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Accounting Cycle Exercises IV
Larry M
...
Skousen

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Larry M
...
Skousen

Accounting Cycle Exercises IV

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Walther, Christopher J
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All material in this publication is copyrighted, and the exclusive property of
Larry M
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ISBN 978-87-7681-644-5

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Accounting Cycle Exercises IV

Contents



Solution 3 (a)

21



Solution 3 (b)

22



Solution 3 (c)

23



Problem 4

24



Worksheet 4

25



Solution 4

27



Problem 5

29



Worksheet 5

30



Solution 5

31



Problem 6

32



Worksheet 6 (a)



Worksheet 6 (b)



Worksheet 6 (c)



Solution 6 (a)



Solution 6 (b)



Solution 6 (c)

360°
thinking


...


33
34
35
37
38
38

360°
thinking


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...


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...
ca/careers

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Deloitte & Touche LLP and affiliated entities
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Dis

Accounting Cycle Exercises IV

Contents



Problem 7

41



Worksheet 7 (a)

42



Worksheet 7 (b)

43



Solution 7 (a)

45



Solution 7 (b)

46



Problem 8

48



Worksheet 8

49



Solution 8

50

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Accounting Cycle Exercises IV

Problem 1

Problem 1
Alberto Condor has an eye for quality
...
Customers buy the artwork through the gallery, but payments are actually
made payable directly to the originating artist
...

Following is Albert’s trial balance after the first year of operation
...

ALBERT CONDOR ART GALLERY
Trial Balance
As of December 31, 20X8
Debits

Credits

$ 64,400

$ -

Supplies

23,765

-

Display equipment

52,500

-

Loan Payable

-

26,250

Capital Stock

-

87,500

Revenues

-

170,065

Rent Expense

38,500

-

Salaries Expense

84,000

-

Interest Expense

1,750

-

Utilities Expense

18,900

-

Cash

$ 283,815

$ 283,815

The Display equipment was purchased near the beginning of the year
...
Its cost should be depreciated equally over its life
...
This revenue has not yet been recorded,
but it is fully expected that the artists will soon be making payment
...


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a) Prepare the necessary adjusting enties as of December 31, 20X8
...

c) Prepare the adjusted trial balance for Amber Nestor
...
31

Dec
...
31

Dec
...
com

8

Accounting Cycle Exercises IV

Problem 1

DISPLAY EQUIPMENT

INTEREST EXPENSE

ACCUMULATED DEPRECIATION

UTILITIES EXPENSE

LOAN PAYABLE

RENT PAYABLE

CAPITAL STOCK

Worksheet 1 (c)
ALBERT CONDOR ART GALLERY
Adjusted Trial Balance
As of December 31, 20X8
Debits
Cash

Credits

$ -

$ -

Accounts Receivable

-

-

Supplies

-

-

Display equipment

-

-

Accumulated deprec
...
com

9

Accounting Cycle Exercises IV

Problem 1

Solution 1 (a)
GENERAL JOURNAL
Date

Accounts

Dec
...
31

Accounts Receivable

62,650

Revenues

62,650

To record earned revenues

Dec
...
31

Rent Expense

3,500

Rent Payable

3,500

To record rent due and payable

Solution 1 (b)
CASH

REVENUES

64,400

170,065
62,650
232,715

ACCOUNTS RECEIVABLE
aje #2

RENT EXPENSE

62,650

38,500
aje #4

3,500
42,000

SUPPLIES
23,765

SALARIES EXPENSE
11,865

84,000

aje #3

11,900

DISPLAY EQUIPMENT

INTEREST EXPENSE

52,500

1,750

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Month 16
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Mo
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solve problems
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-

10,500

Rent Payable

-

3,500

Loan Payable

-

26,250

Capital Stock

-

87,500

Revenues

-

232,715

Rent Expense

42,000

-

Salaries Expense

84,000

-

Interest Expense

1,750

-

Utilities Expense

18,900

-

Depreciation Expense

10,500

-

Supplies Expense

11,865

-

$ 360,465

$ 360,465

Cash

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Over-Head-Eye
utilizes satellite technology and sophisticated mapping software to alert its customers to trespassing,
illegal dumping, and other encroachments on property these customers own around the globe
...

