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Accounting Chapter 4 Solutions

1. Fugazy Investment Advisers adjusted its trial balance through various journal entries, resulting in changes to several account balances. 2. After adjustments, Fugazy reported $101,500 in service revenue and $55,000 in total expenses, yielding net income of $46,500 for the year ended December 31, 2012. 3. As of December 31, 2012, Fugazy had total assets of $158,000, total liabilities of $111,500, and retained earnings of $46,500 according to its adjusted trial balance.

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123 views

Accounting Chapter 4 Solutions

1. Fugazy Investment Advisers adjusted its trial balance through various journal entries, resulting in changes to several account balances. 2. After adjustments, Fugazy reported $101,500 in service revenue and $55,000 in total expenses, yielding net income of $46,500 for the year ended December 31, 2012. 3. As of December 31, 2012, Fugazy had total assets of $158,000, total liabilities of $111,500, and retained earnings of $46,500 according to its adjusted trial balance.

Uploaded by

ali sher
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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(40-50 min.) P 4-24A (Req.

1 )
Myla’s Motors, Inc.
Worksheet
Month Ended November 30, 2012
ADJUSTED TRIAL INCOME BALANCE
TRIAL BALANCE ADJUSTMENTS
BALANCE STATEMENT SHEET
ACCOUNT TITLE
CREDI CREDI
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT DEBIT
T T
Cash $4,300 $4,300 $4,300
Accounts receivable 26,600 (f) $ 800 27,400 27,400
Supplies 500 (c) $ 300 200 200
Prepaid insurance 1,700 (d) 200 1,500 1,500
Equipment 53,500 53,500 53,500
Accumulated depreciation $36,400 (a) 1,100 $37,500 $37,500
Accounts payable 13,400 13,400 13,400
Wages payable (b) 600 600 600
Unearned service revenue 8,000 (e) 4,000 4,000 4,000
Common stock 6,000 6,000 6,000
Retained earnings 13,700 13,700 13,700
Dividends 3,800 3,800 3,800
Service revenue 16,000 (e) 4,000 20,800 $20,800
(f) 800
Depreciation expense (a) 1,100 1,100 $1,100
Wage expense 1,600 (b) 600 2,200 2,200
Insurance expense (d) 200 200 200
Utilities expense 1,500 1,500 1,500
Supplies expense (c) 300 300 300
$93,500 $93,500 $7,000 $7,000 $96,000 $96,000 $5,300 $20,800 $90,700 $75,200
Net income
$15,500 $15,500
$20,800 $20,800 $90,700 $90,700
(continued) P 4-24A
Req. 2
Myla’s Motors, Inc.
Income Statement
Month Ended November 30, 2012
Revenue:
Service revenue $ 20,800
Expenses:
Wage expense $ 2,200
Utilities expense 1,500
Depreciation expense 1,100
Supplies expense 300
Insurance expense 200
Total expenses 5,300
Net income $ 15,500

Myla’s Motors, Inc.


Statement of Retained Earnings
Month Ended November 30, 2012
Retained earnings, November 1, 2012 $ 13,700
Net income 15,500
29,200
Dividends ( 3,800)
Retained earnings, November 30, 2012 $ 25,400

Myla’s Motors, Inc.


