APPENDIX C

END-OF-PERIOD SPREADSHEET (WORK SHEET) FOR

A MERCHANDISING BUSINESS
Prob. C–1
1. [The solution to part (1) can be found on the following pages.]
2.
RACK SAVER CO.
Income Statement
For the Year Ended December 31, 2010
Revenue from sales:
Sales............................................................. $800,000
Less: Sales returns and allowances........ $11,900
Sales discounts................................ 7,100 19,000
Net sales................................................. $781,000
Cost of merchandise sold............................... 507,500
Gross profit....................................................... $273,500
Expenses:
Selling expenses:
Sales salaries expense......................... $ 98,200
Advertising expense............................. 25,000
Depreciation expense—store
equipment......................................... 6,000
Store supplies expense........................ 3,150
Miscellaneous selling expense............ 1,600
Total selling expenses.................... $133,950
Administrative expenses:
Office salaries expense........................ $ 65,200
Rent expense......................................... 16,000
Insurance expense................................ 3,600
Depreciation expense—office
equipment......................................... 3,000
Office supplies expense....................... 1,500
Miscellaneous administrative expense 1,650
Total administrative expenses....... 90,950
Total expenses............................................ 224,900
Income from operations.................................. $ 48,600
Other income and expense:
Rent revenue............................................... $ 1,000
Interest expense......................................... (10,800) (9,800)
Net income........................................................ $ 38,800

461
Prob. C–1 Continued

1.
A B C D E F G H I J K
1 RACK SAVER CO.
2 End-of-Period Spreadsheet (Work Sheet)
3 For the Year Ended December 31, 2010
Unadjusted Adjusted Income Balance
4
Trial Balance Adjustments Trial Balance Statement Sheet
5 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
6 Cash 12,000 12,000 12,000
7 Accounts Receivable 72,500 72,500 72,500
8 Merchandise Inventory 170,000 (a) 7,500 162,500 162,500
9 Prepaid Insurance 9,700 (b) 3,600 6,100 6,100
10 Store Supplies 4,200 (c) 3,150 1,050 1,050
11 Office Supplies 2,100 (d) 1,500 600 600
12 Store Equipment 360,000 360,000 360,000
13 Acc. Depr.—Store Equip. 60,300 (e) 6,000 66,300 66,300
14 Office Equipment 70,000 70,000 70,000
15 Acc. Depr.—Office Equip. 17,200 (f) 3,000 20,200 20,200
16 Accounts Payable 46,700 46,700 46,700
17 Salaries Payable (g) 3,000 3,000 3,000
18 Unearned Rent 3,000 (h) 1,000 2,000 2,000
Note Payable (final payment
19 180,000 180,000 180,000
due 2018)
20 Evan Hoffman, Capital 352,750 352,750 352,750
21 Evan Hoffman, Drawing 25,000 25,000 25,000
22 Sales 800,000 800,000 800,000
23 Sales Returns and Allow. 11,900 11,900 11,900
24 Sales Discounts 7,100 7,100 7,100
25 Cost of Merchandise Sold 500,000 (a) 7,500 507,500 507,500
26 Sales Salaries Expense 96,400 (g) 1,800 98,200 98,200
27 Advertising Expense 25,000 25,000 25,000
28 Depr. Exp.—Store Equip. (e) 6,000 6,000 6,000
29 Store Supplies Expense (c) 3,150 3,150 3,150
30 Misc. Selling Expense 1,600 1,600 1,600

462
31 Office Salaries Expense 64,000 (g) 1,200 65,200 65,200
32 Rent Expense 16,000 16,000 16,000
33 Insurance Expense (b) 3,600 3,600 3,600
34 Depr. Exp.—Office Equip. (f) 3,000 3,000 3,000
35 Office Supplies Expense (d) 1,500 1,500 1,500
36 Misc. Admin. Expense 1,650 1,650 1,650
37 Rent Revenue (h) 1,000 1,000 1,000
38 Interest Expense 10,800 10,800 10,800
39 1,459,950 1,459,950 28,750 28,750 1,471,950 1,471,950 762,200 801,000 709,750 670,950
40 Net Income 38,800 38,800
41 801,000 801,000 709,750 709,750

