Solutions exercises pre-course Fin Acc Session 3a_MIM.doc

7/25/2019 Solutions exercises pre-course Fin Acc Session 3a_MIM.doc

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MIMFinancial Accounting PrecourseAnswers to Problems (Session 3a)

Problem 4

Dear Clay,

This trial balance lists the accounts of Mach-1, Inc. along with its balances at December 31,

20X6. The trial balance is an internal document used by accountants. It is not the same as

a balance sheet and an income statement. The balance sheet and the income statement

are financial statements used by managers, creditors, and investors for decision making.

The fact that the trial balance is in balance does not mean that Mach-1 is a sound

company. It merely means that total debits equal total credits in the company ledger. This

says nothing about the soundness of the business. To compute Mach-1s net income or net

loss for the current period, subtract total expenses from total revenue. During the current

period, Mach-1 earned a net income of $29,000 [service revenue of $86,000 minus total

expenses of $57,000($14,000 + $3,000 + $33,000 + $7,000)].

Note: Student responses may vary

.

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Problem 5

Req. 1

Haas Interiors, Inc.

Analysis of TransactionsASSETS = LIABILITIES + STOCKHOLDERS EQUITY

Cash +

Accounts

Receivable +Supplies + Land =

Accounts

Payable +

Common

Stock +

Retained

Earnings

Type of Stockholders

Equity Transaction

Bal. 1,250 1,500 12,000 8,000 4,000 2,750

a) 9,000 9,000 Issued stock

b) 6,700 6,700 Service revenue

c) (5,000) (5,000)

d) 1,000 1,000

e) 500 (500)

f) 1,000 1,000 Issued stockg) 2,400 2,400 Service revenue

h) (900) (900) Rent expense

(300) (300) Advertising expense

i) (1,800) ____ ____ (1,800) Dividends

Bal. 10,450 3,400 1,000 12,000 4,000 14,000 8,850

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$26,850 $26,850

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Req. 2


Income StatementMonth Ended September 30, 20X8

Revenues:

Service revenue ($6,700 + $2,400)... $9,100

Expenses:

Rent expense $900

Advertising expense... 300

Total expenses. 1,200

Net income. $7,900

Req. 3


Statement of Retained Earnings

Month Ended September 30, 20X8

Retained earnings, August 31, 20X8... $2,750

Add:Net income for the month. 7,900

10,650

Less:Dividends.. (1,800)

Retained earnings, September 30, 20X8 $8,850

Req. 4


Balance Sheet

September 30, 20X8

ASSETS LIABILITIES

Cash. $10,450Accounts payable $ 4,000

Accounts receivable 3,400 STOCKHOLDERS

Supplies.. 1,000 EQUITY

Land. 12,000Common stock. 14,000

Retained earnings 8,850

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Total stockholders equity. 22,850

Total liabilities and

Total assets $26,850 stockholders' equity.. $26,850

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Problem 6

Reqs. 1 and 2

Journal:Debit Credit

(a)

Cash 10.000

Building 50.000

Common Stock 60.000

(b)

Cash 20.000

Note Payable 20.000

!"ansmitting #$ui%ment 22.000

Cash 22.000

(d)

&''ice Su%%lies 00

ccounts %ayable 00

(e)

Sala"y #*%ense 1.+00

Cash 1.+00

(')

Cash 500

Se",ice -e,enue 500

(g)

ccount -ecei,ables 1.00Se",ice -e,enue 1.00

(h)

ccount %ayable 100

Cash 100

(i)

/tility #*%ense 600

ccount %ayable 600

()

Cash 1.100

ccount -ecei,able 1.100

(k)

-ent #*%ense 1.000

d,e"tising #*%ense 00

Cash 1.00

(l)

i,idends 2.600

Cash 2.600

Account Title

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T-accounts:

