&= nbsp; &nbs= p; Total revenues............................= ......... &= nbsp; &nbs= p; 71,500

Expenses

&= nbsp; Salaries expense.............................= ............ $55,700 &= nbsp;

&= nbsp; Utilities expense.............................= .............. 14,900 &= nbsp;

&= nbsp; Depreciation expense.............................= .... 4,000 &= nbsp;

&= nbsp; &nbs= p; Total expenses............................= ......... &= nbsp; &nbs= p; 74,600

Net loss................................= .................................. &= nbsp; &nbs= p; ($ 3,100)

= &nb= sp; = &nb= sp; APACHI COMPANY

= &nb= sp; = Owner’s Equity Statement

= &nb= sp; = For the Year Ended July 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

B. J. Apachi, Capital, August 1, 2007.....= .......... &= nbsp; &nbs= p; $45,200

Less: Net loss...................................................... = $ 3,100 =

&= nbsp; Dr= awings..........................................= .......... 16,000 19,100

B. J. Apachi, Capital, July 31, 2008......= ............. &= nbsp; &nbs= p; $26,100

EXERCISE 4-9 (Continued)

(b) = &nb= sp; = APACHI COMPANY

= &nb= sp; = &nb= sp; Balance Sheet

= &nb= sp; = &nb= sp; July 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

= &nb= sp; = &nb= sp; = Assets

Current assets

&= nbsp; Cash..........................................= ........................ &= nbsp; &nbs= p; $14,840

&= nbsp; Accounts receivable..........................= ............ &= nbsp; &nbs= p; 8,780

&= nbsp; &nbs= p; Total current assets......................= ......... &= nbsp; &nbs= p; 23,620

Property, plant, and equipment

&= nbsp; Equipment..........................................= .............. $15,900 &= nbsp;

&= nbsp; Less: Accumulated depreciation............... 7,400 8,500

&= nbsp; &nbs= p; Total assets..............................= ............... &= nbsp; &nbs= p; $32,120

= &nb= sp; = Liabilities and Owner’s Equity

Current liabilities

&= nbsp; Accounts payable.............................= .............. &= nbsp; &nbs= p; $ 4,220

&= nbsp; Unearned rent revenue........................= ......... &= nbsp; &nbs= p; 1,800

&= nbsp; &nbs= p; Total current liabilities.................= .......... &= nbsp; &nbs= p; 6,020

Owner’s equity

&= nbsp; B. J. Apachi, Capital..................= ..................... &= nbsp; &nbs= p; 26,100

&= nbsp; &nbs= p; Total liabilities and owner’s equity= ..... &= nbsp; &nbs= p; $32,120

EXERCISE 4-10

1. False “Analyze business transactions” is the first step in the accounting cycle.

2. False. Reversing entrie= s are an optional step in the account= ing cycle.

3. True.

4. True.

5. True.

6. False. Steps 1–3 = may occur daily in the accounting cycle. Steps 4–7 are performed on a periodic basis. Steps 8 and 9 are usually prepared only at the end of a company’s annual accounting period.

7. False. The step of “journalize the transactionsR= 21; occurs before the step of “po= st to the ledger accounts.”

8. &nb= sp; False. Closing entries are prepared after financial statements are pre= pared.

EXERCISE 4-11

(a) June 30 Service Revenue.............................= ....... 15,10= 0

&= nbsp; &nbs= p; &= nbsp; Income Summary........................... <= /span> &= nbsp; &nbs= p; 15,100

&= nbsp; 30 Income Summary................................... 13,10= 0

&= nbsp; &nbs= p; &= nbsp; Salaries Expense........................... <= /span> &= nbsp; &nbs= p; 8,800

&= nbsp; &nbs= p; &= nbsp; Supplies Expense.......................... &= nbsp; &nbs= p; 1,300

&= nbsp; &nbs= p; &= nbsp; Rent Expense.............................= ..... &= nbsp; &nbs= p; 3,000

&= nbsp; 30 Income Summary................................... = 2,000

&= nbsp; &nbs= p; &= nbsp; Nina Cole, Capital.......................= .... &= nbsp; &nbs= p; 2,000

&= nbsp; 30 Nina Cole, Capita= l................................... = 2,500

&= nbsp; &nbs= p; &= nbsp; Nina Cole, Drawing.......................= .. &= nbsp; &nbs= p; 2,500

(b)

<= /p>	Income Su= mmary
<= /p>	June 30 13,100	June 30 15,100
<= /p>	June 30 2,000
<= /p>	&nbs= p; 15,100	&nbs= p; 15,100

EXERCISE 4-12

(a) 1. Cash........................................................................= .......... 600

&= nbsp; &nbs= p; Equipment..........................................= ........................... &= nbsp; 600