Balance Sheet
November 30, 2012
ASSETS LIABILITIES
Current assets: Current liabilities:
Cash $ 4,300 Accounts payable $ 13,400
Accounts receivable 27,400 Wages payable 600
Supplies 200 Unearned service revenue 4,000
Prepaid Insurance 1,500 Total current liabilities 18,000
Total current assets 33,400
Plant assets: STOCKHOLDERS’ EQUITY
Equipment $53,500 Common stock $ 6,000
Accumulated. depr. (37,500) 16,000 Retained earnings 25,400
Total stockholders’ equity 31,400
Total liabilities and
Total assets $ 49,400 stockholders’ equity $ 49,400
(50-60 min.) P 4-25A (Req. 1)
Fugazy Investment Advisers, Inc.
Worksheet
Year Ended December 31, 2012
TRIAL BALANCE ADJUSTMENTS ADJUSTED TRIAL INCOME BALANCE SHEET
BALANCE STATEMENT
ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
Cash $32,000 $32,000 $32,000
Accounts receivable 46,000 (e) 4,000 50,000 50,000
Supplies 3,000 (b) 2,000 1,000 1,000
Equipment 25,000 25,000 25,000
Accumulated depreciation $11,000 (c) 6,000 $17,000 $17,000
Accounts payable 15,000 15,000 15,000
Salary payable (d) 1,000 1,000 1,000
Unearned service revenue 2,000 (a) 500 1,500 1,500
Note payable, long-term 39,000 39,000 39,000
Common stock 17,600 17,600 17,600
Retained earnings 20,400 20,400 20,400
Dividends 50,000 50,000 50,000
Service revenue 97,000 (a) 500 101,500 $101,500
(e) 4,000
Salary expense 32,000 (d) 1,000 33,000 $33,000
Supplies expense (b) 2,000 2,000 2,000
Depreciation expense (c) 6,000 6,000 6,000
Interest expense 3,000 3,000 3,000
Rent expense 9,000 9,000 9,000
Insurance expense 2,000 2,000 2,000 ___
$202,000 $202,000 $13,500 $13,500 $213,000 $213,000 $55,000 $101,500 $158,000 $111,500
Net income 46,500 46,500
$101,500 $101,500 $158,000 $158,000
Req. 2

Fugazy Investment Advisers, Inc.


Income Statement
Year Ended December 31, 2012
Revenue:
Service revenue $ 101,500
Expenses:
Salary expense $ 33,000
Rent expense 9,000
Depreciation expense 6,000
Interest expense 3,000
Supplies expense 2,000
Insurance expense 2,000
Total expenses 55,000
Net income $ 46,500

Fugazy Investment Advisers, Inc.


Statement of Retained Earnings
Year Ended December 31, 2012
Retained earnings, January 1, 2012 $ 20,400
Net income 46,500
66,900
Dividends ( 50,000)
Retained earnings, December 31, 2012 $ 16,900

Fugazy Investment Advisers, Inc.


Balance Sheet
December 31, 2012
ASSETS LIABILITIES
Current assets: Current liabilities:
Cash $ 32,000 Accounts payable $ 15,000
Accounts receivable 50,000 Salary payable 1,000
Supplies 1,000 Unearned service revenue _1,500
Total current
Total current assets 83,000 17,500
liabilities
Long-term liabilities:
Plant assets: Note payable 39,000
Equipment $ 25,000 Total liabilities 56,500
Acc. depr. (17,000) 8,000
STOCKHOLDERS’ EQUITY
Common stock 17,600
Retained earnings 16,900
Total stockholders’ equity 34,500
_______ Total liabilities and
Total assets $ 91,000 stockholders’ equity $ 91,000
Req. 3
Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Closing Entries
Dec 31 Service revenue 101,500
Income summary 101,500

31 Income summary 55,000


Depreciation expense 6,000
Salary expense 33,000
Rent expense 9,000
Insurance expense 2,000
Supplies expense 2,000
Interest expense 3,000

31 Income summary 46,500


Retained earnings 46,500

31 Retained earnings 50,000


Dividends 50,000

Req. 4

Fugazy Investment Advisers had a good year during 2012 because the income statement reports
net income of $46,500.
(120-150 min.) P 4-26A
Req. 1

Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Oct 31 Adjusting Entries
a. Unearned service revenue 4,200
Service revenue 4,200

b. Rent expense 200


Prepaid rent 200

c. Supplies expense 1,000


Supplies 1,000

d. Depreciation expense 300


Accumulated depreciation 300

e. Salary expense 200


Salary payable 200

Req. 3
Wolfe Anvils, Inc.
Income Statement
Month Ended October 31, 2012
Revenue:
Service revenue $ 23,100
Expenses:
Salary expense $ 2,700
Supplies expense 1,000
Depreciation expense 300
Rent expense 200
Total expenses 4,200
Net income $ 18,900

Wolfe Anvils, Inc.


