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at The End of Its First Month of Operations, Watson Answering Services Has The Following Unadjusted
at The End of Its First Month of Operations, Watson Answering Services Has The Following Unadjusted
Balance sheet.
1. At the end of its first month of operations, Watson answering services has the following unadjusted
trial balance.
Cash 5,400
Accounts receivable 2,400
Supplies 2,800
Prepaid insurance 1,300
Equipment 60,000
Notes payable 40,000
Accounts payable 2,400
Ray Watson, capital 30,000
Ray Watson, drawing 1,000
Service revenue 4,900
Salary expense 3,200
Utility expense 800
Advertising expense 400
Total 77,300 77,300
Other data:
Instruction:
a. Prepare a single step income statement and an owner’s equity statement.
b. Prepare a classified balance sheet assuming $35,000 of the notes payable is long-
term.
Solution
Instruction: a
Particular Amount
Current liability:
Notes payable……. (40,000-35,000) 5,000
Accounts payable…………………… 2,400
Interest payable…………………….. 500
7,900
Total current liability
Debit Credit
Cash 26,700
Accounts Receivable 30,700
Merchandise Inventory (Nov 30, 2011) 44,700
Store Supplies 6,200
Store Equipment 85,000
Accumulated Depreciation-Store Equipment 18,000
Delivery Equipment 48,000
Accumulated Depreciation- Delivery Equipment 6,000
Notes Payable 51,000
Accounts Payable 48,500
Kevin Poorten, Capital 110,000
Kevin Poorten, Drawing 12,000
Sales 759,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400
Salaries Expenses 140,000
Advertising Expenses 26,400
Utility Expenses 14,000
Repair Expenses 12,100
Delivery Expenses 16,700
Rent Expenses 24,000
Total 992,700 992,700
Adjustment Data:
1. Store supplies on hand totaled Tk.3, 500.
2. Depreciation is Tk. 9,000 on the store equipment and Tk. 6,000 on the delivery equipment.
3. Interest of Tk. 4,080 is accrued on the notes payable at November 30.
Other Data:
1. Salaries expenses 70% selling and 30% administrative.
2. Rent expense and utilities expenses are 80% selling and 20% administrative.
3. Tk. 30,000 of notes payable are due for payment next year.
4. Repair expense is 100% administrative.
Required:
a. Prepare a multiple step income statement and an owner’s equity statement for the year.
b. Classified balance sheet as of November 30, 2011.
Solution
Req:a
Kevin Poorten fashion Centre
Classified Income Statement
For the year ended November 30, 2011
Sales……………………………………….. 759200
Less: Sales returns & allowance…………... (8800)
Net sales…………………………………... 750400
Selling expenses
Particular Amount
Current asset:
Cash…………………………………………………………… 26700
Accounts receivable…………………………………………... 30700
Merchandise inventory (ending)…………………………….... 44700
Store supplies…………………………………………………. 3500
Total current asset…………………………………………... 105,600
Store equipment………………………………………85000
Less: Accumulated depreciation……………………..27000 58000
Delivery equipment…………………………………48000
Less: Accumulated depreciation……………………12000 36000
Total PPE……………………………………………………. 94,000
Intangible asset:…………………………………………… 0
Current liability:
Notes payable… (51000-30000)…………………………… 21000
Accounts payable……………………………………………... 48500
Interest payable……………………………………………….. 4080
Total current liability 73,500
Owners equity
Sales 50,000
Inventory (01-07-2012) 6,000
Purchase 24,000
Purchase return 1,000
Sales discount 2,500
Accounts receivable 20,000
Accounts payable 14,000
Capital 40,000
Drawings 10,000
Salaries 8,000
Supplies 3,000
Delivery van 20,000
Insurance expense 2,200
Cash 9,300
Total 1,05,000 1,05,000
Other data:
Supplies used Tk. 1200.
Depreciation on delivery van is Tk. 2,000.
Inventory was Tk. 5,500 on June 30, 2013.
Salaries was accrued Tk. 4,000.
Tk. 2,500 of accounts receivable was uncollectible.
Instruction:
a. Prepare a multiple step income statement and an owner’s equity statement for the period June 30, 2013.
b. Classified balance sheet as of June 30, 20113.
Solution
Req:a
“Y” Company
Classified Income Statement
For the year ended June 30, 2013
Sales……………………………………….. 50,000
Less: Sales returns …………...................... (2,500)
Net sales…………………………………... 47,500
Selling expenses
Particular Amount
Capital………………………… 40,000
Add: Net profit………………………… 4,100
44,100
Less: Drawings………………………………….. (10,000)
Capital (ending) 34,100
Current asset:
Cash…………………………………………………………… 9,300
Accounts receivable……………20,000
Less: Bad debts…………………2,500 17,500
Inventory (ending)…………………………….... 5,500
supplies…………………………………………………. 1,800
Total current asset…………………………………………... 34,100
Intangible asset:…………………………………………… 0
Liability:
Current liability:
Accounts payable……………………………………………... 14,000
Salary payable……………………………………………….. 4,000
Total current liability 18,000
Owners equity
Capital ending ………………………………. 34,100
Total Liability and owners equity………………………….. 52,100