&= nbsp; Salaries Expense.............................= .............................. 600

&= nbsp; &nbs= p; Cash..........................................= ...................................... &= nbsp; 600

2. Service Revenue..........................................= .................. 100

&= nbsp; &nbs= p; Cash..........................................= ...................................... &= nbsp; 100

&= nbsp; Cash..........................................= .................................... 1,000

&= nbsp; &nbs= p; Accounts Receivable..........................= ........................ 1,000=

EXERCISE 4-12 (Continued)

3. Accounts Payable<= span style=3D'mso-tab-count:2 dotted'>..........................................= ................ 890

&= nbsp; &nbs= p; Equipment..........................................= ........................... &= nbsp; 890

&= nbsp; Equipment..........................................= ............................. 980

&= nbsp; &nbs= p; Accounts Payable.............................= ........................... &= nbsp; 980

(b) 1. Salaries Expense.............................= .............................. 600

&= nbsp; &nbs= p; Equipment..........................................= ........................... &= nbsp; 600

2. Service Revenue..........................................= .................. 100

&= nbsp; Cash..........................................= ........................................ 900

&= nbsp; &nbs= p; Accounts Receivable..........................= ........................ 1,000

3. Equipment..........................................= ............................... 90

&= nbsp; &nbs= p; Accounts Payable.............................= ........................... &= nbsp; 90

EXERCISE 4-13

1. Accounts Payable = ($630 – $360).......................= ..... &= nbsp; 270

&= nbsp; Cash..........................................= ........................... &= nbsp; &nbs= p; 270

2. Supplies..........................................= ............................. &= nbsp; 560

&= nbsp; Equipment..........................................= ................. &= nbsp; &nbs= p; 56

&= nbsp; Accounts Payable.............................= ................. &= nbsp; &nbs= p; 504

3. M. Mason, Drawing= ..........................................= .......... &= nbsp; 400

&= nbsp; Salaries Expense.............................= .................. &= nbsp; &nbs= p; 400

EXERCISE 4-14

(a) = &nb= sp; = KARR BOWLING ALLEY

= &nb= sp; = &nb= sp; Balance Sheet

= &nb= sp; = &nb= sp; December 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

= &nb= sp; = &nb= sp; = Assets

Current assets

&= nbsp; Cash..........................................= ..... &= nbsp; &nbs= p; &= nbsp; $ 18,040

&= nbsp; Accounts receivable................... &= nbsp; &nbs= p; &= nbsp; &nbs= p; 14,520

&= nbsp; Prepaid insurance....................... &= nbsp; &nbs= p; &= nbsp; 4,680<= /p>

&= nbsp; &nbs= p; Total current assets........... &= nbsp; &nbs= p; &= nbsp; &nbs= p; 37,240

Property, plant, and equipment

&= nbsp; Land..........................................= ..... &= nbsp; &nbs= p; $64,000

&= nbsp; Building......................................... = $128,800

&= nbsp; Less: Acc. depr.—building....... 42,600 86,200

&= nbsp; Equipment..................................... = 62,400

&= nbsp; Less: Acc. depr.—equipment.. = 18,720 43,680 193,880<= o:p>

&= nbsp; &nbs= p; Total assets.......................... &= nbsp; &nbs= p; &= nbsp; $231,120

EXERCISE 4-14 (Continued)

= &nb= sp; = K= ARR BOWLING ALLEY

= &nb= sp; = Balance Sheet (Continued)

= &nb= sp; = &nb= sp; December 31, 2008

= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;

= &nb= sp; = Liabilities and Owner’s Equity

Current liabilities

&= nbsp; Current portion of note payable.............= ...................... $ 13,900

&= nbsp; Accounts payable.............................= ............................... &= nbsp; 12,300

&= nbsp; Interest payable.............................= ................................... 2,600

&= nbsp; &nbs= p; Total current liabilities.................= ........................... &= nbsp; 28,800

Long-term liabilities

&= nbsp; Note payable.............................= ........................................ 83,880

&= nbsp; &nbs= p; Total liabilities.........................= .................................. 112,680

Owner’s equity

&= nbsp; S. Karr, Capital ($115,000 + $3,440*)..= .......................... 118,440

&nbs= p; &= nbsp; Total liabilities and owner’s equity= ....................... $231,120=

&= nbsp; *Net income =3D $14,180 – $780 – $7,360 – $2,600 =3D $3,440

(b) Cu= rrent assets exceed current liabilities by $8,440 ($37,240 – $28,800). In addition, approximately 50% of current as= sets are in the form of cash. In sum, the company’s liquidity appea= rs to be reasonably good.

