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Business Accounting Financial Accounting

(a) Accounting Cycle: The accounting cycle refers to the entire process of recording the accounting transactions of an organization and then processing them. The accounting cycle starts when a transaction takes places and it ends at the time when these transactions are recorded in the financial statements of the company. Journal entry : Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side. In addition, it is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements. The following are the rules of debit and credit: 1. Increase in assets and expenses accounts are debited. Decrease in liabilities and stockholders’ equity accounts are debited. 2. Increase in liabilities, revenues, and stockholders’ equity accounts are credited. Decreases in all asset accounts are credited. To Prepare: The journal entries and adjusting entries in booksduring 2014. Answers: Prepare the journal entries for Corporation Kduring 2014: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 1 Cash 49,200 Preferred Stock 48,000(1) Paid-in-Capital in Excess of par value – Preferred Stock 1,200(2) (To record the issuance of preferred stock) 2 Cash 21,000 Common Stock 9,000 Paid-in-Capital in Excess of par value – Common Stock 12,000 (To record the issuance of common stock) 3 Accounts Receivable 320,000 Service revenue 320,000 (To record service revenue) 4 Cash 36,000 Unearned Service Revenue 36,000 (To record unearned service revenue) 5 Cash 276,000 Accounts Receivable 276,000 (To record cash received for accounts receivable) 6 Supplies 35,100 Accounts Payable 35,100 (To record purchase of supplies on account) 7 Accounts Payable 32,200 Cash 32,200 (To record the payment for accounts payable) 8 Treasury Stock 11,200(3) Cash 11,200 (To record purchase of treasury stock) 9 Other operating expense 188,200 Cash 188,200 (To record other operating expense) 10 Cash dividends 13,560 Dividends payable 13,560(4) (To record the dividends payable) 11 Allowance for doubtful accounts 1,700 Accounts Receivable 1,700 (To record the settlement of allowance for doubtful accounts) Table (1) Working Notes: Calculate the amount of preferred stock. Total number of share issued = 1,200 Price per share = $40 Preferred stock = 1,200 × $40 = $48,000 (1) Calculate the amount of paid-in capital. Preferred stock = $48,000(1) Cash received for preferred stock = $49,200 Paid-in capital = $49,200 – $48,000 = $1,200 (2) Calculate the amount of treasury stock. Number of shares purchased = 400 Price per share = $28 Amount of treasury stock = 400 × $28 = $11,200 (3) Calculate the amount of dividends payable. Dividend per share (common stock) = $1.20 Common stock outstanding = 8,500 7% preferred stock = $3,360 ( $48,000 × 7% ) Dividends payable = 7% preferred stock + ( Dividend per share × Common stock outstanding ) = $3,360 + ( $ 1.20 × 8 , 500 ) = $3,360 + $10,200 = $13,560 (4) Adjusting entries are the journal entries that are recorded at an end of an accounting period. It adjusts the income and expense account to comply with the accrual based accounting. This accounting system states that the revenues should be recognized when it is earned, and the expenses should be recognized when it is incurred, irrespective to cash received or paid for it. To Prepare: The adjusting entries of Corporation K during 2014. 1. Answer: Journalize the adjusting entries. The following is the adjusting entry for the suppliesduring the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 1 Supplies Expense 33,600 (5) Supplies 33,600 (To adjust for supplies expense) Table (2) Working Note: Calculate the amount of supplies expense. Beginning balance = $4,400 Purchase = $35,100 (Refer Table 1) Ending balance = $5,900 Supplies expense = Begining balance + Purchase – Ending balance = $4,400 + $35,100 – $5,900 = $33,600 (5) Explanation: Supplies expense is an expense and it is increased by $33,600. Therefore, debit supplies expense account with $33,600. Supplies is an asset and it is decreased by $33,600. Therefore, credit supplies account with $33,600. 2. Explanation: The following is the adjusting entry for the unearned revenueduring the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Unearned service revenue 27,000 Service revenue 27,000(6) (To adjust for unearned service revenue) Table (3) Working Note: Calculate the amount of service revenue adjusted. Fees collected in advance for April 2014 to March 2015 = $36,000 Months adjusted for unearned service revenue = 9 (April 2014 to December 2014) Amount of service revenue adjusted = $36,000 × 9 12 = $ 27 , 000 (6) Unearned service revenue is a liability and it is decreased by $27,000. Therefore, debit unearned service revenue account with $27,000. Service revenue is revenue and it increases the value of equity by $27,000. Therefore, credit service revenue with $27,000. 3. Answer: The following is the adjusting entry for the bad debt expense during the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Bad Debts Expense 3,700(7) Allowance for doubtful accounts 3,700 ( To record the amount of bad debt expense for the year ) Table (4) Working Note: Ending balance of allowance for doubtful accounts = $3,500 Amount written off as uncollectible = $1,700 Beginning balance of allowance for doubtful accounts = $1,500 Bad debt expense = $3,500 + $1,500 – $1,700 = $3,700 (7) Explanation: Bad debt expense is an expense and it is increased by $3,700. Therefore, debit bad debt expense account with $3,700. Allowance for doubtful accounts is a contra asset account and would have a credit balance. Therefore credit allowance for doubtful account with $3,700. 4. The following is the adjusting entry for the depreciation expired during the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Depreciation Expense 4,400(8) Accumulated Depreciation - Building 4,400 ( To record the amount of depreciation for the year ) Table (5) Working Note: Calculate the amount of depreciation expense. Building value = $142,000 Salvage value = $10,000 Life of building = 30 years Depreciation expense = $142,000 − $ 10 , 000 30 years = $ 132 , 000 30 = $ 4 , 400 (8) Explanation: Depreciation expense is an expense and it is increased by $4,400. Therefore, debit depreciation expense account with $4,400. Accumulated Depreciation-Building is a contra asset account and would have a credit balance. Therefore credit accumulated depreciation-equipment account with $4,400. 