Statement of Retained Earnings
Month Ended October 31, 2012
Retained earnings, October 1, 2012 $ 21,600
Net income 18,900
40,500
Dividends (3,500)
Retained earnings, October 31, 2012 $ 37,000
Req. 3
Wolfe Anvils, Inc.
Balance Sheet
October 31, 2012
ASSETS
Current assets:
Cash $ 4,300
Accounts receivable 15,000
Prepaid rent 2,500
Supplies 600
Total current assets 22,400
Plant assets:
Equipment $ 31,200
Accumulated depreciation (3,300) 27,900
Total assets $ 50,300
LIABILITIES
Current liabilities:
Accounts payable $ 6,900
Salary payable 200
Unearned service revenue 1,200
Total current liabilities 8,300
STOCKHOLDERS’ EQUITY
Common stock 5,000
Retained earnings 37,000
Total stockholders’ equity 42,000
Total liabilities and stockholders’ equity $ 50,300
Req. 4

Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Closing Entries
Oct 31 Service revenue 23,100
Income summary 23,100

31 Income summary 4,200


Salary expense 2,700
Rent expense 200
Depreciation expense 300
Supplies expense 1,000

31 Income summary 18,900


Retained earnings 18,900

31 Retained earnings 3,500


Dividends 3,500

Income summary Retained earnings


Clo 4,200 Clo 23,100 Clo 3,500 Oct.31 21,600
Clo 18,900 Bal 18,900 Clo 18,900
Bal 0 Bal 37,000

Req. 5
Wolfe Anvils, Inc.
Post-closing Trial Balance
October 31, 2012
ACCOUNT DEBIT CREDIT
Cash $ 4,300
Accounts receivable 15,000
Prepaid rent 2,500
Supplies 600
Equipment 31,200
Accumulated depreciation $ 3,300
Accounts payable 6,900
Salary payable 200
Unearned service revenue 1,200
Common stock 5,000
Retained earnings 37,000
Total $ 53,600 $ 53,600

Req. 6 Wolfe’s current ratio at October 31, 2012 is 2.70. and Debt ratio is 0.17.
(120-150 min.) P 4-27A
Req. 1
Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Mar 31 Adjusting Entries
a. Unearned service revenue 5,300
Service revenue 5,300

b. Rent expense 300


Prepaid rent 300

c. Supplies expense 800


Supplies 800

d. Depreciation expense 400


Accumulated depreciation 400

e. Salary expense 600


Salary payable 600
(continued) P 4-27A
Req. 2
Racer Internet, Inc.
Worksheet
Month Ended March 31, 2012
TRIAL ADJUSTED INCOME BALANCE
ADJUSTMENTS
BALANCE TRIAL BALANCE STATEMENT SHEET
ACCOUNT TITLE
CREDI
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT
T
Cash $4,300 $4,300 $4,300
Accounts receivable 15,100 15,100 15,100
Prepaid rent 2,300 (b) $ 300 2,000 2,000
Supplies 1,000 (c) 800 200 200
Equipment 30,600 30,600 30,600
Accumulated depreciation $3,900 (d) 400 $4,300 $4,300
Accounts payable 6,400 6,400 6,400
Salary payable (e) 600 600 600
Unearned service revenue 5,800 (a) $5,300 500 500
Common stock 4,000 4,000 4,000
Retained earnings 23,000 23,000 23,000
Dividends 4,100 4,100 4,100
Service revenue 17,300 (a) 5,300 22,600 $22,600
Salary expense 3,000 (e) 600 3,600 $3,600
Rent expense (b) 300 300 300
Depreciation expense (d) 400 400 400
Supplies expense _____ _____ (c) 800 _____ 800 _____ 800 _____
$60,400 $60,400 $7,400 $7,400 $61,40 $61,400 $5,100 $22,600 $56,300 $38,800
0
Net income 17,500 17,500
$22,600 $22,600 $56,300 $56,300
(continued) P 4-27A

Req. 3

Racer Internet, Inc.