EXERCISE 4-15

<= /p>

CL = ;

Accounts payable

CA = ;

Inventories

CA = ;

Accounts receivable

LTI&nbs= p;

Investments

PPE&nbs= p;

Accumulated depreciation

PPE&nbs= p;

Land

PPE&nbs= p;

Buildings

LTL&nbs= p;

Long-term dept

CA = ;

Cash

CA = ;

Supplies

OE = ;

Roberts, Capital

PPE&nbs= p;

Office equipment

IA = ;

Patents

CA = ;

Prepaid expenses

CL = ;

Salaries payable

EXERCISE 4-16

R.= STEVENS COMPANY

Ba= lance Sheet

De= cember 31, 2008

(in thousands)

Assets

= Current assets

= C= ash..........................................= .................. &= nbsp; $ 2,668

= S= hort-term investments.........................= . &= nbsp; 3,690

= A= ccounts receivable..........................= ...... &= nbsp; 1,696

= I= nventories..........................................= ....... &= nbsp; 1,256

= P= repaid expenses............................= ........ &= nbsp; 880

= &nb= sp; Total current assets......................= .. &= nbsp; &nbs= p; $10,1= 90

= Long-term investments.........................= .......... &= nbsp; &nbs= p; &= nbsp; 264

= Property, plant, and equipment

= P= roperty, plant, and equipment............ &= nbsp; 11,500

&= nbsp; Less: Accumulated depreciation.......... <= /span> &= nbsp; (5,655) 5,845

= Total assets..............................= ......................... &= nbsp; &nbs= p; $1= 6,299

Liabilities and Owner’s Equity

= Current liabilities

= N= otes payable in 2009.....................= ........ &= nbsp; $ 481

= A= ccounts payable.............................= ....... &= nbsp; 1,444

= &nb= sp; Total current liabilities.................= ... &= nbsp; &nbs= p; $ 1,925

= Long-term liabilities

= L= ong-term debt................................= ......... &= nbsp; 94= 3

= N= otes payable (after 2009)................= ...... &= nbsp; 368<= /u>

= &nb= sp; Total long-term liabilities................ = &nb= sp; 1,311

= Total liabilities.........................= .......................... &= nbsp; &nbs= p; &= nbsp; 3,236

= Owner’s equity

= R. Stevens, Capital....................= ............... &= nbsp; 13,063

= &nb= sp; Total owner’s equity................= ........ &= nbsp; &nbs= p; 13,063

= Total liabilities and owner’s equity= ............... &= nbsp; &nbs= p; $1= 6,299

EXERCISE 4-17

(a)

B. SNYDER COMPANY

Inco= me Statement

For the Year Ended July 31, 2008

= Revenues

= C= ommission revenue.............................= . &= nbsp; $61,100

= R= ent revenue.............................= ................ &= nbsp; = ; 8,500

= &nb= sp; Total revenues............................= ...... &= nbsp; &nbs= p; $69,6= 00

Expenses

&= nbsp; Salaries expense.............................= ......... &= nbsp; 51,700

&= nbsp; Utilities expense.............................= .......... &= nbsp; 22,600

&= nbsp; Depreciation expense.............................= &= nbsp; 4,000

&= nbsp; &nbs= p; Total expense.............................= ...... &= nbsp; &nbs= p; 78,300

Net loss ............................................................. &= nbsp; &nbs= p; $ (8,700)

B. SNYDER COMPANY

Owne= r’s Equity Statement

For the Year Ended July 31, 2008

= Owner’s equity, August 1, 2007..............= ...... &= nbsp; &nbs= p; $51,2= 00

= Less: Net loss.................................................. &= nbsp; $8,700

= &nb= sp; Drawings..........................................= ...... &= nbsp; 4,000 12,700

= Owner’s equity, July 31, 2008...............= ......... &= nbsp; &nbs= p; $3= 8,500

EXERCISE 4-17 (Continued)

(b)

B. SNYDER COMPANY

Bala= nce Sheet

July 31, 2008

Assets

= Current assets

= C= ash..........................................= ......................... $24,2= 00

= A= ccounts receivable..........................= ............. = ; 9,780

= &nb= sp; Total current assets......................= ......... &= nbsp; &nbs= p; $33,980

= Property, plant, and equipment

= E= quipment..........................................= ............... &= nbsp; 18,500

= L= ess: Accumulated depreciation............= ..... &= nbsp; &nbs= p; 6,000 12,500

= &nb= sp; Total assets .............................= ................ &= nbsp; &nbs= p; $46,480

Liabilities and Owner’s Equity

Current liabilities

&= nbsp; Accounts payable.............................= .............. $ 4,100

&= nbsp; Salaries payable.............................= ................. 2,080

&= nbsp; &nbs= p; Total current liabilities.................= .......... &= nbsp; &nbs= p; $ 6,180

Long-term liabilities

&= nbsp; Note payable.............................= ........................ &= nbsp; &nbs= p; = ; 1,800

