Handout 3-1 Inferring Statement of Earnings Values

Supply the missing dollar amounts for the 2014 statement of earnings of Ultimate Style
Company for each of the following independent cases:

Case A Case B Case C Case D Case E

Sales revenue $900 $700 $410 $ * $ *
Cost of sales * 380 * 500 310
Gross profit 400 * * * 440
Other operating expenses:
Selling expense * 150 80 400 250
Administrative expense 150 * 60 100 80
* * * * *
Earnings before income tax 200 90 * 190 *
Income tax expense * 30 20 40 30
Net earnings $170 $ * $ 50 $ * $80

Handout 3-2: Transaction Analysis

Make journal entries for the following items.

(a) Provide website design services for $40,000, and receive cash.

Debit and credit the accounts affected

(b) Provide website design services to Acme Company, for $20,000 on account. We expect
Acme to pay in the future.

Debit and credit the accounts affected

(c) Collect $18,000 from Acme Company on account.

Debit and credit the accounts affected

(d) Sell a $1,000 gift certificate.

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Debit and credit the accounts affected

(e) Customer redeems $1,000 gift certificate for website design services.

Debit and credit the accounts affected

(f) Paid employees $16,000 earned.

Debit and credit the accounts affected

(g) Paid $3,000 insurance for next year in advance.

Debit and credit the accounts affected

(h) Paid $9,000 rent for next six months in advance.

Debit and credit the accounts affected

(i) Received $250 telephone bill for this month, to be paid next month.

Debit and credit the accounts affected

(j) Received $500 utility bill for this month, to be paid immediately.

Debit and credit the accounts affected

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T-Account
Assets Liabilities Shareholders’ Equity
+ Cash – - Accounts Payable + -Contributed Capital +
BegBa 3,10 0 BegBal 10,000 BegBal
l 0

- Notes Payable + - Retained Earnings +

15,000 BegBal 0 BegBal

+ Supplies –
BegBal 900 - Revenue +
0 BegBal
- Deferred/Unearned Revenue +
0 BegBal

+ Accounts Receivable –
BegBal 0
+ Wage Expense –
BegBal 0

+ Prepaid Rent –
BegBal 0

+ Utilities Expense –
BegBal 0

+ Prepaid Insurance –
BegBal 0

+ Telephone Expense –
BegBal 0

+ Property, Plant & Equipment –

BegBal 21,000

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Handout 3-3: Unadjusted Trial Balance
World Wide Webster
Unadjusted Trial Balance
January 2014

Debit Credit
Cash
Supplies
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Property, Plant & Equipment
Accounts Payable
Notes Payable
Deferred/Unearned Revenue
Contributed Capital
Retained Earnings
Revenue
Wage Expense
Utilities Expense
Telephone Expense
Totals