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# Problem 4 - 1

Transactional analysis
Tr. No. Date Description Cash AR Inventory
BEGINNING BAL. \$900 \$3,000 \$5,700
1 bought inv on account 2,350
2 sold goods on account 6350 -4150
3 paid vendors -3400
4 Collected from customers 5,350 -5,350
5 Paid off note payable -950
\$1,900 \$4,000 \$3,900

Once you did this, look at the information present in Row-1 (Heading) of the table. It can contains both assets and liabilit
Cash is an asset ==> Its balances in general is positive (debit) balance.
Accounts Payable (AP) is a liability ==> its balance, in general, is negative (credit).

## Another way to understand it is as below:

Assets = Liabilities + Owners Equity
===> Assets - Liabilities - Owners Equity

Take the cash portion of the transaction table (as given below). It can be transformed into T-table as below:

## Tr. No. Date Description Cash

BEGINNING BAL. \$900
(1) bought inv on account
(2) sold goods on account
(3) paid vendors -3400
(4) Collected from customers 5,350
(5) Paid off note payable -950
\$1,900

## Tr. No. Date Description AR

BEGINNING BAL. \$3,000
(1) bought inv on account
(2) sold goods on account 6350
(3) paid vendors
(4) Collected from customers -5,350
(5) Paid off note payable
\$4,000
Tr. No. Date Description Inventory
BEGINNING BAL. \$5,700
(1) bought inv on account 2,350
(2) sold goods on account -4150
(3) paid vendors
(4) Collected from customers
(5) Paid off note payable
\$3,900

## Tr. No. Date Description AP

BEGINNING BAL. \$3,600
(1) bought inv on account 2350
(2) sold goods on account
(3) paid vendors -3400
(4) Collected from customers
(5) Paid off note payable
\$2,550

## Tr. No. Date Description NP

BEGINNING BAL. \$950
(1) bought inv on account
(2) sold goods on account
(3) paid vendors
(4) Collected from customers
(5) Paid off note payable -950
\$0
Tr. No. Date Description OE
BEGINNING BAL. \$5,050
(1) bought inv on account
(2) sold goods on account \$2,200
(3) paid vendors
(4) Collected from customers
(5) Paid off note payable
\$7,250

Problem 4 - 2

Woodside Company
Journal

Debit
Date Description pg. No. amount

## (1) 1-May-xx By Prepaid rent a/c Dr. \$14,340

To Cash a/c Cr.
(rent for the period May 1 - Oct 31)

## (2) By Sales discounts & allowances a/c Dr. \$34,150

To provision for sales discounts & allowances Cr.
(sales discounts & allowances for May-xx)

## (3) By Interest receivable a/c Dr. \$35

To Interest income a/c Cr.
(Being the interest amount receivable from employee)

## (4) By depreciation expense a/c Dr. \$13,660

To Accumulated depreciation a/c Cr.
(Being the interest amount receivable from employee)

## (5) By cash a/c Dr. \$2,730

To Deferred revenue a/c Cr.

## (6) By Stamps expense a/c Dr. \$100

By Stamps inventory a/c Dr. \$72
To Cash a/c Cr.
(Being stamps bought and a portion of it expensed)

## (7) By bad debt expense a/c Dr. \$1,350

To Allowance for doubtful accounts Cr.

Problem 4 - 3

(a) Prepare journal in the lines shown in solution for problem 4-2.

(c) \$1,280

## (d) Current assets \$6,530 Current liabilities \$3,300

Non-current assets (net) \$3,100 Non-current liabilities \$800
Owners' equity \$5,530
\$9,630 \$9,630

## (e) Sales \$3,750

Gross margin \$2,470
Operating income \$540

Problem 4 -4

## Cash and Equivalents Accounts Receivab

\$119,115 \$162.50
\$119,115 \$162,500

## Store Equipment Merchandise Invent

\$215,000 \$700,680
\$215,000 \$397,690

## Supplies Inventory Prepaid Insurance

\$15,475 \$10,265 (3)
\$5,210

## Selling Expense Sales Salaries

\$24,900 24,900 (a) \$105,750
(6) 3,575
Cost of Goods Sold Depreciation Expen
(1) \$302,990 \$302,990 (h) (2)

## Supplies Expense Insurance Expens

(3) \$10,265 \$10,265 (j) (4)

\$3,730 (5)
\$3,730

(7) 390 (l)
390

## Miscellaneous General Expenses Sales Discounts

\$31,000 31,000 (c) (d)

## Interest Expense Social Security Tax

\$9,300
(5) 3,730 \$13,030 (e)

\$37,300
12,750 -2
\$50,050

\$143,000
\$143,000

## Retained Earnings Sales

\$122,375 (g) \$716,935
192,585 (m)
\$314,960

(c)

## (d) Net sales \$710,715 Current assets

Gross margin \$407,725 Fixed assets (net)
Operating profit \$205,225
Net profit \$192,585
Asset L & OE
AP NP OE Total Total
\$3,600 \$950 \$5,050 \$9,600 \$9,600
2,350 \$11,950 \$11,950 Dr. Inventory
2200 \$14,150 \$14,150 Dr. AR
-3400 \$10,750 \$10,750 Dr. AP
\$10,750 \$10,750 Dr. Cash
-950 \$9,800 \$9,800 Dr. NP
\$2,550 \$0 \$7,250

= 0

## into T-table as below:

Cash
Cash A/c Date Description Tr. No. Amount
debit credit Balance debited
900 900 debit 1-apr-11 To balance b/d 900
0 900 debit (1)
0 900 debit (2)
3,400 (2,500) credit (3)
5,350 2,850 debit To AR (4) 5,350
950 1,900 debit (5)
Total 6,250

6,250
1-Apr-11 To balance b/d 1,900

Accounts receivable
Accounts Receivable A/c Date Description Tr. No. Amount
debit credit Balance debited
3,000 3,000 debit 1-apr-11 To balance b/d 3,000
0 3,000 debit
6,350 9,350 debit To sales a/c (2) 6,350
0 9,350 debit
5,350 4,000 debit
4,000 debit
Total 9,350

9,350
1-Apr-11 To balance b/d 4,000
Inventory A/c
Inventory A/c Date Description Tr. No. Amount
debit credit Balance debited
5,700 5,700 debit 1-apr-11 To balance b/d 5,700
2,350 8,050 debit To AP (1) 2,350
(4,150) 3,900 debit
0 3,900 debit
0 3,900 debit
3,900 debit
Total 8,050

