CASH AND ACCRUAL BASIS

Prob 2: B Prob 18: C Prob 30: A

Prob 4: A Prob 20: A
Prob 6: B A
Prob 8: A Prob 22: D
Prob 10: B Prob 24: A
Prob 12: A Prob 26: B
Prob 14: A Prob 28:
Prob 32:
1 Adjusting Entries
1 SALES 200,000 5
RETAINED ERANINGS 200,000

ACCOUNTS RECEIVABLE 250,000

SALES 250,000 6

2 SALES 40,000
ADVANCES TO CUSTOMER 40,000 7

3 RETAINED ERANINGS 350,000

PURCHASES 350,000
8
PURCHASES 280,000
ACCOUNTS PAYABLES 280,000

4 RETAINED ERANINGS 70,000 9

EXPENSES 70,000

EXPENSES 100,000 10
ACCRUED EXPENSES 100,000
2 Income Statement 3
ZAMBOANGA COMPANY
INCOME STATMENT
YEAR ENDED DECEMBER 31,2021

SALES 4,090,000
COST OF SALES:
MERCHANDISE INVENTORY-BEG 150,000
PURCHASES 1,830,000
GOODS AVAILABLE FOR SALE 1,980,000
MERCHANDISE INVENTORY-END -210,000 -1,770,000
GROSS INCOME 2,320,000
 EXPENSES:
EXPENSES 1,530,000
DEPRECIATION-EQUIPMENT 20,000
DEPRECIATION-BUILDING 300,000
DOUBTFUL ACCOUNTS 25,000
INTEREST EXPENSE 36,000 -1,911,000
NET INCOME 409,000

Prob 34
1 Adjusting Entries
1 MERCHANDISE INVENTORY- END 500,000 6
INCOME SUMMARY 500,000
2 ACCOUNTS RECEIVABLE 100,000 7
SALES 100,000
PURCHASES 80,000
ACCOUNTS PAYABLES 80,000
3 EXPENSES 20,000
ACCRUED EXPENSES 20,000
4 RECEIVABLE FROM OFFICER 10,000
PURCHASES 10,000
5 SALES 25,000 8
ADVANCES FROM CUSTOMER 25,000
2 Income Statement 3
CIVIC COMPANY
INCOME STATMENT
YEAR ENDED DECEMBER 31,2021

SALES 4,475,000
COST OF SALES:
PURCHASES 4,270,000
INVENTORY-END 500,000 -3,770,000
GROSS INCOME 705,000
EXPENSES:
EXPENSES 460,000
 DOUBTFUL ACCOUNTS 5,000
DEPRECIATION 5,000
INTEREST EXPENSE 4,000 -474,000
NET INCOME 231,000

Prob 36 1 A 2 B 3 B 4 A
MERCHANDIES INVENTORY-BEG 150,000
RETAINED EARNINGS 150,000
MERCHANDISE INVENTORY-END 210,000
INCOME SUMMARRY 210,000
ADVANCES TO SUPPLIER 100,000
PURCHASES 100,000