Mr
...
Prepare these reports from the following adjusted trial balance
...
Schnitzer needs this
information for internal review purposes, and does not require a classified balance sheet
...

OVER-HEAD-EYE CORPORATIOn
Adjusted Trial Balance
As of December 31, 20X0
Debits

Credits

$ 2,502,663

$ -

1,037,727

-

Prepaid Expenses

137,361

-

Supplies

199,995

-

9,027,000

-

Accumulated deprec
...
1

-

686,676

Dividends

150,000

-

Revenues

-

7,120,206

Selling Expenses

1,429,335

-

Interest Expense

240,000

-

2,033,001

-

668,967

-

1,725,000

-

$ 19,151,049

$ 19,151,049

Cash
Accounts Receivable

Satellite equipment

Salaries Expenses
Maintenance and supplies
expense
Depreciation expense

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Accounting Cycle Exercises IV

Problem 2

OVER-HEAD-EYE CORPORATION
Statement of Retained Earnings
Beginning retained earnings

$ -

Plus: Net income



-

$ $ -

OVER-HEAD-EYE CORPORATION
Balance Sheet
Assets
$ Satellite equipment

$ -

Less: Accumulated depreciation

-

  Total assets

$ -

Liabilities
$   Total liabilities

$ -

Stockholders’ equity
$ Total stockholders’ equity

-

  Total liabilities and equity

$ -

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Accounting Cycle Exercises IV

Problem 2

OVER-HEAD-EYE CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 20X0
Beginning retained earnings

$ 686,676

Plus: Net income

1,023,903
$ 1,710,579

Less: Dividends

150,000

Ending retained earnings

$ 1,560,579

OVER-HEAD-EYE CORPORATION
Balance Sheet
December 31, 20X0
Assets
Cash

$ 2,502,663

Accounts receivable

1,037,727

Prepaid expenses

137,361

Supplies

199,995

Satellite equipment

$ 9,027,000

Less: Accumulated depreciation

(3,666,597)

  Total assets

5,360,403
$ 9,238,149

Liabilities
Accounts payable

$ 1,632,570

Unearned revenues

1,365,000

Loan payable

3,000,000

  Total liabilities

$ 5,997,570

Stockholders’ equity
Capital stock

$ 1,680,000

Retained earnings

1,560,579

  Total stockholders’ equity

3,240,579

   Total liabilities and equity

$ 9,238,149

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The company has
completed preparation of financial statements and is now ready to prepare closing entries
...


-

90,900

Accounts Payable

-

78,300

Loan Payable

-

225,000

Capital Stock

-

180,000

Retained earnings

-

157,500

Dividends

45,000

-

Revenues

-

1,076,400

Rent Expense

270,000

-

Salaries Expense

530,100

-

Supplies Expenses

40,500

-

Interest Expenses

16,650

-

Depreciation expense

22,725

-

$ 1,808,100

$ 1,808,100

Cash

Equipment

a) Prepare the necessary closing entries
...