8,050
1-Apr-11 To balance b/d 3,900

## Accounts payable A/c

Accounts Payable A/c Date Description Tr. No. Amount
debit credit Balance debited
3,600 (3,600) credit
2,350 (5,950) credit
(5,950) credit
3,400 (2,550) credit To cash a/c (3) 3,400
0 (2,550) credit
(2,550) credit
Total 3,400
To Balance c/f 2,550
5,950

## Notes Payable A/c

Notes Payable A/c Date Description Tr. No. Amount
debit credit Balance debited
950 (950) credit
(950) credit
(950) credit
(950) credit
(950) credit
950 0 debit To cash (5) 950
Total 950
0
950

## Owners' Equity A/c

Accounts Receivable A/c Date Description Tr. No. Amount
debit credit Balance debited
5,050 (5,050) credit
(5,050) credit
2,200 (7,250) credit
(7,250) credit
(7,250) credit
(7,250) credit
Total 0
To Balance c/f 7,250
7,250

Credit
amount Disclosure on financial statements

Prepaid rent is an asset and hence disclosed on the asset side of the balance sheet.
\$14,340 Cash paid out. Hence, cash balance shown on asset side of balance sheet would be less by 14

Sales discounts and allowances is a deduction from gross sales to arrive at net sales.
\$34,150 The provision is a liability.

Interest receivable is an asset. Shown on the asset side of the balance sheet.
\$35 Interest income would be listed as other income in this period’s income statement.

## Depreciation expense would be listed as expense in this period's income statement.

\$13,660 Accumulated depreciation is disclosed as a deduction from the related depreciable asset.

## Cash increased by 2,730.

\$2,730 Deferred revenue is a liability until it is earned. It is shown on the liability side of balance sh

## Shown in this period's income statement.

It is an asset and is lying in stock. It will be shown on asset side of balance sheet.
\$172

## It is an expense. It is shown in this period's income statement.

\$1,350 Allowance for doubtful accounts is a contra asset displayed as a deduction from the asset acc

Accounts Receivable

Merchandise Inventory
\$302,990 (1)

Prepaid Insurance
\$38,250 \$4,660 (4)
\$33,590

Sales Salaries

109,325 (b)
Depreciation Expense
\$12,750 \$12,750 (i)

Insurance Expense
\$4,660 \$4,660 (k)

\$3,575 (6)
\$3,575

Interest Income
390 390 (7)

Sales Discounts
6,220 \$6,220

## Social Security Taxes

\$9, 600 \$9,600 (f)

counts Payable
\$118,180
\$118,180

Common Stock
\$300,000
\$300,000

Sales
\$716,935

## \$718,495 Current liabilities \$125,485

\$164,950 Notes payable \$143,000
Owners' equity \$614,960
\$883,445 \$883,445
Journal

## 2,350 Cr. AP 2,350

6350 Cr. Inventory 4150 Cr. Profit & 2200
3400 Cr. Cash 3400
5,350 Cr. AR 5,350
950 Cr. Cash 950

## Date Description Tr. No. Amount

debited

(1)
(2)
By AP (3) 3,400
(4)
By NP (5) 950
Total 4,350
By Balance c/f 1,900
6,250

unts receivable
Date Description Tr. No. Amount
debited

## By cash (4) 5,350

Total 5,350
By Balance c/f 4,000
9,350
Inventory A/c
Date Description Tr. No. Amount
debited

## By sales (2) 4,150

Total 4,150
By Balance c/f 3,900
8,050

## unts payable A/c

Date Description Tr. No. Amount
debited
1-apr-11 By Balance b/d 3,600
By inventory a/c (1) 2,350

5,950

5,950
1-Apr-11 By balance b/d 2,550

es Payable A/c
Date Description Amount
debited
1-apr-11 By Balance b/d 950

950

950
1-Apr-11 By balance b/d 0

## Owners' Equity A/c

Date Description Tr. No. Amount
debited
1-apr-11 To balance b/d 5,050

## By sales (2) 2,200

Total 7,250

7,250
1-Apr-11 By balance b/d 7,250

## f the balance sheet.

ance sheet would be less by 14,340.

## s to arrive at net sales.

balance sheet.
’s income statement.

## d's income statement.

e related depreciable asset.

## the liability side of balance sheet.

de of balance sheet.
a deduction from the asset accounts receivable.
Problem 4 - 1
Set up the following in T-account form and determine the ending balances in so far as these accounts are concerne
Beginning Balances
Account Dr. Cr. Transactions
Cash 900 1 Purchased inventory on account
AR 3000 2 Sold goods on account: sales revenue
Inventory 5700 Cost of goods sold
AP 3600 3 Paid vendors
NP 950 4 Collected from customers
OE 5050 5 Paid off notes payable

Transactional analysis
Tr. No. Date Description Cash AR Inventory
BEGINNING BAL. \$900 \$3,000 \$5,700
1 bought inv on account 2,350
2 sold goods on account 6350 -4150
3 paid vendors -3400
4 Collected from customers 5,350 -5,350
5 Paid off note payable -950
\$1,900 \$4,000 \$3,900

Once you did this, look at the information present in Row-1 (Heading) of the table. It can contains both assets and li
Cash is an asset ==> Its balances in general is positive (debit) balance.
Accounts Payable (AP) is a liability ==> its balance, in general, is negative (credit).

## Another way to understand it is as below:

Assets = Liabilities + Owners Equity
===> Assets - Liabilities - Owners Equity =

## The journal is prepared, using the above equation, as below:

General Journal
Date Tr. No. Transaction detail LF No. Debit Credit
1 By Inventory a/c 3 2,350
To Accounts payable 4 2,350
Inventory purchased on account
2 By Accounts receivable 2 6,350
To Sales 6 6,350
Sold goods on account
By Cost of Goods Sold 7 4150
To Inventory 3 4,150
Goods delivered on account of sale
3 By Accounts payable 4 3,400
To Cash 1 3,400
Paid vendors
4 By Cash 1 5,350
To Accounts receivable 2 5,350
Collected from customers
5 By Notes payable 5 950
To Cash 1 950
Paid off notes payable

## Notes payable Ledger Folio: 5

Date Description Debit Date Description Credit
??? To Cash 950 By balance b/d 950
950 950

## Sales Ledger Folio: 6

Date Description Debit Date Description Credit
By Accounts receivabl 6,350

## Cost of goods sold Ledger Folio: 7

Date Description Debit Date Description Credit
To Inventory 4,150

## The trial balance for the above firm is provided below:

LF No. Account head Debit Credit
1 Cash Account 1,900
2 Accounts receivable 4,000
3 Inventory 3,900
4 Accounts payable 2,350
5 Notes payable 0
6 Sales 6,350
7 Cost of goods sold 4,150
13,950 8,700

Why does the transactional analysis and the double-entry book-keeping provides the same answer?