Cash Accounts Receivable

(a) 10,000(c) 22,000 (g) 1,800(j) 1,100

(b) 20,000(e) 1,300 Bal. 700

(f) 500(h) 100(j) 1,100(k) 1,800

(l) 2,600

Bal. 3,800

Office Supplies Transmitting Equipment

(d) 400 (c) 22,000

Bal. 400 Bal. 22,000

Building Accounts Payable

(a) 50,000 (h) 100 (d) 400

Bal. 50,000 (i) 600

Bal. 900

Note Payable Common Stock

(b) 20,000 (a) 60,000

Bal. 20,000 Bal. 60,000

Dividends Service Revenue

(l) 2,600 (f) 500

Bal. 2,600 (g) 1,800

Bal. 2,300

Salary Expense Rent Expense

(e) 1,300 (k) 1,000

Bal. 1,300 Bal. 1,000

Advertising Expense Utilities Expense

(k) 800 (i) 600

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Bal. 800 Bal. 600

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Req. 3

CableVision, Inc.

Trial BalanceJanuary 31, 20X7

ACCOUNT DEBIT CREDIT

Cash... $ 3,800

Accounts receivable.. 700

Office supplies 400

Transmitting equipment... 22,000

Building. 50,000

Accounts payable.. $ 900

Note payable 20,000

Common stock 60,000

Dividends.. 2,600

Service revenue.. 2,300

Salary expense 1,300

Rent expense... 1,000

Advertising expense.. 800

Utilities expense. 600

Total... $83,200 $83,200

Req. 4

Total assets = $76,900 ($3,800 + $700 + $400 + $22,000 + $50,000)

Total liabilities = $20,900 ($900 + $20,000)

Net loss = $1,400 ($2,300 - $1,300 - $1,000 - $800- $600)

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Problem 7

Req. 1 (journal entries; explanations not required)

Journal

DATE ACCOUNT TITLES DEBIT CREDIT

Jan. 2 Cash 33,000

Common Stock 33,000

3Supplies. 500

Furniture 2,600

Accounts Payable.. 3,100

4Cash 1,500

Service Revenue. 1,500

7Land 22,000

Cash... 22,000

11Accounts Receivable.. 800

Service Revenue. 800

16Accounts Payable 2,600

Cash 2,600

17Utilities Expense.. 110

Cash 110

18Cash 400

Accounts Receivable. 400

Jan. 22 Utilities Expense 130

Cash.. 130

29 Cash.. 1,800

Service Revenue 1,800

31 Salary Expense.. 1,300

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Cash.. 1,300

31 Dividends. 2,200

Cash.. 2,200

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Req. 2 (ledger accounts)


Jan. 2 33,000 Jan. 7 22,000 Jan. 11 800 Jan. 18 400

4 1,500 16 2,600 Bal. 400

18 400 17 110

29 1,800 22 130

31 1,300 Supplies

31 2,200 Jan. 3 500

Bal. 8,360 Bal. 500

Furniture Land

Jan. 3 2,600 Jan. 7 22,000

Bal. 2,600 Bal. 22,000

Accounts Payable Common Stock

Jan. 16 2,600 Jan. 3 3,100 Jan. 2 33,000

Bal. 500 Bal. 33,000

Dividends

Jan. 31 2,200 Bal. 2,200

Service Revenue Salary Expense

Jan. 4 1,500 Jan. 31 1,300

11 800 Bal. 1,300

29 1,800

Bal. 4,100

Utilities ExpenseJan. 17

22

110

130

Bal. 240

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Req. 3

Pat ODell, Attorney, P.C.

Trial BalanceJanuary 31, 20XX


Cash... $ 8,360


Supplies 500

Furniture... 2,600

Land... 22,000


Common stock 33,000

Dividends.. 2,200




Total... $37,600 $37,600

Req.4

Pat ODell

Income Statement

Month Ended January 31 st, current year

Revenues:

Service revenue ... $4,100

Expenses:

Salary expense $1.300

Utilities expense... 240

Total expenses. 1,540Net income. $2,560

Pat ODell


Month Ended January 31 st current year

Retained earnings, 1 st January ... $0

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Add: Net income for the month. 2,560