c) Prepare the post-closing trial balance
...
com

18

Accounting Cycle Exercises IV

Problem 3

Worksheet 3 (a)
GENERAL JOURNAL
Date

Accounts

Debit

Credit

Dec
...
31

To close the expense accounts to
Income Summary
Dec
...
31
To close dividends

Worksheet 3 (b)
CASH

DIVIDENDS
closing

ACCOUNTS RECEIVABLE

REVENUES
closing

SUPPLIES

RENT EXPENSE
closing

EQUIPMENT

SALARIES EXPENSE
closing

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31

Accounts

Debit

Revenues

Credit

1,076,400

  Income Summary

1,076,400

To close the revenue account to
Income Summary
Dec
...
31

Income Summary

196,425

  Retained Earnings

196,425

To close Income Summary to
retained earnings
Dec
...
com

21

Accounting Cycle Exercises IV

Problem 3

Solution 3 (b)
CASH

DIVIDENDS

80,100

45,000

45,000

closing

0
ACCOUNTS RECEIVABLE

REVENUES

53,325

closing

1,076,400

1,076,400
0

SUPPLIES

RENT EXPENSE

16,875

270,000

270,000

closing

0
EQUIPMENT

SALARIES EXPENSE

732,825

530,100

530,100

closing

0
ACCUMULATED DEPRECIATION

SUPPLIES EXPENSE

90,900

40,500

40,500

closing

0
ACCOUNTS PAYABLE

INTEREST EXPENSE

78,300

16,650

16,650

closing

0
LOAN PAYABLE

DEPRECIATION EXPENSE

225,000

22,725

22,725

closing

0
CAPITAL STOCK

INCOME SUMMARY

180,000

closing

879,975

closing

196,425
0

RETAINED EARNINGS
closing

45,000

157,500
196,425

45,000

closing

353,925
308,925

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Accounting Cycle Exercises IV

Problem 4

Problem 4
Elements is an upscale university housing complex providing all the amenities of private townhouse
living, and a full service 24-hour cafeteria for busy students
...

As of December 31, 20X8, the company owes $45,000 of additional salaries to employees, and accrued
rent due from residents amounts to $300,000
...

On January 15, 20X9, Traditions received rental payments for $750,0000 covering the rents due as due
of December 31, 20X8, and additional amounts relating to the first half of January, 20X9
...

b) Determine the total salaries expense and total rent revenue for 20X4
...

d) Assuming the company used reversing entries, prepare entries for January 10 and 15, 20X5
...

f) Show how 20X5 salaries expense and rent revenue will be the same, whether reversing
entries are used or not
...
com

24

Accounting Cycle Exercises IV

Problem 4

Worksheet 4
GENERAL JOURNAL
Date
a)

Accounts

Debit

Dec
...
31

b)

c)

Jan
...
1

d)

Jan
...
15

e)

Jan
...
com

25

Credit

Accounting Cycle Exercises IV

Problem 4

Jan
...


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31

Accounts

Debit

Salaries Expense

Credit

45,000

Salaries Payable

45,000

To record accrued salaries

Dec
...
1

Salaries Payable

45,000

Salaries Expense

45,000

To reverse accrued salaries

Jan
...
10

Salaries Expense

120,000

Cash

120,000

To record payment of salaries

Jan
...
10

Salaries Expense

75,000

Salaries Payable

45,000

Cash

120,000

To record payment of salaries

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15

Problem 4

Cash

750,000

Rent Receivable

300,000

Rent Revenues

450,000

To record collection of rent

f)

Salaries expense without reversing entries of $75,000 (see entry (e)) equals the results from (c)
and (d) with reversing entries ($120,000 – $45,000)
...


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He is interested in attracting
additional investors to obtain financing for planned expansion
...


To alleviate this concern Dingane provided the following complete list of assets and liabilities of
the company
...
Use this information to determine the
company’s current assets, current liabilities, working capital, current ratio, and quick ratio
...
com

29

Accounting Cycle Exercises IV

Problem 5

Worksheet 5
Current Assets
Accumulated Depreciation
Prepaid Rent

Quick Assets

Current
Liabilities

R 7,995,750
80,150

Note Payable (due in 3 months)

175,000

Accounts Receivable

819,000

Accounts Payable

446,250

Patent

5,250,000

Cash

1,382,500

Supplies

235,900

Unearned Revenues

232,750

Equipment
Interest Payable
Loan Payable (due in 3 years)

15,360,800
78,750
2,625,000

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Accounting Cycle Exercises IV

Problem 5

Working Capital:

Current Ratio:

Quick Ratio:

Solution 5
Current Assets
Accumulated Depreciation

Quick Assets

Current Liabilities

R 7,995,750

Prepaid Rent

80,150

Note Payable (due in 3 months)

175,000

Accounts Receivable

819,000

Accounts Payable

R 80,150
R 175,000

446,250

819,000

R 819,000
446,250

Patent

5,250,000

Cash

1,382,500

1,382,500

Supplies

235,900

235,900

Unearned Revenues

232,750

Equipment

1,382,500
232,750

15,360,800

Interest Payable

78,750

Loan Payable (due in 3 years)

78,750

2,625,000
R 2,517,550

R 2,201,500

R 932,750

Working Capital:
Current assets

R 2,517,550

Less: Current liabilities

932,750
R 1,584,800

Current Ratio:
Current assets ÷ Current liabilities

R 2,517,550 ÷ R 932,750 = 2
...
36

The ratios do not seem to indicate a liquidity problem
...