Take the cash portion of the transaction table (as given below). It can be transformed into T-table as below:

## Transactions on cash account

Tr. No. Date Description Cash debit
BEGINNING BAL. \$900 900
(1) bought inv on account 0
(2) sold goods on account 0
(3) paid vendors -3400
(4) Collected from customers 5,350 5,350
(5) Paid off note payable -950
\$1,900

## Transactions on Accounts Receivable A/c

Tr. No. Date Description AR debit
BEGINNING BAL. \$3,000 3,000
(1) bought inv on account 0
(2) sold goods on account 6350 6,350
(3) paid vendors 0
(4) Collected from customers -5,350
(5) Paid off note payable
\$4,000
Transactions on Inventory A/c
Tr. No. Date Description Inventory debit
BEGINNING BAL. \$5,700 5,700
(1) bought inv on account 2,350 2,350
(2) sold goods on account -4150 (4,150)
(3) paid vendors 0
(4) Collected from customers
(5) Paid off note payable
\$3,900

## Transactions on Accounts payable A/c

Tr. No. Date Description AP debit
BEGINNING BAL. \$3,600
(1) bought inv on account 2350
(2) sold goods on account
(3) paid vendors -3400 3,400
(4) Collected from customers
(5) Paid off note payable
\$2,550

## Transactions on notes payable

Tr. No. Date Description NP debit
BEGINNING BAL. \$950
(1) bought inv on account
(2) sold goods on account
(3) paid vendors
(4) Collected from customers
(5) Paid off note payable -950 950
\$0

Transactions on owners'equity
Tr. No. Date Description OE debit
BEGINNING BAL. \$5,050
(1) bought inv on account
(2) sold goods on account \$2,200
(3) paid vendors
(4) Collected from customers
(5) Paid off note payable
\$7,250
e accounts are concerned. (Not all balance sheet accounts are to be shown)

2,350
t: sales revenue 6,350
4,150
3,400
5,350
950

Asset L & OE
AP NP OE Total Total
\$3,600 \$950 \$5,050 \$9,600 \$9,600
2,350 \$11,950 \$11,950
2200 \$14,150 \$14,150
-3400 \$10,750 \$10,750
\$10,750 \$10,750
-950 \$9,800 \$9,800
\$2,550 \$0 \$7,250

## Cash Account Ledger Folio: 1

Date Description Tr. No. Amount Date Description Tr. No.
debited
1-apr-11 To balance b/d 900 By Accounts payable 3
To Accounts receiv 4 5,350 By Notes payable 5
By balance c/d Bal. fig.
6,250
1-May-11 To balance b/d 1,900

## Accounts receivable Ledger Folio: 2

Date Description Tr. No. Amount Date Description Tr. No.
debited
1-Apr-11 To balance b/d 3,000 By Cash 4
To Sales 2 6,350 By balance c/d Bal. fig.
9,350
1-May-11 To balance b/d 4,000

## Inventory Ledger Folio: 3

Date Description Tr. No. Amount Date Description Tr. No.
debited
1-Apr-11 To balance b/d 5,700 By Cost of Goods Sold 2
To Accounts payabl 3 2,350 By balance c/d Bal. fig.
8,050
1-May-11 To balance b/d 3,900

## Accounts payable Ledger Folio: 4

Date Description Tr. No. Amount Date Description Tr. No.
debited
To Cash 3 3,400 By balance b/d
To balance c/d 0 2,550 By Inventory a/c 1
5,950
1-May-11 To balance b/d

-table as below:
Cash
Cash A/c Date Description Tr. No. Amount Date
credit Balance debited
900 debit 1-apr-11 To balance b/d 900
900 debit (1)
900 debit (2)
3,400 (2,500) credit (3)
2,850 debit To AR (4) 5,350
950 1,900 debit (5)
Total 6,250

6,250
1-Apr-11 To balance b/d 1,900

Accounts receivable
Accounts Receivable A/c Date Description Tr. No. Amount Date
credit Balance debited
3,000 debit 1-apr-11 To balance b/d 3,000
3,000 debit
9,350 debit To sales a/c (2) 6,350
9,350 debit
5,350 4,000 debit
4,000 debit
Total 9,350

9,350
1-Apr-11 To balance b/d 4,000

Inventory A/c
Inventory A/c Date Description Tr. No. Amount Date
credit Balance debited
5,700 debit 1-apr-11 To balance b/d 5,700
8,050 debit To AP (1) 2,350
3,900 debit
3,900 debit
0 3,900 debit
3,900 debit
Total 8,050

8,050
1-Apr-11 To balance b/d 3,900

## Accounts payable A/c

Accounts Payable A/c Date Description Tr. No. Amount Date
credit Balance debited
3,600 (3,600) credit 1-apr-11
2,350 (5,950) credit
(5,950) credit
(2,550) credit To cash a/c (3) 3,400
0 (2,550) credit
(2,550) credit
Total 3,400
To Balance c/f 2,550
5,950
1-Apr-11

## Notes Payable A/c

Notes Payable A/c Date Description Tr. No. Amount Date
credit Balance debited
950 (950) credit 1-apr-11
(950) credit
(950) credit
(950) credit
(950) credit
0 debit To cash (5) 950
Total 950
0
950
1-Apr-11

## Owners' Equity A/c

Owners equity A/c Date Description Tr. No. Amount Date
credit Balance debited
5,050 (5,050) credit 1-apr-11
(5,050) credit
2,200 (7,250) credit
(7,250) credit
(7,250) credit
(7,250) credit
Total 0
To Balance c/f 7,250
7,250
1-Apr-11
Ledger Folio: 1
Amount
credited
3,400
950
1,900
6,250