DEPRECIATION -EQUIPMENT 20,000

RETAINED EARNINGS 10,000
ACCUMULATED DEPRECIATION 30,000

DEPRECIATION-BUILDING 300,000
RETAINED EARNINGS 300,000
ACCUMULATED DEPRECIATION 600,000

DOUBTFUL ACCOUNTS 25,000

ALLOWANCE FOR DOUBTFUL ACCOUNTS 25,000

INTEREST EXPENSE 36,000

ACCRUED INTEREST EXPENSE 36,000
Statement of Financial Position
ZAMBOANGA COMPANY
STATEMENT OF FINANCIAL POSITION
DECEMBER 31,2021
ASSETS
CURRENT ASSETS:
CASH 1,500,000
ACCOUNTS RECEIVABLE, NET ALLOWANCES 225,000
ADVANCES TO SUPPLIES 100,000
MERCHANDISE INVENTORY 210,000 2,035,000
NONCURRENT ASSETS:
LAND 800,000
 EQUIPMENT 200,000
ACCUMULATED DEPRECIATION -30,000 170,000
BUILDING 1,500,000
ACCUMULATED DEPRECIATION -600,000 900,000 1,870,000
TOTAL ASSETS 3,905,000
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 280,000
ACCRUED EXPENSES 100,000
ACCRUED INTEREST PAYABLE 36,000 416,000
NONCURRENT LIBILITY:
MORTGAGE PAYABLE 900,000
EQUITY:
SHARE CAPITAL 2,000,000
RETAINED EARNINGS 589,000 2,589,000
TOTAL LIBILITIES AND EQUITY 3,905,000

DOUBTFUL ACCOUNTS 5,000

ALLOWANCE FOR DOUBTFUL ACCOUNTS 5,000
OFFICE SUPPLIES UNUSED 5,000
EXPENSES 5,000
EQUIPMENT 100,000
EXPENSES 100,000
DEPRECIATION 5,000
ACCUMULATED DEPRECIATION 5,000
PREPAID INSURANCE 15,000
EXPENSES 15,000
INTEREST EXPENSE 4,000
ACCRUED INTERES PAYABLE 4,000
Statement of Financial Position
CIVIC COMPANY
STATEMENT OF FINANCIAL POSITION
DECEMBER 31,2021
ASSETS
CURRENT ASSETS:
CASH 840,000
ACCOUNTS A 95,000
RECEIVABLE FROM OFFICER 10,000
INVENTORY 500,000
PREPAID EXPENSES 20,000 1,465,000
NONCURRENT ASSETS:
 EQUIPMENT 100,000
ACCUMULATED DEPRECIATION -5,000 95,000
TOTAL ASSETS 1,560,000
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 80,000
NOTES PAYABLE 200,000
ACCRUED EXPENSES 20,000
ADVANCES FROM CUSTOMER 25,000
ACCRUED INTEREST PAYABLE 4,000 329,000
EQUITY:
SHARE CAPITAL 1,000,000
RETAINED EARNINGS 231,000 1,231,000
TOTAL LIBILITIES AND EQUITY 1,560,000
5 B
SINGLE ENTRY
Prob 2 A Prob 8 C
Prob 4 A Prob 10 D
Prob 6 A Prob 12 C

Prob 14 Dec-31 Jan-01 CAPITAL-END

TOTAL ASSETS 6,880,000 6,000,000 WITHDRAWALS
TOTAL LIABILITIES -1,600,000 -2,120,000 TOTAL
CAPITAL 5,280,000 3,880,000 CAPITAL-BEG 3,880,000
INVESTMENT 600,000
NET INCOME

CASH SALES 800,000 CASH PURCHASE

SALES ON ACCOUNT: NOTES PAYABLE-END
NOTES RECEIVABLE-END 1,200,000 ACCOUNTS PAYABLE-END
ACCOUNTS RECEIVABLE-END 2,000,000 PAYMENTS TO NP
COLECTIONS-NR 960,000 PAYMENTS TO AP
COLLECTIONS-AR 3,000,000 PURCHASE ALLOWANCES
SALES DISCOUNT 100,000 TOTAL
BAD DEBTS 120,000 NOTES PAYABLE-BEG
SALES RETURNS 320,000 ACCOUNTS PAYABLE-BEG
TOTAL 8,500,000 TOTAL PURCHASES
NOTES RECEIVABLE-BEG 400,000
ACCOUNTS RECEIVABLE-BEG 1,600,000 -2,000,000 EQUIPMENT-BEG
TOTAL SALES 6,500,000 ACQUISITION
TOTAL
EQUIPMENT-END
CARRYING AMOUNT-EQUIPMENT SOL
DEPRECIAITON
Income Statement
LANCER COMPANY
INCOME STATEMENT
DECEMBER 31,2021
notes
1 NET SALES 6,080,000 NOTES TO INCOME STATEMENT:
2 COST OF SALES -3,640,000 1 NET SALES
GROSS INCOME 2,440,000 SALES
3 OTHER INCOME 180,000 SALES DISCOUNT
TOTAL INCOME 2,620,000 SALES RETURN
EXPENSES:
EXPENSES 800,000
 BAD DEBTS 120,000 2 COST OF SALES
DEPRECIATION 380,000 INVENTORY-BEG
INTEREST EXPENSES 120,000 -1,420,000 PURCHASES
NET INCOME 1,200,000 PURCHASE ALLOWANCE
GAS
INVENTORY-END