463
Prob. C–1 Continued

3.
RACK SAVER CO.
Statement of Owner’s Equity
For the Year Ended December 31, 2010
Evan Hoffman, capital, January 1, 2010.............................. $352,750
Net income for the year......................................................... $38,800
Less withdrawals................................................................... 25,000
Increase in owner’s equity.................................................... 13,800
Evan Hoffman, capital, December 31, 2010......................... $366,550
Prob. C–1 Continued

4.
RACK SAVER CO.
Balance Sheet
December 31, 2010
Assets
Current assets:
Cash............................................................. $ 12,000
Accounts receivable................................... 72,500
Merchandise inventory.............................. 162,500
Prepaid insurance....................................... 6,100
Store supplies............................................. 1,050
Office supplies............................................ 600
Total current assets............................... $254,750
Property, plant, and equipment:
Store equipment.......................................... $360,000
Less accumulated depreciation............ 66,300 $293,700
Office equipment........................................ $ 70,000
Less accumulated depreciation............ 20,200 49,800
Total property, plant, and
equipment........................................ 343,500
Total assets....................................................... $598,250

Liabilities
Current liabilities:
Accounts payable....................................... $ 46,700
Note payable (current portion).................. 36,000
Salaries payable.......................................... 3,000
Unearned rent.............................................. 2,000
Total current liabilities........................... $ 87,700
Long-term liabilities:
Note payable (final payment due 2018).... 144,000
Total liabilities.................................................. $231,700

Owner’s Equity
Evan Hoffman, capital...................................... 366,550
Total liabilities and owner’s equity................ $598,250
Prob. C–1 Continued

5.
(a) Cost of Merchandise Sold............................................ 7,500
Merchandise Inventory............................................ 7,500
(b) Insurance Expense........................................................ 3,600
Prepaid Insurance.................................................... 3,600
(c) Store Supplies Expense................................................ 3,150
Store Supplies.......................................................... 3,150
(d) Office Supplies Expense............................................... 1,500
Office Supplies......................................................... 1,500
(e) Depreciation Expense—Store Equipment.................. 6,000
Accum. Depreciation—Store Equipment............... 6,000
(f) Depreciation Expense—Office Equipment................. 3,000
Accum. Depreciation—Office Equipment.............. 3,000
(g) Sales Salaries Expense................................................. 1,800
Office Salaries Expense................................................ 1,200
Salaries Payable....................................................... 3,000
(h) Unearned Rent............................................................... 1,000
Rent Revenue............................................................ 1,000
Prob. C–1 Concluded

6.
Sales................................................................................ 800,000
Rent Revenue................................................................. 1,000
Income Summary...................................................... 801,000
Income Summary........................................................... 762,200
Sales Returns and Allowances............................... 11,900
Sales Discounts........................................................ 7,100
Cost of Merchandise Sold....................................... 507,500
Sales Salaries Expense........................................... 98,200
Advertising Expense................................................ 25,000
Depreciation Expense—Store Equipment............. 6,000
Store Supplies Expense.......................................... 3,150
Miscellaneous Selling Expense.............................. 1,600
Office Salaries Expense........................................... 65,200
Rent Expense............................................................ 16,000
Insurance Expense................................................... 3,600
Depreciation Expense—Office Equipment............ 3,000
Office Supplies Expense......................................... 1,500
Miscellaneous Administrative Expense................ 1,650
Interest Expense....................................................... 10,800
Income Summary........................................................... 38,800
Evan Hoffman, Capital............................................. 38,800
Evan Hoffman, Capital................................................... 25,000
Evan Hoffman, Drawing........................................... 25,000
Prob. C–2