Ledger Folio: 2
Amount
credited
5,350
4,000
9,350

Ledger Folio: 3
Amount
credited
4,150
3,900
8,050

Ledger Folio: 4
Amount
credited
3,600
2,350
5,950
2,350

## DescriptionTr. No. Amount

debited

(1)
(2)
By AP (3) 3,400
(4)
By NP (5) 950
Total 4,350
By Balance c/f 1,900
6,250

debited

## By cash (4) 5,350

Total 5,350
By Balance c/f 4,000
9,350
nventory A/c
DescriptionTr. No. Amount
debited

## By sales (2) 4,150

Total 4,150
By Balance c/f 3,900
8,050

## DescriptionTr. No. Amount

debited
By Balance b/d 3,600
By inventor (1) 2,350

5,950

5,950
By balance b/d 2,550

Description Amount
debited
By Balance b/d 950

950

950
By balance b/d 0

## DescriptionTr. No. Amount

debited
To balance b/d 5,050

## By sales (2) 2,200

Total 7,250

7,250
By balance b/d 7,250
Problem 4 - 1
Write the journal entries for the following transactions that occurred at Woodside Company during May and explain
original entry
1. The company prepaid \$14,340 rent for the period May 1 - October 31. yes
2. Sales discounts and allowances were \$34,150 yes
3. A loan for \$3,500 at 12% interest continued to be owed to the company by one employee, who made no payment
4. Depreciation expense was \$13,660
5. Customers paid \$2,730 for services they will not receive until sometime in June yes
6, The company purchased \$172 worth of stamps and used \$100 worth of them yes
7. The allowance for doubtful accounts were increased by \$1,350, reflecting a new estimate of uncollectible accou

Woodside Company
General journal for May-2015
(original entries during May 2015)
Date Description Tr. No. Debit Credit
??? Prepaid rent A/c 1 14,340 <---- prepaid rent is an a
Cash A/c 14,340
(Prepaid the rent for 6 month period)
??? Sales discounts and allowances 2 34,150 <---- Sales discounts an
Provision for sales discount and allowances 34,150 The provision is a liabil
(Sales allowances provided for)
??? Cash A/c 5 2,730
Deferred revenue A/c 2,730 <--- Deferred revenue is
??? Stamp inventory 6 172 <--- Stamps expense is
Cash A/c 172
31-May-15 Rent expense A1 2390
Prepaid rent A/c 2,390
(Part of the prepaid rent is expired)
31-May-15 Interest receivable A2 35 <--- Interest receivable i
Interest income 35 <--- Interest income wou
(Being the interest income recognized)
31-May-15 Depreciation expense A3 13660 <-- Depreciation expens
Accumulated depreciation A/c 13,660 <--- Accumulated depre
(Depreciation expense has been booked)
31-May-15 Stamps expense 100 <--- Stamps expense is
Stamp inventory a/c 100
(Part of the stamps inventory depleted)
Allowance for doubtful accounts 1,350 <--- Allowance for doubt
(Being the bad debt expense recognized)
y during May and explain how each would be disclosed in Woodside financial statements.
yes

## e, who made no payment yes

yes

yes
e of uncollectible accou yes

## <---- prepaid rent is an asset

<---- Sales discounts and allowances is a deduction from gross sales to arrive at net sales.
The provision is a liability.

## <--- Interest receivable is an asset.

<--- Interest income would be listed as other income in this period’s income statement.

## <-- Depreciation expense is an expense shown in the income statement

<--- Accumulated depreciation is a contra asset viz. It can not be a liability or provision.

## <--- Bad debt expense account is an expense account.

<--- Allowance for doubtful accounts is a contra asset displayed as a deduction from the asset accounts receivable.
Problem 4-3
Luft corporation's accounts had the following beginning balances:
Dr. Cr.
1 Accounts payable 3,070
2 Accounts receivable 2,160
3 Accumulated depreciation 2,800
4 Allowance for doubtful accounts 70
5 Cash 1,440
6 Fixed asset (at cost) 6,200
7 Inventories 1,730
8 Notes payable (current) 600
9 Owners' equity 4,990

Cash AR PBDD
During the period, the following transactions were occurred: 1440 2160 -70
1 Purchased inventory on account, \$1,300
2 Paid employees, \$730 -730
3 Sold goods for cash, \$1,940. 1,940
4 Sold goods on credit, \$1,810. 1,810
5 Overheads and other expenses paid in cash, \$900 -900
6 Collection of accounts receivable, \$1,510. 1,510 -1,510
7 Paid certain accounts payable, \$1,720 -1720
8 Received cash for revenue, applicable for the next period \$650 650
9 Increased the current notes payable by \$200 200
10 Physical inventory showed a ending balance of \$1,750.
11 Depreciation expense, \$300
2390 2460 -70
Closing entry
2390 2460 -70

Required:
a. Journalize the transactions
b. Set up T account and post beginning balanaces and transactions
c. Determine the cost of goods sold
d. Prepare an ending balance sheet
e. Prepare an income statement for the period.

SOLUTION
Luft Corporation
General Journal Date
Date Tr. No. Transaction detail LF No. Debit Credit
31-Jan-15 1 Merchandise inventory LF No. 4 1,300
Accounts payable 1,300
Being the inventory purchased on credit
31-Jan-15 2 Salaries expense 730
Cash a/c LF No. 1 730
Being the salary paid to employees
31-Jan-15 3 Cash LF No. 1 1,940
Sales revenue a/c 1,940
Being the goods sold for cash
31-Jan-15 4 Accounts receivable LF No. 2 1,810 Date
Sales revenue a/c 1,810
Being the goods sold on account
31-Jan-15 5 Overhead and other expenses 900
Cash a/c LF No. 1 900
Being the overhead and other expenses incurred
31-Jan-15 6 Cash a/c LF No. 1 1,510 Date
Accounts receivable a/c LF No. 2 1,510
Being the cash collected from customers
31-Jan-15 7 Accounts payable 1,720
Cash a/c LF No. 1 1,720 Date
Being amount paid to suppliers
31-Jan-15 8 Cash a/c LF No. 1 650
Deferred revenue a/c 650
31-Jan-15 9 Cash a/c LF No. 1 200
Notes payable a/c 200 Date
31-Jan-15 A1 Cost of goods sold 1,280
Merchandise inventory LF No. 4 1,280
Being the goods delivered Date
31-Jan-15 A2 Depreciation expense 300
Accumulated depreciation a/c LF No. 6 300
Being depreciation expense for the period
C1 Sales revenue LF No. 12 3,750
Retained earnings LF No. 11 3,750 Date
(Being the nominal account, it is closed)
C2 Retained earnings LF No. 11 3,210
cost of goods sold LF No. 13 1,280
Salary expense LF No. 14 730
overhead expense LF No. 15 900
Depreciation expense LF No. 16 300 Date
(Being the nominal accounts, they are closed)