2,560


Retained earnings, 31 st January $360

Req 5

Pat ODell

Balance Sheet

January 31stcurrent year

ASSETS LIABILITIES

Cash. $8,360Accounts payable $ 500

Accounts receivable 400 STOCKHOLDERS

Supplies.. 500 EQUITY

Land. 22,000Common stock. 33,000

Furniture.. 2,600 Retained earnings 360



Total assets $33,860 stockholders' equity.. $33,860

Pat ODell Attorney PC

Statement of Cash Flows

Period Ended January 31, current year

Cash flows from operating activities:

Collections from customers. $ 3,700

Payments to utilities suppliers . (240)

Payments to employees.. (1.300)

Net cash used for operating activities.. 2,160

Cash flows from investing activities:

Purchase of land/furniture.. (24,600)

Net cash used for investing activities (24,600)

Cash flows from financing activities:

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Issuance of common stock 33,000

Payment of dividend (2,200)

Net cash provided by financing activities 30,800

________

Increase in cash. $ 8,360

Cash balance, January 1, . 0Cash balance, January 31, ... $ 8,360

Req. 6

Total resources (assets) = $33,860 ($8,360 + $400 + $500 + $2,600 + $22,000)

Amount owed (total liabilities) = $500

Profit (net income) = $2,560 ($4,100 - $1,300 - $240)

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Problem 8

Req. 1

Lane Designers, Inc.

Analysis of Transactions

ASSETS = LIABILITIES + STOCKHOLDERS EQUITY

Cash +

Accounts

Receivable +Supplies + Land =

Accounts

Payable +

Common

Stock +

Retained

Earnings

Type of Stockholders

Equity Transaction

Bal. 1,720 2,240 24,100 5,400 10,000 12,660

a) 42,000 42,000 Issued stock

b) (1,400) (1,400)

c) 4,100 4,100 Service revenue

d) 750 (750)

e) 720 720f) 5,000 5,000 Service revenue

g) 1,700 1,700 Issued stock

h) (1,200) (1,200)Rent expense

(660) (660) Advertising expense

i) (2,400) ___ (2,400) Dividends

Bal. 44,610 6,490 720 24,100 4,720 53,700 17,500

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$75,920 $75,920

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Req. 2


Income StatementMonth Ended May 31, 20X5

Revenues:

Service revenue ($4,100 + $5,000).. $9,100

Expenses:

Rent expense... $1,200

Advertising expense.. 660

Total expenses 1,860

Net income $7,240

Req. 3



Month Ended May 31, 20X5

Retained earnings, April 30, 20X5 $12,660

Add:Net income for the month. 7,240

19,900


Retained earnings, May 31, 20X5. $17,500

Req. 4


Balance Sheet

May 31, 20X5

ASSETS LIABILITIES

Cash. $44,610Accounts payable. $ 4,720

Accounts receivable 6,490 STOCKHOLDERS

Supplies.. 720 EQUITY

Land. 24,100Common stock.. 53,700

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Retained earnings.... 17,500



Total assets... $75,920 stockholders' equity... $75,920

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Problem 9

Req. 1 (journal entries; explanations not required)

Journal

DATE ACCOUNT TITLES DEBIT CREDIT

Sept. 3 Cash. 25,000

Common Stock. 25,000

4Supplies.. 200

Furniture. 1,800

Accounts Payable 2,000

6Cash. 1,000

Service Revenue.. 1,000

7Land. 15,000

Cash 15,000

10Accounts Receivable.. 600

Service Revenue.. 600

14Accounts Payable 1,800

Cash 1,800

16Utilities Expense.. 120

Cash 120

17Cash. 500

Accounts Receivable.. 500

Sept. 24 Utilities Expense. 110

Cash.. 110

28 Cash 1,500

Service Revenue. 1,500

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30 Salary Expense 1,200

Cash... 1,200

30 Dividends.. 2,400

Cash... 2,400

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Req. 2 (ledger accounts)


Sept. 325,000 Sept. 7 15,000 Sept. 10 600 Sept. 17 500

6 1,000 14 1,800 Bal. 100

17 500 16 120

28 1,500 24 110

30 1,200 Supplies

30 2,400 Sept. 4 200

Bal. 7,370 Bal. 200

Furniture Land

Sept. 4 1,800 Sept. 7 15,000

Bal. 1,800 Bal. 15,000

Accounts Payable Common Stock

Sept. 14 1,800 Sept. 4 2,000 Sept. 3 25,000

Bal. 200 Bal. 25,000

Dividends Service Revenue

Sept. 30 2,400 Sept. 6 1,000

Bal. 2,400 10 600

28 1,500

Bal. 3,100

Salary ExpenseSept. 30 1,200

Bal. 1,200

Utilities Expense

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Sept. 16

24

120

110

Bal. 230

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Req. 3

Toms Lopez, Attorney, P.C.

