MGAB01H3 Lecture Notes - Lecture 3: Accrual, Deferral
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On November 1, 2012 the following were the account balances ofSolo Sales and Service, Inc. The perpetual inventory method isused.
Debits | Credits | |||
Cash | $4,795 | Accumulated depreciation | $1,000 | |
Accounts Receivable | 2,320 | Accounts Payable | 6,800 | |
Supplies | 1,000 | Unearned Service Revenue | 400 | |
Equipment | 40,000 | Salaries Payable | 550 | |
Common Stock | 11,000 | |||
Retained Earnings | 28,365 | |||
$48,115 | $48,115 |
During November the followingsummary transactions were completed.
Nov. 8 | Paid $1,150 for salaries due employees, of which $550 is forOctober salaries payable and $600 is for November. |
10 | Received $1,400 cash from customers in payment of account. |
11 | Purchased merchandise on account from Midwest Wholesale Supplyfor $6,000, terms 2/10, n/30. |
12 | Sold merchandise on account for $4,500, terms 2/10, n/30. Thecost of the merchandise sold was $3,000. |
15 | Received credit from Midwest Wholesale Supply for merchandisereturned $200. |
19 | Received collections in full, less discounts, from customersbilled on sales of $4,500 on November 12. |
20 | Paid Midwest Wholesale Supply in full, less discount. (Don’tforget the return on the 15th.) |
22 | Received $1,300 cash for services performed in November. |
25 | Purchased equipment on account $3,000. |
27 | Purchased supplies on account $1,300. |
28 | Paid creditors $2,500 of accounts payable due. |
29 | Paid November rent $300. |
29 | Paid salaries $1,100. |
29 | Performed services on account and billed customers for servicesprovided $1,900. |
29 | Received $550 from customers for services to be provided in thefuture. |
Adjustment data:
1. | Supplies on hand are valued at $1,600. |
2. | Accrued salaries payable as of 11/30 are $500. |
3. | Depreciation for the month is $750. |
4. | $650 of the unearned service revenue has not been earned bymonth end. |
Instructions
Enter the November 1 balances in ledger accounts. Use T accountsprovided on the next page.
Cash | |
| |
|
Accounts Receivable | |
Supplies | |
Store Equipment | |
Accumulated Depreciation— Store Equipment | |
Accounts Payable | |
Unearned Service Revenue | |
Salaries Payable | |
Common Stock | |
Retained Earnings | |
General Ledger (Continued)
Income Summary | |
Stacey's Piano Rebuilding Company has been operating for one year. At the start of the second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash | $ | 6,400 | Accounts payable | $ | 9,600 |
Accounts receivable | 32,000 | Unearned revenue | 3,840 | ||
Supplies | 1,500 | Long-term note payable | 48,500 | ||
Equipment | 9,500 | Common stock | 1,600 | ||
Land | 7,400 | Retained earnings | 11,560 | ||
Building | 25,300 | Additional paid-in capital | 7,000 | ||
a. Rebuilt and delivered five pianos in January to customers who paid $19,000 in cash.
b. Received a $600 deposit from a customer who wanted her piano rebuilt.
c. Rented a part of the building to a bicycle repair shop; received $850 for rent in January.
d. Received $7,200 from customers as payment on their accounts.
e. Received an electric and gas utility bill for $400 to be paid in February.
f. Ordered $960 in supplies.
g. Paid $2,300 on account in January.
h. Received from the home of Stacey Eddy, the major shareholder, a $920 tool (equipment) to use in the business in exchange for 100 shares of $1 par value stock.
i. Paid $16,500 in wages to employees who worked in January.
j. Declared and paid a $2,200 dividend (reduce Retained Earnings and Cash).
k. Received and paid cash for the supplies in (f).
Required:
Prepare an income statement for January 31 (ignore income taxes). Fill in the letters
STACEY’S PIANO REBUILDING COMPANYIncome Statement (unadjusted)
For the Month Ended January 31
Operating revenues
a)
b)
Total operating revenues: a)
Operating expenses
a)
b)
c)
d)
Total operating expenses: a)
Other item:
a)
b)
c)