## Sales Revenue LF No. 12 Date

Date Description Tr. No. Debit Credit Balance
opening balance 0
Cash 3 1,940 -1,940
Accounts receivable 4 1,810 -3,750
Retained earnings C1 3,750 0 Date

## Cost of goods sold LF No. 13

Date Description Tr. No. Debit Credit Balance
opening balance 0 Date
Merchandise inven A1 1,280 1,280
Retained earnings C2 1,280 0

## Salary expense LF No. 14

Date Description Tr. No. Debit Credit Balance
opening balance 0
Cash a/c 2 730 730
Retained earnings C2 730 0

## Overhead expense LF No. 15

Date Description Tr. No. Debit Credit Balance
opening balance 0
Cash a/c 5 900 900
Retained earnings C2 900 0

## Depreciation expense LF No. 16

Date Description Tr. No. Debit Credit Balance
opening balance 0
Accumulated depre A2 300 300
Retained earnings C2 300 0

## Luft Corporation Luft Corporation

Balance sheet at BoP and EoP Income statement for the
BoP EoP Increase
ASSETS REVENUES
Current assets Sales revenue
Cash 1,440 2,390 950 EXPENSES
AR 2,160 2,460 300 Cost of goods sold
PBDD -70 -70
Merchandise Inventory 1,730 1,750 20 Salaries expense
Fixed assets (at cost) 6,200 6,200 0 Depreciation expense
accmulated deprn. -2,800 -3,100 -300 Net profit
8,660 9,630
LIABILITIES AND CAPITAL Depreciation expense
Current liabilities
Accounts payable 3,070 2,650 -420
Deferred Revenue 0 650 650 Luft Corporation
Notes payable (current) 600 800 200 Cash flow from operating
Capital Net profit
Owners equity 4,990 4,990 0 Add: depreciation expenses
Retained earnings 0 540 540 interest expenses
8,660 9,630
Less: cash from operating activities
Increase in operting assets
Decrease in operating liabilitie
Inventories FA acc dep AP Deferred RevNP (current) OE RE Bss ops.
1730 6200 -2800 -3070 -600 -4990
1300 -1300
730
-1,940
-1,810
900

1720
-650
-200
-1280 1280
-300 300
1750 6200 -3100 -2650 -650 -800 -4990 0 -540
-540 540
1750 6200 -3100 -2650 -650 -800 -4990 -540 0

Cash LF No. 1
Description Tr. No. Debit Credit Balance
opening balance 1,440
Salaries expense 2 730 710
Sales revenue a/c 3 1,940 2,650
Overhead and other e 5 900 1,750
Cash a/c 6 1,510 3,260
Accounts payable 7 1,720 1,540
Deferred revenue 8 650 2,190
Notes payable a/c 9 200 2,390

## Accounts receivable LF No. 2

Description Tr. No. Debit Credit Balance
opening balance 2,160
Sales revenue a/c 4 1,810 3,970
Accounts receivab 6 1,510 2,460

## Allowance for doubtful accounts LF No. 3

Description Tr. No. Debit Credit Balance
opening balance -70

## Merchandise Inventory LF No. 4

Description Tr. No. Debit Credit Balance
opening balance 1,730
Accounts payable 1 1,300 3,030
Cost of goods sold A1 1,280 1,750

## Fixed Assets LF No. 5

Description Tr. No. Debit Credit Balance
opening balance 6,200

## Accumulated depreciation LF No. 6

Description Tr. No. Debit Credit Balance
opening balance -2,800
Depreciation expense A2 300 -3,100

## Accounts payable LF No. 7

Description Tr. No. Debit Credit Balance
opening balance -3,070 11 Sales revenue
Merchandise inventory 1 1,300 -4,370 12
Cash a/c 7 1,720 -2,650 13
14
Deferred revenue LF No. 8 15
Description Tr. No. Debit Credit Balance
Cash a/c 8 650 -650

## Notes payable (current) LF No. 9

Description Tr. No. Debit Credit Balance
opening balance -600
Cash a/c 9 200 -800

## Owners' equity LF No. 10

Description Tr. No. Debit Credit Balance
opening balance -4,990

## Retained earnings LF No. 11

Description Tr. No. Debit Credit Balance
opening balance 0
Sales revenue C1 3,750 -3,750
cost of goods sold C2 1,280 -2,470
Salary expense C2 730 -1,740
Depreciation expense C2 300 -540
Luft Corporation
Income statement for the period
Change in operating assets / liabilities

3,750 3,750 Accounts receivable 300 4,100 <-- cash received from customers
Deferred revenues 650
1,280 -1,280 Merchandise inventory 20 -1,720 <-- amount paid to suppliers
Accounts payable -420
730 -730 Salaries payable 0 -730 <-- amount paid to employees
300 3,210 -300 Accumulated depreciatio -300 0
540 Cash flow operaitng activities 750

on expense 300 Accumulated epreciation -300 0 <-- Cash flow from investing activities

## interest payable 0 200 <-- Cash flow from fin activities

Luft Corporation 950 Net cash flow
Cash flow from operating activities 1,440 Cash at beginning of the period
540 2,390 Cash at end of the period
eciation expenses 300
est expenses 0 300
840
from operating activities
e in operting assets 320
se in operating liabilitie -430 -110
950
Total
0
0
0 Salary -730
0 cash sales 1,940
0 credit sales
0
0
0
0
0 cost of goods sold
0 Depreciation expense
0
0
0
Sales revenue
ceived from customers

t paid to suppliers

t paid to employees

## eginning of the period

nd of the period
Problem 4-4
The account balances in the ledger of the Dindorf Company on January 31 (the end of fiscal year), before the ad
Debit Credit
1 Cash and cash equivalents 119,115
2 Accounts receivable 162,500
3 Merchandise inventory 700,680
4 Store equipment 215,000
5 Supplies inventory 15,475
6 Prepaid insurance 38,250
7 Selling expense 24,900
8 Salesman salaries 105,750
9 Miscellaneous general expenses 31,000
10 Sales discounts 6,220
11 Interest expense 9,300
12 Social Security tax expense 9,600
13 Acc. Dep. - Store equipment 37,300
14 Accounts payable 118,180
15 Notes payable 143,000
16 Common stock 300,000
17 Retained earnings 122,375
18 Sales revenue 716,935
1,437,790 1,437,790
The data for the adjustment are:
1. Cost of merchandise sold, \$302,990
2. Depreciation on store equipment, \$12,750.
3. Supplies inventory, January 31, \$5,210. (Purchase of supplies during the year were debited to supplies accou
4. Expired insurance, \$4,660.
5. Interest accrued on notes payable, \$3,770
6. Sales salaries earned but not paid to employees, \$3,575.
7. Interest earned on savings account, but not recorded, \$390.