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...
The trial balance and
other information was evaluated by Darren Anderson, CPA
...

MCCORMICK CORPORATION
Trial Balance
As of December 31, 20X8
Debits

Credits

$ 91,620

$ -

135,000

-

21,000

-

733,500

-

Accumulated Deprec
...
1

-

189,600

Dividends

36,000

-

Revenues

-

869,400

643,800

-

Utilities Expenses

26,100

-

Selling Expenses

124,830

-

Depreciation Expenses

36,000

-

Interest expense

22,500

-

$ 1,870,350

$ 1,870,350

Cash
Accounts Receivable
Supplies
Equipment

Wages Expense

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33

Credit

Accounting Cycle Exercises IV

Problem 6

Worksheet 6 (b)
McCORMICK CORPORATION
Worksheet for Adjusted Trial Balance
December 31, 20X8
Debits
Cash
Accounts Receivable
Supplies

$

Debits

91,620

$

Debits
-

$

Debits
-

$

Debits
-

$

Debits
-

$

-

135,000

-

-

-

-

-

21,000

-

-

-

-

-

733,500

-

-

-

-

-

Accumulated Deprec
...
1

-

189,600

-

-

-

-

36,000

-

-

-

-

-

Dividends
Revenues

-

869,400

-

-

-

-

643,800

-

-

-

-

-

Utilities Expense

26,100

-

-

-

-

-

Selling Expenses

124,830

-

-

-

-

-

36,000

-

-

-

-

-

-

-

-

-

-

-

22,500

-

-

-

-

-

$ 1,870,350

$ 1,870,350

Wages Expense

Depreciation Expenses
Supplies Expenses
Interest expense

$

-

$

-

$

-

$

-

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35

Accounting Cycle Exercises IV

Problem 6

McCORMICK CORPORATION
Balance Sheet
December 31, 20X8
Assets
  Current assets
 Cash

$ -

  Accounts receivable

-

 Supplies

-

$ -

Property, plant & equipment
 Equipment

$ -

  Less: Accumulated depreciation

-

Total assets

$ -

Liabilities
  Current liabilities
  Accounts payable

$ -

  Utilities payable

-

  Wages payable

-

  Unearned revenue

-

$ -

Long-term liabilities
  Notes payable

-

  Total liabilities

$ -

Stockholders’ equity
  Capital stock

$ -

  Retained earnings

-

Total stockholders’ equity

-

  Total liabilities and equity

$ -

d)

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31

Accounts

Debit

Unearned Revenue

Credit

37,500

Revenues

37,500

To adjust Unearned Revenue for portion
earned ($93,750 X 40%)
Dec
...
31

Utilities Expense

4,500

Utlities Payable

4,500

To record accrued utilities
Dec
...
31

Depreciation Expense

9,300

Accumulated Depreciation

9,300

To record depreciation expense

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38

Accounting Cycle Exercises IV

Problem 6

McCORMICK CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 20X8
Beginning retained earnings

$ 189,600

Plus: Net income

16,170
$ 205,770

Less: Dividends

36,000

Ending retained earnings

$ 169,770

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The increase in revenues
of $37,500 is exactly offset by the increase in expenses ($12,000 + $4,500 + $11,700 +
$9,300 = $37,500)
...
It is important that all information be correct, and the adjustments should
be recorded
...
com

40

Accounting Cycle Exercises IV

Problem 7

Problem 7
Examine the following trial balances, before and after adjustment:
YORKSHIRE CONSULTING CORPORATION
Trial Balance and Adjusted Trial Balance
As of December 31, 20X9