Trial BalanceSeptember 30, 20XX


Cash... $ 7,370


Supplies 200

Furniture... 1,800

Land... 15,000


Common stock 25,000Dividends.. 2,400




Total... $28,300 $28,300

Rev. 4

Total resources (assets) = $24,470 ($7,370 + $100 + $200 + $1,800 + $15,000)

Amount owed (total liabilities)= $200

Profit (net income) = $1,670 ($3,100 - $1,200 - $230)

Toms Lpez

Income Statement

Month Ended September 30 , current year

Revenues:

Service revenue ... $3,100

Expenses:

Salary expense $1.200

Utilities expense... 230

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Total expenses. 1,430

Net income. $1,670

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Toms Lpez


Month Ended sept. 30 current year

Retained earnings, 1 st september ... $0

Add: Net income for the month. 1 .6701.670

Less:Dividends..

(2 .400)

Retained earnings, 30 sept. $(730 )

Req. 5 Toms Lpez

Balance Sheet

Sept. 30 current yearASSETS LIABILITIES

Cash $7.370 Accounts payable $ 200

Accounts receivable 100 STOCKHOLDERS

Supplies 200 EQUITY

Land 15,000 Common stock 25.000

Furniture 1,800 Retained earnings (730)

Total stockholders equity. 24.270


Total assets $24,470Stockholders' equity. $24,470

Toms Lpez

Statement of Cash Flows

Period Ended September 30, current year

Cash flows from operating activities:

Collections from customers. $ 3,000

Payments to utilities suppliers . (230)

Payments to employees.. (1.200)

Net cash used for operating activities.. 1,570

Cash flows from investing activities:

Purchase of land/furniture.. (16,800)

Net cash used for investing activities (16,800)

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Cash flows from financing activities:

Issuance of common stock 25,000

Payment of dividend (2,400)

Net cash provided by financing activities 22,600

________Increase in cash. $ 7,370

Cash balance, January 1, . 0

Cash balance, January 31, ... $ 7,370

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Problem 10

Reqs. 1 and 2


(a) 11,000(d) 88,000 (f) 2,100(j) 1,200

(b) 90,000(e) 2,200 Bal. 900

(i) 1,100(g) 800

(j) 1,200(k) 1,100

(l) 500

Bal. 10,700

Office Supplies Computer Equipment

(c) 1,300 (d) 88,000

Bal. 1,300 Bal. 88,000

Building Accounts Payable

(a) 60,000 (g) 800(c) 1,300

Bal. 60,000 (h) 600

Bal. 1,100

Note Payable Common Stock

(b) 90,000 (a) 71,000

Bal. 90,000 Bal. 71,000

Dividends Service Revenue(l) 500 (f) 2,100

Bal. 500 (i) 1,100

Bal. 3,200

Salary Expense Advertising Expense

(e) 2,200 (h) 600

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Bal. 2,200 Bal. 600

Rent Expense Utilities Expense

(k) 700 (k) 400

Bal. 700 Bal. 400

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Req. 3

Hendrix Computer Graphics Service, Inc.