Required
a. Set up T accounts with the balances given above.
c. Journalize and post the closing entries.
d. Prepare an income statement for the fiscal year and a fiscal year-end balance sheet.

SOLUTION
LF No. Debit Credit
A CA 1 Cash and cash equivalents 1 119,115
A CA 2 Accounts receivable 2 162,500
A CA 3 Merchandise inventory 3 700,680
A CA 4 Supplies inventory 4 15,475
A CA 5 Accrued interest revenue 5
A NCA 1 Store equipment 6 215,000
A NCA 2 Acc. Dep. - Store equipment 7 37,300
A NCA 3 Prepaid insurance 8 38,250
L CL 1 Accounts payable 9 118,180
L CL 2 Notes payable 10 143,000
L CL 3 Salaries payable 11
C EQ 1 Common stock 12 300,000
C EQ 2 Retained earnings 13 122,375
IS R 1 Sales revenue 14 716,935
IS R 2 Sales discounts 15 6,220
3 Interest revenue 16
IS E 1 Selling expense 17 24,900
IS E 2 Salesman salaries expense 18 105,750
IS E 3 Miscellaneous general expenses 19 31,000
IS E 4 Social Security tax expense 20 9,600
IS E 9 Interest expense 21 9,300
5 Cost of merchandise sold 22
6 Depreciation expense 23
7 Supplies expense 24
8 Insurance expense 25
1,437,790 1,437,790

Dindorf Company
part a) Cash and cash equivalents LF No. 1
Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 119,115 119,115

## Merchandise inventory LF No. 3

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 700,680 700,680
31-Jan-15 Cost of goods sold A1 302,990 397,690

## Accrued interest revenue LF No. 5

Date Description Tr. No. Debit Credit Balance
31-Jan-15 Interest earned A7 390 390

General Journal
Date Tr. No. Transaction detail LF No. Debit Credit
31-Jan-15 A1 Cost of merchandise sold 302990
Merchandise inventory 302,990
31-Jan-15 A2 Depreciation expense 12,750
Acc. Dep. - Store equipment 12,750
31-Jan-15 A3 Supplies expense 10,265
Supplies inventory 10,265
31-Jan-15 A4 Insurance expense 4,660
Prepaid insurance 4,660
31-Jan-15 A5 Interest expense 3,730
Notes payable 3,730
31-Jan-15 A6 Salesman salaries expense 3,575
Salaries payable 3,575
31-Jan-15 A7 Accrued interest revenue 390
Interest revenue 390
31-Jan-15 C1 Sales revenue 716,935
Accrued interest income 390
Retained earnings 717,325
Closing the nominal accounts
31-Jan-15 C2 Retained earnings 524,740
Sales discounts 6,220
Selling expense 24,900
Salesman salaries expense 109,325
Miscellaneous general expenses 31,000
Social Security tax expense 9,600
Interest expense 13,030
Cost of merchandise sold 302,990
Depreciation expense 12,750
Supplies expense 10,265
Insurance expense 4,660
Closing the nominal accounts

## Sales revenue LF No. 14

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 716,935 -716,935
31-Jan-15 Retained earnings C1 716935 0

## Interest revenue LF No. 16

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 0 0
31-Jan-15 Saving interest rev A5 390 -390
31-Jan-15 Retained earnings C1 390 0

## Salesman salaries expense LF No. 18

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 105,750 105,750
31-Jan-15 Salaries payable A6 3,575 109,325
31-Jan-15 Retained earnings C2 109,325 0

## Social Security tax expense LF No. 20

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 9,600 9,600
31-Jan-15 Retained earnings C2 9,600 0

## Cost of merchandise sold LF No. 22

Date Description Tr. No. Debit Credit Balance
31-Jan-15 Merchandise inventory A1 302990 302,990
31-Jan-15 Retained earnings C2 302,990 0

## Supplies expense LF No. 25

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 0 0
31-Jan-15 Supplies inventory A3 10265 10,265
31-Jan-15 Retained earnings C2 10,265 0

Dindorf Company
Balance sheet as of Jan. 31, 2015
\$ \$
ASSETS LIABILITIES AND CAPITAL
Non-current assets Equity capital
Store equipment 215,000 164,950 Common stock 300,000
Acc. Dep. - Store equ 50,050 Retained earnings 314,960
Prepaid insurance 33,590 614,960
198,540
Current assets Current liabilities
Cash and cash equival 119,115 Accounts payable 118,180
Accounts receivable 162,500 Notes payable 146,730
Merchandise inventory 397,690 Salaries payable 3,575
Supplies inventory 5,210 268,485
Accrued interest reve 390 684,905
Total assets 883,445 883,445
e end of fiscal year), before the adjustments, were as follows:

## Step 1: Crosscheck whether debit total is same as credit total

Normal balance is Increase Decreases
Assets Debit Asset balances will Debit Credit
Liabilities Credit Liabilities balances will Credit Debit
Capital Credit Capital balance will Credit Debit
Revenues Credit Revenues will Credit Debit
Expenses Credit Expenses will Debit Credit

## ar were debited to supplies account).

Debit Credit Debit Credit Debit Credit
119,115 119,115
162,500 162,500
302990 397,690 397,690
10,265 5,210 5,210
390 390 390
215,000 215,000
12750 50,050 50,050
4,660 33,590 33,590
118,180 118,180
3,730 146,730 146,730
3,575 3,575 3,575
300,000 300,000
122,375 192,585 314,960
716,935 716,935
6,220 6,220
390 390 390
24,900 24,900
3,575 109,325 109,325
31,000 31,000
9,600 9,600
3,730 13,030 13,030
302990 302,990 302,990
12750 12,750 12,750
10,265 10,265 10,265
4,660 4,660 4,660
338,360 338,360 1,458,235 1,458,235 717,325 524,740 883,445 883,445
Assets Liabilities
BS total 933,495 740,910 192,585 <-- profit
IS total 524740 717325 -192,585
1,458,235 1,458,235 0