Prob 16
Income Statement Statement of Financial Po
CAMRY CORPORATION CAMRY CORPORATION
INCOME STATEMENT STTEMENT OF FINANCIAL
DECEMBER 31,2021 DECEMBER 31,2021
ASSETS
SALES 3,990,000 CURRENT ASSETS:
COST OF SALES:
MERCHANDISE INVENTORY-BEG 700,000
PURCHASES 2,280,000
PURCHASE RETURNS -70,000
GOODS AVAILABLE FOR SALE 2,910,000 NONCURRENT ASSETS:
MERCHANDISE INVENTORY-END -650,000 2,260,000
GROSS INCOME 1,730,000
EXPENSES: TOTAL ASSETS
SALARIES 405,000 LIABILITIES AND EQUITY
SUPPLIES 95,000 CURRENT LIABILITIES:
TAXES 45,000
OTHER EXPENSES 245,000
DOUBTFUL ACCOUNTS 60,000
DEPRECIATION 35,000 EQUITY:
BANK SERVICE CHARGE 10,000
MISCELLANEOUS EXPENSE 35,000 -930,000
NET INCOME 800,000

TOTAL LIABILITIES AND EQ

Prob 18
Income Statement Statement of FInancial Po
ULTIMATE COMPANY ULTIMATE COMPANY
INCOME STATEMENT STATEMENT OF FINANCIAL
DECEMBER 31,2021 DECEMBER 31,2021
ASSETS
SALES 3,150,000 CURRENT ASSETS:
COST OF SALES:
INVENTORY-BEG 230,000
 PURCHASES 1,570,000
GOODS AVAILABLE FOR SALE 1,800,000
INVENTORY-END -245,000 -1,555,000 NONCURRENT ASSETS:
GROSS INCOME 1,595,000
GAIN ON SALE OF EQUIPMENT 25,000
TOTAL INCOME 1,620,000
EXPENSES:
INSURANCE 90,000
DEPRECIATION 285,000 TOTAL ASSETS
SALARIES 400,000 LIABILITIES AND EQUITY
DOUBTFUL ACCOUNTS 10,000 CURRENT LIABILITIES:
OTHER EXPENSES 135,000 -920,000
NET INCOME 700,000

EQUITY:

TOTAL LIABILITIES AND EQ

 5,280,000
400,000
5,680,000

-4,480,000
1,200,000

600,000 RENT RECEIVED 80,000

480,000 UNEARNED RENT INCOME-BEG 120,000
S PAYABLE-END 1,040,000 TOTAL 200,000
1,280,000 UNEARNED RENT INCOME- END -40,000
1,520,000 RENT INCOME 160,000
ALLOWANCES 80,000
5,000,000 SALES PRICE 120,000
720,000 CARRYING AMOUNT-EQUIPMENT SOLD -100,000
S PAYABLE-BEG 1,200,000 -1,920,000 GAIN ON SALE OF EQUIPMENT 20,000
3,080,000
INTEREST PAID 160,000
1,200,000 ACCRUED INTEREST PAYABLE-END 40,000
400,000 TOTAL 200,000
1,600,000 ACCRUED INTEREST PAYABLE-BEG -80,000
-1,120,000 INTEREST EXPENSE 120,000
AMOUNT-EQUIPMENT SOLD -100,000
380,000

INCOME STATEMENT:

6,500,000 3 OTHER INCOME

SALES DISCOUNT -100,000 RENT INCOME 160,000
SALES RETURN -320,000 GAIN ON SALE OF EQUIPMENT 20,000
6,080,000 180,000
COST OF SALES
INVENTORY-BEG 1,600,000
PURCHASES 3,080,000
PURCHASE ALLOWANCE -80,000 3,000,000
4,600,000
INVENTORY-END -960,000
3,640,000

Statement of Financial Position

CAMRY CORPORATION
STTEMENT OF FINANCIAL POSITION
DECEMBER 31,2021

CURRENT ASSETS:
CASH 760,000
ACCOUNTS RECEIVABLES,NET 400,000
MERCHANDISE INVENTORY 650,000
PREPAID SUPPLIES 20,000 1,830,000
NONCURRENT ASSETS:
EQUIPMENT 350,000
ACCUMULATED DEPRECIATION -135,000 215,000
TOTAL ASSETS 2,045,000
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 260,000
NOTES PAYABLE 80,000
ACCRUED SALARIES EXPENSE 15,000 355,000

CAPITAL-BEG 1,130,000
NET INCOME 800,000
TOTAL 1,930,000
DRAWINGS -240,000 1,690,000
TOTAL LIABILITIES AND EQUITY 2,045,000

Statement of FInancial Position

ULTIMATE COMPANY
STATEMENT OF FINANCIAL POSITION
DECEMBER 31,2021

CURRENT ASSETS:
CASH 905,000
ACCOUNTS RECEIVABLES, NET 190,000
 INVENTORY 245,000
PREPAID INSURANCE 25,000 1,365,000
NONCURRENT ASSETS:
LAND 500,000
BUILDING 2,000,000
ACCUMULATED DEPRECIATION -900,000
EQUIPMENT 950,000
ACCUMULATED DEPRECIATION -295,000 2,255,000
TOTAL ASSETS 3,620,000
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 100,000
ACCRUED SALARIES EXPENSE 30,000
ADVANCES FROM CUSTOMERS 50,000
DIVIDENDS PAYABLE 125,000 305,000

SHARE CAPITAL 2,500,000

RETAINED EARNINGS 815,000 3,315,000
TOTAL LIABILITIES AND EQUITY 3,620,000
ERROR CORRECTION
Prob 2 A Correction Worksheet
2020 2021
NET INCOME 3,000,000 4,000,000
2020 INVENTORY UNDERSTATED 20,000 -20,000
2021 INVENTORY OVERSTATED - -18,000
2020 DEPRECIATION UNDERSTATED -4,000 -
2020 UNRECORDED PREPAID INSURANCE 10,000 -5,000
GAIN ON SALE OF MACHINERY - 32,000
CORRECTED NET INCOME 3,026,000 3,989,000

B Adjusting Entries-DECEMBER 31,2021

1 INVENTORY-BEG 20,000
RETAINED EARNINGS 20,000
2 PROFIT AND LOSS 18,000
INVENTORY-END 18,000
3 RETAINED EARNINGS 4,000
ACCUMULATED DEPRECIATION 4,000
4 PREPAID INSURANCE 5,000
INSURANCE 5,000
RETAINED EARNINGS 10,000
5 CASH 32,000
ACCUMULATED DEPRECIATION 200,000
MACHINERY 200,000
GAIN ON SALE OF MACHINERY 32,000

Prob 6 B Prob 12 B Prob 20

Prob 8 C Prob 14 A 1
Prob 10 B B 2
A D 3
A Prob 16 A 4
A Prob 18 A 5
Prob 4 A Correct Net Income
INCOME-BOOK 6,500,000
UNRECORDED PURCHASE -1,000,000
INVENTORY-END UNDERSTATED 1,500,000
UNRECORDED ADVERTISING -500,000
UNEARNED RENT INCOME -200,000
PREPAID INSURANCE 100,000
CORRECTED NET INCOME 6,400,000