Income Statement
Month Ended March 31, 2012
Revenue:
Service revenue $ 22,600
Expenses:
Salary expense $ 3,600
Supplies expense 800
Depreciation expense 400
Rent expense 300
Total expenses 5,100
Net income $ 17,500

Racer Internet, Inc.


Statement of Retained Earnings
Month Ended March 31, 2012
Retained earnings, March 1, 2012 $ 23,000
Net income 17,500
40,500
Dividends (4,100)
Retained earnings, March 31, 2012 $ 36,400
(continued) P 4-27A
Req. 3
Racer Internet, Inc.
Balance Sheet
March 31, 2012
ASSETS
Current assets:
Cash $ 4,300
Accounts receivable 15,100
Prepaid rent 2,000
Supplies 200
Total current assets 21,600
Plant assets:
Equipment $ 30,600
Accumulated depreciation (4,300) 26,300
Total assets $ 47,900
LIABILITIES
Current liabilities:
Accounts payable $ 6,400
Salary payable 600
Unearned service revenue 500
Total current liabilities 7,500
STOCKHOLDERS’ EQUITY
Common stock 4,000
Retained earnings 36,400
Total stockholders’ equity 40,400
Total liabilities and stockholders’ equity $ 47,900
(continued) P 4-27A (Req. 4)

Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
2011 Closing Entries
Mar 31 Service revenue 22,600
Income summary 22,600

31 Income summary 5,100


Salary expense 3,600
Rent expense 300
Depreciation expense 400
Supplies expense 800

31 Income summary 17,500


Retained earnings 17,500

31 Retained earnings 4,100


Dividends 4,100

Income summary Retained earnings


Clo 5,100 Clo 22,600 Clo 4,100 Mar 31 23,000
Clo 17,500 Bal 17,500 Clo 17,500
Bal 0 Bal 36,400

Req. 5
Racer Internet, inc.
Post-closing Trial Balance
March 31, 2012
ACCOUNT DEBIT CREDIT
Cash $ 4,300
Accounts receivable 15,100
Prepaid rent 2,000
Supplies 200
Equipment 30,600
Accumulated depreciation $ 4,300
Accounts payable 6,400
Salary payable 600
Unearned service revenue 500
Common stock 4,000
Retained earnings 36,400
Total $ 52,200 $ 52,200

Req. 6 Racer’s current ratio at March 31, 2012 is 2.88 and Debt ratio is 0.16.
(45-60 min.) P 4-28A (Req. 2)
Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Jun 30 Adjusting Entries
a. Insurance expense 300
Prepaid Insurance 300

b. Accounts receivable 1,300


Service Revenue 1,300

c. Salary expense 900


Salary payable 900

d. Depreciation expense 8,500


Accumulated depreciation 8,500

e. Supplies expense 600


Supplies 600

Req. 3
Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Closing Entries
Jun 30 Service revenue 99,200
Income summary 99,200

30 Income summary 57,400


Salary expense 33,300
Depreciation expense 8,500
Insurance expense 4,500
Utilities expense 4,000
Supplies expense 7,100

30 Income summary 41,800


Retained earnings 41,800

30 Retained earnings 27,900


Dividends 27,900

Req. 3
Income summary Retained earnings
Clo 54,700 Clo 99,200 Clo 27,900 Bal 19,800
Clo 41,800 Bal 41,800 Clo 41,800
Bal 33,700
Req. 4 The ending balance of Retained earnings is $33,700.

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