## Accounts receivable LF No. 1

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 162,500 162,500

## Supplies inventory LF No. 4

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 15,475 15,475
31-Jan-15 supplies consumed A3 10,265 5,210

## Store equipment LF No. 6

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 215,000 215,000

## Acc. Dep. - Store equipment LF No. 7

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 37,300 -37,300
31-Jan-15 Depreciation expense A2 12,750 -50,050

## Prepaid insurance LF No. 8

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 38,250 38,250
31-Jan-15 Insurance expense A4 4,660 33,590

## Accounts payable LF No. 9

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 118,180 -118,180

## Notes payable LF No. 10

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 143,000 -143,000
31-Jan-15 Insurance expense A5 3,730 -146,730

## Salaries payable LF No. 11

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 0 0
31-Jan-15 Interest expense A6 3,575 -3,575

## Common stock LF No. 12

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 300,000 -300,000
Retained earnings LF No. 13
Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 122,375 -122,375
31-Jan-15 Sales revenue C1 716,935 -839,310
31-Jan-15 Accrued interest inco C1 390 -839,700
31-Jan-15 Sales discounts C2 6,220 -833,480
31-Jan-15 Selling expense C2 24,900 -808,580
31-Jan-15 Salesman salaries C2 109,325 -699,255
31-Jan-15 Miscellaneous gen C2 31,000 -668,255
31-Jan-15 Social Security ta C2 9,600 -658,655
31-Jan-15 Interest expense C2 13,030 -645,625
31-Jan-15 Cost of merchandis C2 302,990 -342,635
31-Jan-15 Depreciation expe C2 12,750 -329,885
31-Jan-15 Supplies expense C2 10,265 -319,620
31-Jan-15 Insurance expense C2 4,660 -314,960

## Sales discounts LF No. 15

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 6,220 0 6,220
31-Jan-15 Retained earnings C2 6,220 0

## Selling expense LF No. 17

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 24,900 0 24,900
31-Jan-15 Retained earnings C2 24,900 0

## Miscellaneous general expenses LF No. 19

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 31,000 31,000
31-Jan-15 Retained earnings C2 31,000 0

## Interest expense LF No. 21

Date Description Tr. No. Debit Credit Balance
31-Jan-15 unadjusted Trial balance 9,300 9,300
31-Jan-15 Notes payable A5 3,730 13,030
31-Jan-15 Retained earnings C2 13,030 0

## Depreciation expense LF No. 23

Date Description Tr. No. Debit Credit Balance
31-Jan-15 Acc. Dep. - Store equ A2 12,750 12,750
31-Jan-15 Retained earnings C2 12,750 0

## Insurance expense LF No. 25

Date Description Tr. No. Debit Credit Balance
31-Jan-15 Prepaid insurance 4,660 4,660
31-Jan-15 Retained earnings C2 4,660 0

Dindorf Company
Income statement for the year ended Jan. 31, 2015
\$ \$
REVENUES
Sales revenue 716,935
Less: Sales returns 0
Sales discounts and allowa 6,220 6220 710,715
Savings interest income 390
711,105
EXPENSES
Selling expense 24,900
Salesman salaries expense 109,325
Miscellaneous general expenses 31,000
Social Security tax expense 9,600
Interest expense 13,030
Cost of merchandise sold 302,990
Depreciation expense 12,750
Supplies expense 10,265
Insurance expense 4,660 518,520
Profit 192,585
PC Depot, Inc.
Transactional Analysis
prepaid prepaid
Particulars Cash AR Inventory Insurance rent F&F Acc dep AP
(1) Capital brought in 165,000
(2) Rent (sept.) paid (1,485)
(3) Inventory bought 137,500 137,500
(4) Furniture & Fixtures (15,500) 15,500
(6) Wages paid (935)
(7) Supplies expense (1,100)
(8) Utilities expense (275)
(9) Cash sales 38,000
(10) Credit sales 14,850
(11) collections from custo 3,614 (3,614)
(12) Payment to suppliers (96,195) (96,195)
(13) Inventory bought 49,940 49,940
(14) Cost of sales (38,140)
(15) Wages paid (688)
(16) Wages earned but not paid
(17) Rent of October (1,485) 1,485
(18) Insurance for 12 mont (2,310) 2,310.0
(19) Electricity bill due
(20) Sign board (660) 1,760
(21) Depreciation expense -144
(22) Interest expense
(23) Insurance expensed -192.5
84,661 11,236 149,300 2,118 1,485 17,260 (144) 91,245

## Income Statement Cash Flow Statement (Direct approach)

Sales ………………. 52,850 41,614
cost of sales ……… (38,140) 96,195
Gross margin…. 14,710 (54,581)
Expenses:
Wages………… (2,063) (1,623)
Office supplies (1,100) (1,100)
utilities (501) (275)
Rent (1,485) (1,485)
prepaid (1,485)
Insurance (192.5) ###
Interest (1,250) -
Depreciation -144 ### 0 (9,598)
Net profit 6,654.5 (64,179)
Less: dividends 0 Furniture & fixtur (15,500)
### Glow sign board (660)
Bk loan ###
Cash Flow Statement (Indirect approach) Capital 65,000
A. Cash flows from operations (CFFO): Closing cash 84,661
Net income 6,654.5
Add: Depreciation 144 Operating CF -64179 balancing figure
Loss on sale of assets Invt. Cash flows (16,160)
Less: increase in Operating CL ### Financing CF ###
CFFO ### Net CF 84661
Opening cash 0
B. Cash Flows from Investments (CFFI) 84661
Increase in Fixed assets (17,260)
Less: Gross block of FA sold 0 Raw Activities
Investments sold (Gross) 0 Raw cash approach: Cash operating
CFFI (17,260) (1) Capital brought in 165000
(2) Rent (sept.) paid -1485 (1,485)
C. Cash Flows from Financing (CFFF) (3) Inventory bought
Equity capital raised ### (4) Furniture & Fixtur -15500
Borrowed from banks & FI 65,000 (5) Advertising -1320 (1,320)
Credit from sign board vendor 1,100 (6) Wages paid -935 (935)
Repayment of loans - (7) Supplies expense -1100 (1,100)
Payment of dividends - (8) Utilities expense -275 (275)
CFFO ### (9) Cash sales 38000 38,000
(10) Credit sales
Cash Flow Summary (11) collections from 3614 3,614
Net cash flow (A + B + C) ### (12) Payment to suppli -96195 (96,195)
Add: opening cash balance 0 (13) Inventory bought
===> Closing cash balance ### (14) Cost of sales
(15) Wages paid -688 (688)
(16) Wages earned but not paid
(17) Rent of October -1485 (1,485)
(18) Insurance for 12 -2310 (2,310)
(19) Electricity bill due
(20) Sign board -660
(21) Depreciation expense
(22) Interest expense
(23) Insurance expensed
84,661 (64,179)
ional Analysis
signboard Interest Wages utility bill 15%
payables payable payable payable Bk loan Capital Rev, exp
100,000 65,000 -
(1,485) -
-
-
(1,320) -
(935) -
(1,100) -
(275) -
38,000 -
14,850 -
-
-
-
(38,140) -
(688) -
440 (440) -
-
-
226 (226) -
1,100 -
-144 -
1,250 (1,250) -
-192.5 -
1,100 1,250 440 226 100,000 65,000 6,655 0