&= nbsp; &nbs= p; Total liabilities.........................= ................. &= nbsp; &nbs= p; 7,980

Owner’s equity

&= nbsp; B. Snyder, Capital.....................= ....................... &= nbsp; 38,500

&= nbsp; Total owner’s equity................= ....................... &= nbsp; &nbs= p; 38,500

&= nbsp; Total liabilities and owner’s equity= .............. &= nbsp; &nbs= p; $46,480

*EXERCISE 4-18

(a) Dec. 31 Salaries Expense ($10,000 X 2/5)......... = 4,000

&= nbsp; &nbs= p; = Salaries Payable.............................= . &= nbsp; &nbs= p; 4,000

Jan. 6 Salaries Payable.............................= ......... = 4,000

&= nbsp; &nbs= p; Salaries Expense ($10,000 X 3/5)......... = 6,000

&= nbsp; &nbs= p; = Cash..........................................= ......... &= nbsp; &nbs= p; 10,000

(b) Dec. 31 Sal= aries Expense.............................= ....... = 4,000

&= nbsp; &nbs= p; = Salaries Payable.............................= . &= nbsp; &nbs= p; 4,000

Jan. 1 Salaries Payable.............................= ......... = 4,000

&= nbsp; &nbs= p; = Salaries Expense............................ = &= nbsp; &nbs= p; 4,000

Jan. 6 Salaries Expense.............................= ....... 10,00= 0

&= nbsp; &nbs= p; = Cash..........................................= ......... &= nbsp; &nbs= p; 10,000

*EXERCISE 4-19

(a) Dec. 31 Commission Revenue............................ = 92,00= 0

&= nbsp; &nbs= p; = Income Summary............................ = &= nbsp; &nbs= p; 92,000

&= nbsp; 31 Income Summary.................................... = 7,800

&= nbsp; &nbs= p; = Interest Expense.............................= &= nbsp; &nbs= p; 7,800

(b) Jan. 1 &= nbsp; Commission Revenue............................ = = 4,500

&= nbsp; &nbs= p; = Accounts Receivable...................... &= nbsp; &nbs= p; 4,500

&= nbsp; 1 Interest Payable<= span style=3D'mso-tab-count:1 dotted'>....................................... = 1,500

&= nbsp; &nbs= p; = Interest Expense.............................= &= nbsp; &nbs= p; 1,500

*EXERCISE 4-19 (Continued)

Accounts Receivable
Dec. 31 Balance *19,500 <= /p>
= ; 31 Adjusting 4,500
= ; &n= bsp; = ; 24,000
	Jan.= 1 Reversing 4,500

*($24,000 – $4,500)

Commission Revenue
Dec. 31 Closing 92= ,000	Dec. 31 Balance = ; 87,500*
&nbs= p;	&nbs= p; 31 Adjusting 4,500
= ; &n= bsp; = ; 92,000	&nbs= p; &= nbsp; &nbs= p; 92,000
Jan. 1 = ; Revers= ing 4,500	Jan. 10 &nbs= p; &= nbsp; 4,500

*($92,000 – $4,500)

Interest Payable
	Dec.= 31 Adjusting 1,500
Jan. 1 = ; Revers= ing 1,500

Interest Expense
Dec. 31 Balance *6= ,300	Dec.= 31 Closing= 7= ,800
= ; 31 Adjusting 1,500
= ; &n= bsp; = ; 7,800	= ; &n= bsp; = ; 7,800
Jan. 15 &nb= sp; 2,500	Jan.= 1 Reversing 1,500

*($7,800 – $1,500)

(= d) &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; (1)

Jan. 10 Cash..........................................= ....................... 4,500

&= nbsp; &nbs= p; = Commission Revenue........................... <= /span> &= nbsp; 4,= 500

&n= bsp; = ; &n= bsp; = ; &n= bsp; (2)

&= nbsp; 15 Interest Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= .. 2,500

&= nbsp; &nbs= p; = Cash..........................................= ............... &= nbsp; 2,= 500

CL = ;	Accounts payable	CA = ;	Inventories
CA = ;	Accounts receivable	LTI&nbs= p;	Investments
PPE&nbs= p;	Accumulated depreciation	PPE&nbs= p;	Land
PPE&nbs= p;	Buildings	LTL&nbs= p;	Long-term dept
CA = ;	Cash	CA = ;	Supplies
OE = ;	Roberts, Capital	PPE&nbs= p;	Office equipment
IA = ;	Patents	CA = ;	Prepaid expenses
CL = ;	Salaries payable

EXERCISE 4-1

BRISCOE COMPANY

Worksheet

Account Titles

Trial Balance

Adj. Trial Balance

Bala= nce Sheet

Cash

Salaries Payable