Trial Balance

June 30, 20X3ACCOUNT DEBIT CREDIT

Cash $ 10,700

Accounts receivable... 900

Office supplies. 1,300

Computer equipment.. 88,000

Building.. 60,000

Accounts payable $ 1,100

Note payable. 90,000

Common stock. 71,000Dividends... 500

Service revenue 3,200

Salary expense. 2,200

Advertising expense... 600

Rent expense 700

Utilities expense.. 400 _______

Total. $165,300 $165,300

Req. 6

Total assets = $160,900 ($10,700 + $900 + $1,300 + $88,000 + $60,000)

Total liabilities = $91,100 ($1,100 + $90,000)

Net loss = $700 ($3,200 - $2,200 - $600 - $700 -$400)

Req. 4

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Revenue

Se",ice -e,enue .............. +.200

ExpensesSala"y #*%ense ................. 2.200

-ent #*%ense ................. 00

d,e"tising #*%ense ............. 600

/tilities #*%ense ................. 00

Total Expenses .............. +.300Net Income .................. !""#

$endrix Computer %rap&ics 'ervice( Inc.

Income 'tatement )#Mont& ended *une +"( ,"-+

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-etained ea"nings4 ay +14 20+ 0

dd7 Net income 'o" the month .............. (00)!""#

8ess7 i,idends ............................. (500)

-etained ea"nings4 end o' yea" ............... .,""#


'tatement o/ Retained Earnings )#Mont& ended *une +"( ,"-+

Req.5

Cash 10.00 ccounts %ayable 1.1

ccounts "ecei,able 300 Note %ayable 30.0

&''ice Su%%lies 1.+00

Com%ute" #$ui%ment .000 Total liabilities 0.

Building 60.000

Common Stock 1.0

-etained ea"nings (1.20

Total '$E 10.2

Total Assets 1".0"" Total 3iabilities and '$E 1".0

'T4C5$43DER'6 E78IT9

:alance '&eet )#

*une +"( ,"-+

A''ET' 3IA:I3ITIE'


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Problem 11

Req. 1

20X5 20X4

(Thousands)

STATEMENT OF OPERATIONS

Revenues 13,176 = $ k $15,487

Cost of goods sold 11,026 a = 12,822

Other expenses 1,230 1,169

Earnings before income taxes 920 1,496

Income taxes (35% in 20X5) 322 = l 100

Net earnings 598 =$ m $ b = 1,396

STATEMENT OF RETAINED EARNINGS

Beginning balance 4,043 =$ n $ 2,702

Net earnings 598 = o c = 1,396

Dividends (65) (55)

Ending balance 4,576 =$ p $ d = 4,043

BALANCE SHEET

Assets:

Cash 1,421 =$ q $ e = 1,086

Property, plant and equipment 1,597 1,750

Other assets 10,198 = r 10,190

Total assets 13,216 =$ s $13,026

Liabilities:

Current liabilities 5,706 =$ t $ 5,403

Notes payable and long-term debt 2,569 3,138

Other liabilities 69 72Total liabilities 8,344 f = 8,613

Shareholders Equity:

Common stock $ 117 $ 118

Retained earnings 4,576 = u g = 4,043

Other shareholders equity 179 252

Total shareholders equity 4,872 = v 4,413

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Total liabilities and shareholders equity 13,216 =$ w $ h = 13,026

STATEMENT OF CASH FLOWS

Net cash provided by operating activities 986 =$ x $ 475

Net cash provided by investing activities 58 574

Net cash used for financing activities (709) (1,045)

Increase (decrease) in cash 335 i = 4

Cash at beginning of year 1,086 = y 1,082

Cash at end of year 1,421 =$ z $ j = 1,086

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Req. 2

a.Operations deteriorated during 20X5. Revenues decreased, and net earnings fell

from $1,396 thousand to $598 thousand.

b.The company retained most of its net earnings for use in the business. Dividends

were only $55 thousand in 20X4 and $65 thousand in 20X5, which are much less

than net earnings.

c.Total assets at the end of 20X5 were $13,216 thousand. This is the amount of total

resources that the company has to work with as it moves into the year 20X6.

d.At the end of 20X4 the company owed total liabilities of $8,613 thousand. At the

end of 20X5 the company owed $8,344 thousand. A decrease in total liabilities is a

good trend in relation to an increase in total assets because this means that total

stockholders equity is increasing.

e.The companys major source of cash is operating activities, and cash is

increasing. Based on these two facts, it appears that the companys ability to

generate cash is strong despite the drop in 20X5 net earnings.

Solutions exercises pre-course Fin Acc Session 3a_MIM.doc

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