Balance Sheet

## Liabilities and owners' equity Assets

### AP Cash 84,661.0
1,250.0 Interest payable AR 11,236.0
440.0 wages payable Inventory 149,300.0
226.0 utility bill Insurance prepaid 2,117.5
1,100.0 Due for sign board rent prepaid 1,485.0
### Bk loan F&F 17,260
### Capital Acc dep (144) 17,116.0
6,654.5 Retained earnings
### 265,915.5

## ### operating CL Cash 84,661.0

1,100.0 Invt CL CA (other than cash) 164,138.5
### Long-term loan FA (net) 17,116.0
### Networth
### 265,915.5
balancing figure

Activities
Investing Financing
###

(15,500)

(1,760) 1,100

(17,260) ###
4 -1 PC Depot

Q1. introduced capital; paid September rent at beginning of the month; Purchased merchandise inventory on credit; pu
Paid for office supplies at end of the month; paid electricity bill at end of the month;

Q2 Debit Credit
Cash A/c 144,385
Accounts receivable -
Inventory 137,500
Prepaid Insurance -
Prepaid rent -
F&F 15,500
Acc dep - F&F -
Accounts payable 137,500
15% Bank loan 100,000
Capital 65,000
Rent expense 1,485
Wages expense 935
Supplies expense 1,100
Utilities expense 275
302,500 302,500

Q3
Debit Credit
15% bank loan 100,000
Acc. Dep.
Accounts payable 91,245
Accounts payable - SB vendor 1,100
Accounts Receivable a/c 11,236
Cash a/c 84,661
Cost of Sales a/c 38,140
Depreciation expense a/c
Furniture & Fixtures a/c 17,260
Insurance expense a/c
Interest expense
Interest payable
Inventory a/c 149,300
Prepaid insurance a/c 2,310
Prepaid rent 1,485
Prop. Capital 65,000
Rent expenses 1,485
Retained earnings
Sales a/c 52,850
Supplies expense 1,100
Utilities expense a/c 501
Utilities payable 226
Wages expense a/c 2,063
Wages payable a/c 440
310,861 310,861

Q4. 3 adjustment entries were to be posted: depreciation, insurance expense and interest expense

## Q5. new ledger accounts required were:

Depreciation expense a/c
Accumulated depreciation a/c
Insurance expense a/c
interest expense a/c
Interest payable a/c

## Q6. Sales 52,850 Cash

Cost of sales 38,140 Non-cash CA
Operating expenses 8055.5 Fixed assets
Net profit 6654.5 total assets

## Case 4-2 Save-Mart

Q1.

Q2. 7 adjusting entries are to be prepared and posted. New accounts to be opened are:
interest payable
Sales salaries payable
Bank service charge expense

Q3.

## Q4. Sales 988,700 Cash

Cost of merchandise sold 604,783 Non-cash current assets
Operating expenses 125,612 Fixed assets (net)
Net profit 258,305

## Q1. Sales 252,200 Cash

Cost of merchandise sold 60,250 Non-cash current assets
Operating expenses 144,125 Fixed assets (net)
Net profit 3,352

Q2.

## Case 4-4 Waltham Oil & Lube Center, Inc.

Q1. 16 transactions were involved. You can identify them. Answer to question 2 will provide the summary of these 16 tr

Q2. The unadjusted trial balance is provided below to answer the 6 questions.
Name of account Debit Credit
Accounts Receivable -
Cash a/c 33,650
Deposit - National oil -
Equipment 75,000
Furniture & Fixtures a/c 6,000
Inventory 14,550
Operating supplies and uniforms 4,130
Prepaid insurance 1,200
Acc. Dep. - Equipment
Acc. Dep. - Furniture
Accounts payable 3,880
Accrued payroll -
Accrued utilities -
Deferred Parking Revenue -
Equipment payables 47,310
Prop. Capital 50,000
Retained earnings (4,500)
Lease expense 27,900
Misc. expenses 6,600
Parking revenue 3,300
Service revenue 105,300
Cost of Sales
Depreciation expense
Insurance expense
Payroll expense 34,560
Utilities expense a/c 1,700
205,290 205,290

## Q3. Withdrawals = 4,500

Cost of sales = 9,260
parking revenues = 3,640
Lease expenses = 27,900
Total revenues = 109,670

## Q4. deferred revenues (realized but not earned.)

Given the low level of parking receivables, any bad debt allowance might not be material enough to warrant accoun
The family use is an income item for tax purposes, which might motivate management to use a cost based measur
ndise inventory on credit; purchased F&F for cash; paid for advtg in cash; paid wages at end of the month;
84,661 operating CL 93,161
164,138.5 Invt CL 1,100
17,116 LT bank loan 65,000
265,915.5 Networth 106,655
265,915.5

## 88,110 operating current liab 91,310

434,959 financing current liab 89,365
49,411 Networth 391,805
572,480 572,480

## 60,195 Current liabilities 21,468

37,625 Bank loan 36,000
297,000 Networth 337,352
394,820 394,820

## the summary of these 16 transactions.

al enough to warrant accounting recognition of a bad debt allowance.
to use a cost based measure ment.