B Adjusting EntrieS-December 31,2021

1

D 6 C
C 7 B
D 8 A
A 9 A
C 10 B
STATEMENT OF CAHS FLOWS
Prob 2 Staement of Cash Flow-Indirect Method Prob 4
HILL COMPANY
STATEMENT OF CASH FLOWS
DECEMBER 31,2021

CASH FLOW FROM OPERATING ACTIVITIES:

NET INCOME 1,500,000
INCREASE IN ACCOUTNS RECEIVABLE -650,000
INCREASE IN INVENTORY -750,000
DECREASE IN PREPAID EXPENSES 50,000
INCREASE IN ACCOUNTS PAYABLE 250,000
DECREASE IN ACCRUED EXPENSES -150,000
DEPRECIATION 350,000 600,000
CASH FLOW FROM INVESTING ACTIVITIES:
PURCHASE OF EQUIPMENT -1,000,000
CASH FLOW FROM FINANCING ACTIVITIES:
ISSUE OF SHARE CAPITAL 500,000
PAYMENT OF CASH DIVIDEND -300,000 200,000
DECREASE IN CASH AND CASH EQUIVALENTS -200,000
CASH AND CASH EQUIVALENTS-BEG 950,000
CASH AND CASH EQUIVALENTS-END 750,000

Porb 6 Statement of Cash Flows

KENWOOD COMPANY
STATEMENT OF CASH FLOWS
DECEMBER 31,2021

CASH FLOW FROM OPERATING ACTIVITIES:

NET INCOME 1,095,000
GAINS ON BOND RETIREMENT -50,000
LOSS ON SALE OF EQUIPMENT 20,000
INCREASE IN ACCOUNTS RECEIVABLE, NET -350,000
INCREASE IN INVENTORY -100,000
DEPRECIATION 100,000
AMORTIZATION OF PATENT 15,000
INCREASE IN ACCOUNTS PAYABLE 350,000
INCREASE IN ACCRUED EXPENSES 250,000 1,330,000
CASH FLOW FROM INVESTING ACTIVITIES:
SALE OF EQUIPMENT 95,000
 PURCHASE OF LAND -425,000 -330,000
CASH FLOW FROM FINANCING ACTIVITIES:
RETIREMENT OF BONDS PAYABLE -450,000
CASH DIVIDENDS -500,000 -950,000
INCREASE IN CASH AND CASH EQUIVALENTS 50,000
CASH AND CASH EQUIVALENTS-BEG 450,000
CASH AND CASH EQUIVALENT-END 500,000
Statement of Cash Flow
FOREST COMPANY
STATEMENT OF CASH FLOW
DECEMBER 31,2021

CASH FLOW FROM OPERATING ACTIVITIES:

NET INCOME 1,705,000
AMORTIZATION OF DISCOUNT 10,000
LOSS ON RETIREMENT 28,000
INCREASE IN ACCOUNST RECEIVABLE -80,000
INCREASE IN INVENTORY -60,000
DEPRECIATION 100,000
UNREALIZED GAIN -100,000
DECREASE IN ACCOUNT PAYABLE -310,000
INCREASE IN ACCRUED EXPENSES 100,000 1,393,000
CASH FLOW FROM FINANCING ACTIVITIES:
ISSUE OF ORDINARY SHARE CAPITAL 120,000
PAYMENT OF CASH DIVIDENDS -1,000,000
BOND RETIREMENT -210,000 -1,090,000
INCREASE IN CASH AND CASH EQUIVALENTS 303,000
CASH AND CASH EQUIVALENTS-BEG 300,000
CASH AND CASH EQUIVALENTS-END 603,000

Prob 8 C Prob 32 B Prob 40 1 C 6

Prob 10 A D 2 A 7
Prob 12 C D 3 A 8
Prob 14 C Prob 34 C 4 C 9
Prob 16 A B 5 C 10
Prob 18 A D
Prob 20 B Prob 36 A
Prob 22 D B
Prob 24 B C
Prob 26 D Prob 38 A
Prob 28 A B
B C
Prob 30 A D
C
D
C
C
D