Debits

Debits

Debits

Debits

$ 667,560

$ -

$ 667,560

$ -

350,616

-

430,616

-

Supplies

35,968

-

18,000

-

Prepaid Rent

24,000

-

8,000

-

582,800

-

582,800

-

Accumulated Deprec
...
1

-

356,476

-

356,476

Dividends

160,000

-

160,000

-

Revenues

-

1,337,960

-

1,441,960

1,104,492

-

1,122,492

-

132,000

-

148,000

-

Depreciation Expenses

-

-

28,000

-

Supplies Expenses

-

-

17,968

-

14,000

-

20,000

-

3,071,436

$ 3,071,436

$ 3,203,436

Cash
Accounts Receivable

Equipment

Wages Expense
Rent Expenses

Interest expense
$

$ 3,203,436

a) Determine and record the apparent adjusting entries in journal entry format
...

c) Prepare a statement of retained earnings for the year ending December 31, 20X9
...


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Credit

Accounting Cycle Exercises IV

Problem 7

Worksheet 7 (b)
YORKSHIRE CONSULTING CORPORATION
Income Statement
For the Year Ending December 31, 20X9
Revenues
  Services to customers

$ -

Expenses
 Wages

$ -

 Rent



-

 Depreciation



-

 Supplies



-

 Interest



-

Net income

$ -

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Accounting Cycle Exercises IV

Problem 7

YORKSHIRE CONSULTING CORPORATION
Statement of Retained Earnings
For the Year Ending December 31, 20X9
Beginning retained earnings

$ -

Plus: Net income

$ -

Less: Dividends

$ -

Ending retained earnings

YORKSHIRE CONSULTING CORPORATION
Balance Sheet
December 31, 20X9
Assets
  Current assets
 Cash

$ -

  Accounts receivable

-

 Supplies

-

  Prepaid rent

-

$ -

Property, plant & equipment
 Equipment

$ -

  Less: Accumulated depreciation

-

$ -

Total assets
Liabilities
  Current liabilities
  Accounts payable

$ -

  Wages payable

-

  Interest payable

-

  Unearned revenue

-

$ -

Long-term liabilities
  Notes payable

-

Total liabilities

$ -

Stockholders’ equity
  Capital stock

$ -

  Retained earnings

-

Total stockholders’ equity

-

  Total liabilities and equity

$ -

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31

Accounts

Debit

Accounts Receivable

Credit

80,000

Revenues

80,000

To record earned revenues and
related receivable

Dec
...
31

Rent Expense

16,000

Prepaid Rent

16,000

To record expired rent

Dec
...
31

Wages Expense

18,000

Wages Payable

18,000

To record accrued wages

Dec
...
31

Unearned Revenue

24,000

Revenues

24,000

To record earned portion of customer
prepayment ($72,000 – $48,000 = $24,000)

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46

Accounting Cycle Exercises IV

Problem 7

YORKSHIRE CONSULTING CORPORATION
Balance Sheet
December 31, 20X9
Assets
  Current assets
 Cash

$ 667,560

  Accounts receivable

430,616

 Supplies

18,000

  Prepaid rent

8,000

$ 1,124,176

Property, plant & equipment
 Equipment

$ 582,800

  Less: Accumulated depreciation

(178,640)

Total assets

404,160
$ 1,528,336

Liabilities
  Current liabilities
  Accounts payable

$ 54,360

  Wages payable

18,000

  Interest payable

6,000

  Unearned revenue

48,000

$ 126,360

Long-term liabilities
  Notes payable

200,000

Total liabilities

$ 326,360

Stockholders’ equity
  Capital stock

$ 900,000

  Retained earnings

301,976

Total stockholders’ equity

1,201,976

  Total liabilities and equity

$ 1,528,336

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...
Some of the accounts do not belong in the balance sheet, and 20% of the loan
payable matures each June 30
...
com

48

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Accounting Cycle Exercises IV

Problem 8

Loan payable 3,000,000
Equipment 2,663,655
Land 836,370
Interest payable 93,351
Inventories 363,024
Cash value of life insurance

75,000

Worksheet 8
WYLFA CORPORATION
Balance Sheet
December 31, 20X8
Assets

Liabilities

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