Chapter 2 Review of the Accounting Process Brief Exercises

BRIEF EXERCISES Brief Exercise 2–1 Assets 1. + 165,000 2. – 40,000 3. + 200,000 – 120,000 4. + 180,000 – 180,000 5. – 145,000 = Liabilities + Paid-in Capital + Retained Earnings (inventory) + 165,000 (accounts payable) (cash) (accounts receivable) (inventory) (cash) (accounts receivable) (cash) – 145,000 (accounts payable) Brief Exercise 2–2 1. 2. 3. 4. 5. Inventory .................................................................. Accounts payable ................................................. Salaries expense ....................................................... Cash ..................................................................... Accounts receivable ................................................. Sales revenue ........................................................ Cost of goods sold .................................................... Inventory .............................................................. Cash ......................................................................... Accounts receivable ............................................ Accounts payable .................................................... Cash ...................................................................... – 40,000 (expense) + 200,000 (revenue) – 120,000 (expense) 165,000 40,000 200,000 120,000 180,000 145,000 165,000 40,000 200,000 120,000 180,000 145,000 2– Solutions Manual, Vol.1, Chapter 2 7 Brief Exercise 2–3 BALANCE SHEET ACCOUNTS Cash Accounts receivable ___________________________ ___________________________ 6/1 Bal. 4. 6/30 Bal. 65,000 180,000 40,000 145,000 _______________ 2. 5. 60,000 6/30 Bal. 0 120,000 165,000 _______________ 3. 45,000 43,000 200,000 180,000 4. ______________ 6/30 Bal. Inventory ___________________________ 6/1 Bal. 1. 6/1 Bal. 3. 63,000 Accounts payable ___________________________ 6/1 Bal. 5. 22,000 145,000 165,000 ______________ 1. 42,000 6/30 Bal. INCOME STATEMENT ACCOUNTS Sales revenue ___________________________ 0 200,000 _______________ 6/1 Bal. 3. 6/1 Bal. 3. 200,000 6/30 Bal. 6/30 Bal. 120,000 Salaries expense ___________________________ 2–8 Cost of goods sold ___________________________ 6/1 Bal. 2. 0 40,000 _______________ 6/30 Bal. 40,000 0 120,000 ______________ Brief Exercise 2–4 1. 2. 3. Prepaid insurance ..................................................... Cash ..................................................................... Note receivable ........................................................ Cash ..................................................................... Equipment ................................................................ Cash ..................................................................... Brief Exercise 2–5 1. 2. 3. Insurance expense ($12,000 x 3/12) ............................. Prepaid insurance ................................................ Interest receivable ($10,000 x 6% x 6/12) ..................... Interest revenue .................................................... Depreciation expense ............................................... Accumulated depreciation – equipment ............... 12,000 10,000 60,000 3,000 300 12,000 12,000 10,000 60,000 3,000 300 12,000 Brief Exercise 2–6 Net income would be higher by $14,700 ($3,000 –300 + 12,000). 2– Solutions Manual, Vol.1, Chapter 2 9 Brief Exercise 2–7 1. 2. 3. 4. Service revenue ....................................................... Unearned service revenue ................................... Advertising expense ($2,000 x 1/2) ............................. Prepaid advertising ............................................. Salaries expense ....................................................... Salaries payable ................................................... Interest expense ($60,000 x 8% x 4/12) ........................ Interest payable .................................................... 4,000 1,000 16,000 1,600 4,000 1,000 16,000 1,600 Brief Exercise 2–8 Assets would be higher by $1,000, the amount of prepaid advertising that expired during the month. Liabilities would be lower by $21,600 ($4,000 + 16,000 + 1,600). Shareholders’ equity (and net income for the period) would be higher by $22,600. Brief Exercise 2–9 BOWLER CORPORATION Income Statement For the Year Ended December 31, 2013 Sales revenue ............................................... Cost of goods sold ....................................... Gross profit .................................................. Operating expenses: Salaries ...................................................... Rent ........................................................... Depreciation .............................................. Miscellaneous ........................................... Total operating expenses .............. Net income .................................................. 2–10 $325,000 168,000 157,000 $45,000 20,000 30,000 12,000 107,000 $ 50,000 Brief Exercise 2–10 BOWLER CORPORATION Balance Sheet At December 31, 2013 Assets Current assets: Cash ........................................................... Accounts receivable .................................. Inventory ................................................... Total current assets .............................. Property and equipment: Machinery and Equipment ........................ Less: Accumulated depreciation ............... Total assets ........................................ $ 5,000 10,000 16,000 31,000 100,000 (40,000) 60,000 $91,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable ...................................... Salaries payable ......................................... Total current liabilities ......................... Shareholders’ equity: Common stock .......................................... Retained earnings ...................................... Total shareholders’ equity ................... Total liabilities and shareholders’ equity $ 20,000 12,000 32,000 $50,000 9,000 59,000 $91,000 2– Solutions Manual, Vol.1, Chapter 2 11 Brief Exercise 2–11 Sales revenue ................................................................... 850,000 Income summary ......................................................... 850,000 Income summary ............................................................. 815,000 Cost of goods sold ....................................................... 580,000 Salaries expense .......................................................... 180,000 Rent expense ............................................................... 40,000 Interest expense ........................................................... 15,000 Income summary ($850,000 – 815,000) .............................. Retained earnings ....................................................... Brief Exercise 2–12 Revenues Expenses: Salaries Utilities Advertising Net Income 35,000 35,000 $428,000* (240,000) (33,000)** (12,000) $143,000 *$420,000 cash received plus $8,000 increase ($60,000 – 52,000) in amount due from customers: Cash ........................................................................ Accounts receivable (increase in account) .............. Sales revenue (to balance) ................................... 420,000 8,000 428,000 ** $35,000 cash paid less $2,000 decrease in amount owed to utility company: Utilities expense (to balance) .................................. Utilities expense payable (decrease in account) ...... Cash ..................................................................... 2–12 33,000 2,000 35,000