1.
A B C D E F G H I J K
1 QUALITY SPORTS CO.
2 End-of-Period Spreadsheet (Work Sheet)
3 For the Year Ended December 31, 2010
Unadjusted Adjusted Income Balance
4
Trial Balance Adjustments Trial Balance Statement Sheet
5 Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
6 Cash 18,000 18,000 18,000
7 Accounts Receivable 42,500 42,500 42,500
8 Merchandise Inventory 218,000 (a) 7,000 211,000 211,000
9 Prepaid Insurance 8,000 (b) 5,000 3,000 3,000
10 Store Supplies 4,200 (c) 3,050 1,150 1,150
11 Office Supplies 2,100 (d) 1,350 750 750
12 Store Equipment 282,000 282,000 282,000
13 Acc. Depr.—Store Equip. 70,300 (e) 7,500 77,800 77,800
14 Office Equipment 60,000 60,000 60,000
15 Acc. Depr.—Office Equip. 17,200 (f) 3,800 21,000 21,000
16 Accounts Payable 26,700 26,700 26,700
17 Salaries Payable (g) 2,500 2,500 2,500
18 Unearned Rent 2,500 (h) 2,000 500 500
Note Payable (final payment
19 175,000 175,000 175,000
due 2018)
20 Rosario Noe, Capital 286,450 286,450 286,450
21 Rosario Noe, Drawing 10,000 10,000 10,000
22 Sales 900,000 900,000 900,000
23 Sales Returns and Allow. 13,900 13,900 13,900
24 Sales Discounts 7,100 7,100 7,100
25 Cost of Merchandise Sold 557,000 (a) 7,000 564,000 564,000
26 Sales Salaries Expense 101,400 (g) 1,500 102,900 102,900
27 Advertising Expense 45,000 45,000 45,000
28 Depr. Exp.—Store Equip. (e) 7,500 7,500 7,500
29 Delivery Expense 6,000 6,000 6,000
30 Store Supplies Expense (c) 3,050 3,050 3,050
31 Misc. Selling Expense 1,600 1,600 1,600
32 Office Salaries Expense 64,000 (g) 1,000 65,000 65,000
33 Rent Expense 25,200 25,200 25,200
34 Insurance Expense (b) 5,000 5,000 5,000
35 Depr. Exp.—Office Equip. (f) 3,800 3,800 3,800
36 Office Supplies Expense (d) 1,350 1,350 1,350
37 Misc. Admin. Expense 1,650 1,650 1,650
38 Rent Revenue (h) 2,000 2,000 2,000
39 Interest Expense 10,500 10,500 10,500
40 1,478,150 1,478,150 32,200 32,200 1,491,950 1,491,950 863,550 902,000 628,400 589,950
41 Net Income 38,450 38,450
42 902,000 902,000 628,400 628,400
Prob. C–2 Continued

2. QUALITY SPORTS CO.

Income Statement
For the Year Ended December 31, 2010
Revenue from sales:
Sales............................................................ $900,000
Less: Sales returns & allowances........... $ 13,900
Sales discounts.............................. 7,100 21,000
Net sales..................................................... $ 879,000
Cost of merchandise sold.............................. 564,000
Gross profit...................................................... $ 315,000
Expenses:
Selling expenses:
Sales salaries expense........................ $102,900
Advertising expense............................ 45,000
Depreciation expense—store
equipment........................................ 7,500
Delivery expense.................................. 6,000
Store supplies expense ...................... 3,050
Misc. selling expense.......................... 1,600
Total selling expenses................... $166,050
Administrative expenses:
Office salaries expense ...................... $ 65,000
Rent expense........................................ 25,200
Insurance expense............................... 5,000
Depreciation expense—office
equipment........................................ 3,800
Office supplies expense...................... 1,350
Misc. administrative expense............. 1,650
Total administrative
expenses..................................... 102,000
Total expenses........................................... 268,050
Income from operations................................. $ 46,950
Other income and expense:
Rent revenue.............................................. $ 2,000
Interest expense........................................ (10,500) (8,500)
Net income....................................................... $ 38,450

