4.11: Problems
- Page ID
- 30652
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PROBLEM 4–1 (LO2) Classified Balance Sheet
The following list of accounts is taken from the records of the Norman Company Ltd. at December 31, 2015:
| Account Title | Balance |
| Accounts Payable | $125 |
| Accounts Receivable | 138 |
| Building | 400 |
| Cash | 250 |
| Share Capital | 400 |
| Equipment | 140 |
| Land | 115 |
| Mortgage Payable (due 2022) | 280 |
| Bank Loan, due within 90 days | 110 |
| Notes Receivable, due within 90 days | 18 |
| Prepaid Insurance | 12 |
| Retained Earnings | 214 |
| Salaries Payable | 14 |
| Unused Office Supplies | 70 |
Required: Prepare a classified balance sheet.
PROBLEM 4–2 (LO2) Classified Balance Sheet
The following adjusted trial balance has been extracted from the records of Dark Edge Sports Inc. at December 31, 2015, its second fiscal year-end.
| Account Balances | ||
| Dr. | Cr. | |
| Accounts Payable | $8,350 | |
| Accounts Receivable | $18,700 | |
| Accumulated Depreciation – Equipment | 2,000 | |
| Advertising Expense | 7,200 | |
| Bank Loan, due May 31, 2016 | 10,000 | |
| Cash | 1,500 | |
| Depreciation Expense | 1,100 | |
| Dividends | 600 | |
| Equipment | 12,500 | |
| Income Taxes Expense | 2,300 | |
| Income Taxes Payable | 4,600 | |
| Insurance Expense | 1,200 | |
| Interest and Bank Charges Expense | 1,300 | |
| Prepaid Insurance | 1,300 | |
| Prepaid Rent | 600 | |
| Retained Earnings | 2,000 | |
| Rent Expense | 17,950 | |
| Revenue | 80,000 | |
| Salaries Expense | 39,000 | |
| Share Capital | 3,000 | |
| Telephone Expense | 1,100 | |
| Utilities Expense | 3,600 | |
|
Totals |
$109,950 |
$109,950 |
Note: No shares were issued during 2015.
Required:
- Calculate net income for year ended December 31, 2015.
- Prepare a statement of changes in equity for the year ended December 31, 2015.
- Prepare a classified balance sheet at December 31, 2015.
- By what amounts do total current liabilities exceed total current assets at December 31, 2015?
- Assume a $5,000 bank loan is received, payable in six months. Will this improve the negative working capital situation calculated in (4) above? Calculate the effect on your answer to (4) above?
- As the bank manager, what questions might you raise regarding the loan?
PROBLEM 4–3 (LO2) Closing Entries and Financial Statements
Below is the adjusted trial balance with accounts in alphabetical order for MayBee Services Ltd. All accounts have normal balances.
|
MayBee Services Ltd. Trial Balance At June 30, 2016 |
|
| Accounts payable | $32,550 |
| Accounts receivable | 149,520 |
| Accrued salaries payable | 12,180 |
| Accumulated depreciation, building | 280 |
| Accumulated depreciation, equipment | 4,480 |
| Advertising expense | 5,670 |
| Building | 145,400 |
| Cash | 122,220 |
| Cash dividends | 7,000 |
| Depreciation expense | 3,332 |
| Equipment | 21,000 |
| Income tax expense | 6,300 |
| Income taxes payable | 6,300 |
| Insurance expense | 5,180 |
| Interest expense | 210 |
| Interest payable | 210 |
| Notes payable, due 2018 | 42,000 |
| Office supplies | 2,520 |
| Prepaid insurance expense | 17,906 |
| Rent expense | 31,500 |
| Repairs expense | 10,920 |
| Retained earnings | 343,058 |
| Revenue | 135,000 |
| Salaries expense | 58,380 |
| Share capital | 2,100 |
| Shop supplies expense | 1,050 |
| Trademark | 10,000 |
| Unearned revenue | 52,500 |
| Utilities expense | 32,550 |
Additional Information: For the note payable, its account balance will be reduced by $14,000 as at June 30, 2017.
Required:
- Prepare the closing entries.
- Prepare a classified balance sheet.
- Prepare a post-closing trial balance.
PROBLEM 4–4 (LO2) Challenge Question – Closing Entries and Financial Statements
Below is the unadjusted trial balance with accounts in alphabetical order for Jennette Ltd. All accounts have normal balances.
|
Jennette Ltd. Unadjusted Trial Balance At September 30, 2016 |
|
| Accounts payable | $39,983 |
| Accounts receivable | 321,468 |
| Accrued salaries payable | 21,909 |
| Accumulated depreciation, building | 9,632 |
| Accumulated depreciation, vehicle | 602 |
| Advertising expense | 12,191 |
| Building | 312,610 |
| Cash | 262,773 |
| Cash dividends | 15,050 |
| Copyright | 21,500 |
| Depreciation expense | 7,164 |
| Income tax expense | 13,545 |
| Income taxes payable | 13,545 |
| Insurance expense | 11,137 |
| Interest expense | 452 |
| Interest payable | 4,730 |
| Mortgage payable, due 2019 | 90,300 |
| Office supplies | 5,418 |
| Prepaid insurance expense | 8,498 |
| Rent expense | 67,725 |
| Repairs expense | 23,478 |
| Retained earnings | 737,575 |
| Revenue | 290,250 |
| Salaries expense | 155,517 |
| Share capital | 4,515 |
| Shop supplies expense | 2,259 |
| Unearned revenue | 112,875 |
| Utilities expense | 39,981 |
| Vehicle | 45,150 |
Additional information:
Adjustments not yet recorded are:
- Revenue earned but not yet billed is $20,000.
- Depreciation expense for the vehicle is $3,000.
- The building's estimated residual value is $100,000 and its estimated useful life is 25 years.
- Salaries not yet paid are $2,500.
- Revenue that was paid in cash as an advance of $50,000 is now earned.
- Rent for October 2016 of $5,150 was paid and recorded to rent expense.
- One-half of the prepaid insurance is has now been used.
Mortgage payments for the next fiscal year will total $36,000, which includes interest expense of $6,000.
Required:
- Update all the account balances with appropriate adjusting entries based on the six missing adjustments above. (Hint: Use a trial balance format with adjusting entry columns.)
- Prepare an adjusted trial balance.
- Prepare a classified balance sheet.