470
Prob. C–2 Continued

3.
QUALITY SPORTS CO.
Statement of Owner’s Equity
For the Year Ended December 31, 2010
Rosario Noe, capital, January 1, 2010................................. $286,450
Net income for the year......................................................... $38,450
Less withdrawals................................................................... 10,000
Increase in owner’s equity.................................................... 28,450
Rosario Noe, capital, December 31, 2010............................ $314,900

471
Prob. C–2 Continued

4.
QUALITY SPORTS CO.
Balance Sheet
December 31, 2010
Assets
Current assets:
Cash............................................................. $ 18,000
Accounts receivable................................... 42,500
Merchandise inventory.............................. 211,000
Prepaid insurance....................................... 3,000
Store supplies............................................. 1,150
Office supplies............................................ 750
Total current assets.............................. $276,400
Fixed assets:
Store equipment.......................................... $282,000
Less accumulated depreciation.......... 77,800 $204,200
Office equipment........................................ $ 60,000
Less accumulated depreciation.......... 21,000 39,000
Total fixed assets............................. 243,200
Total assets....................................................... $519,600

Liabilities
Current liabilities:
Accounts payable....................................... $ 26,700
Note payable (current portion).................. 25,000
Salaries payable.......................................... 2,500
Unearned rent.............................................. 500
Total current liabilities.......................... $ 54,700
Long-term liabilities:
Note payable (final payment, 2018).......... 150,000
Total liabilities.................................................. $204,700

Owner’s Equity
Rosario Noe, capital......................................... 314,900
Total liabilities and owner’s equity................ $519,600

472
Prob. C–2 Continued

5.
(a) Cost of Merchandise Sold............................................ 7,000
Merchandise Inventory............................................ 7,000
(b) Insurance Expense........................................................ 5,000
Prepaid Insurance.................................................... 5,000
(c) Store Supplies Expense................................................ 3,050
Store Supplies.......................................................... 3,050
(d) Office Supplies Expense............................................... 1,350
Office Supplies......................................................... 1,350
(e) Depreciation Expense—Store Equipment.................. 7,500
Accumulated Depreciation—Store Equipment..... 7,500
(f) Depreciation Expense—Office Equipment................. 3,800
Accumulated Depreciation—Office Equipment.... 3,800
(g) Sales Salaries Expense................................................. 1,500
Office Salaries Expense................................................ 1,000
Salaries Payable....................................................... 2,500
(h) Unearned Rent............................................................... 2,000
Rent Revenue............................................................ 2,000

473
Prob. C–2 Concluded

6. Sales................................................................................. 900,000
Rent Revenue.................................................................. 2,000
Income Summary....................................................... 902,000
Income Summary............................................................. 863,550
Sales Returns and Allowances................................ 13,900
Sales Discounts......................................................... 7,100
Cost of Merchandise Sold........................................ 564,000
Sales Salaries Expense............................................. 102,900
Advertising Expense................................................. 45,000
Depreciation Expense—Store Equipment.............. 7,500
Delivery Expense....................................................... 6,000
Store Supplies Expense............................................ 3,050
Miscellaneous Selling Expense............................... 1,600
Office Salaries Expense............................................ 65,000
Rent Expense............................................................. 25,200
Insurance Expense.................................................... 5,000
Depreciation Expense—Office Equipment............. 3,800
Office Supplies Expense........................................... 1,350
Miscellaneous Administrative Expense.................. 1,650
Interest Expense........................................................ 10,500
Income Summary............................................................. 38,450
Rosario Noe, Capital.................................................. 38,450
Rosario Noe, Capital....................................................... 10,000
Rosario Noe, Drawing............................................... 10,000

474