5. The following is the adjusting entry for the accrued income tax for the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Income Tax Expense 35,130 Income Tax Payable 35,130 ( To record the amount of accrued income tax for the year ) Table (6) Income tax expense is an expense and it is increased by $35,130. Therefore, debit income tax expense account with $35,130. Income tax payable is a liability and it is increased by $35,130. Therefore, credit income tax payable account with $35,130. (b) T Accounts: T- accounts are prepared for all the business transactions. First, journal entries are passed and then transferred to the respective ledger accounts where they are recorded, and summarized in either side of the ‘T’ format. It is divided into two parts by a vertical line, that is, the left side and the right side. The left side of the T-account is known as the debit side, and the right side of the T-account is known as the credit side. The account name appears on the top of the T-account. To Post: The above journal entries and adjusting entries to T-accounts of Corporation K. Explanation: The following are the T-accounts. Cash Account: Cash Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 24,600 Accounts Payable 32,200 Preferred stock 48,000 Treasury stock 11,200 Paid-in capital in Excess of par value – Preferred stock 1,200 Other operating expenses 188,200 Common stock 9,000 Ending Balance 175,200 Paid-in capital in Excess of par value – Common stock 12,000 Unearned service revenue 36,000 Accounts Receivable 276,000 Total 406,800 Total 406,800 Table (7) Accounts Receivable Account: Accounts Receivable Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning Balance 45,500 Cash 276,000 Sales Revenue 320,000 Sales discounts 1,700 Ending Balance 87,800 Total 365,500 Total 365,500 Table (8) Allowance for Doubtful Accounts: Allowance for doubtful Accounts Date Particulars Debit ($) Date Particulars Credit ($) Accounts receivable 1,700 Beginning Balance 1,500 Ending Balance 3,500 Bad debt expense 3,700 Total 5,200 Total 5,200 Table (9) Supplies Account: Supplies Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 4,400 Adjustment 33,600 Accounts Payable 35,100 Ending Balance 5,900 Total 39,500 Total 39,500 Table (10) Land Account: Land Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 40,000 Ending Balance 40,000 Total 40,000 Total 40,000 Table (11) Building Account: Building Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 142,000 Ending Balance 142,000 Total 142,000 Total 142,000 Table (12) Accumulated Depreciation - Building Account: Accumulated Depreciation - Building Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 26,400 Beginning balance 22,000 Adjustment 4,400 Total 26,400 Total 26,400 Table (13) Accounts Payable Account: Accounts Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 32,200 Beginning balance 25,600 Ending Balance 28,500 Supplies 35,100 Total 60,700 Total 60,700 Table (14) Income Tax Payable Account: Income Tax Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 35,130 Adjustment 35,130 Total 35,130 Total 35,130 Table (15) Unearned Service Revenue Account: Unearned Service Revenue Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 27,000 Cash 36,000 Ending Balance 9,000 Total 36,000 Total 36,000 Table (16) Dividends Payable Account: Dividends Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 13,560 Cash dividends 13,560 Total 13,560 Total 13,560 Table (17) Preferred Stock Account: Preferred Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 48,000 Cash 48,000 Total 48,000 Total 48,000 Table (18) Paid-In Capital in Excess of Par Value - Preferred Stock Account: Paid-In Capital in Excess of Par Value - Preferred Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 1,200 Cash 1,200 Total 1,200 Total 1,200 Table (19) Common Stock Account: Common Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 89,000 Beginning balance 80,000 Cash 9,000 Total 89,000 Total 89,000 Table (20) Paid-In Capital in Excess of Par Value - Common Stock Account: Paid-In Capital in Excess of Par Value - Common Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 12,000 Cash 12,000 Total 12,000 Total 12,000 Table (21) Retained Earnings Account: Retained Earnings Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 127,400 Beginning balance 127,400 Total 127,400 Total 127,400 Table (22) Cash Dividends Account: Cash Dividends Account Date Particulars Debit ($) Date Particulars Credit ($) Dividends payable 13,560 Ending Balance 13,560 Total 13,560 Total 13,560 Table (23) Treasury Stock Account: Treasury Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 11,200 Ending Balance 11,200 Total 11,200 Total 11,200 Table (24) Service Revenue Account: Service Revenue Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 347,000 Accounts receivable 320,000 Unearned Service Revenue 27,000 Total 347,000 Total 347,000 Table (25) Bad Debt Expense Account: Bad Debt Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 3,700 Ending Balance 3,700 Total 3,700 Total 3,700 Table (26) Depreciation Expense Account: Depreciation Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 4,400 Ending Balance 4,400 Total 4,400 Total 4,400 Table (27) Supplies Expense Account: Supplies Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 33,600 Ending Balance 33,600 Total 33,600 Total 33,600 Table (28) Other Operating Expense Account: Other Operating Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 188,200 Ending Balance 188,200 Total 188,200 Total 188,200 Table (29) Income Tax Expense Account: Income Tax Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 35,130 Ending Balance 35,130 Total 35,130 Total 35,130 Table (30) (b) Trial balance: This is a statement prepared to show all the year-end account balances of a business. The balances are shown in separate columns as debit and credit. Trial balance is made to check whether books of accounts of the business are arithmetically accurate. To determine: Prepare an adjusted trial balance for Corporation K as on December 31, 2014. Answer: The following is the adjusted trial balance of Corporation K as on December 31, 2014. Corporation K Adjusted Trial Balance At December 31, 2014 Account Title Balance ($) Debit Credit Cash 175,200 Accounts Receivable 87,800 Allowance for doubtful accounts 3,500 Supplies 5,900 Land 40,000 Buildings 142,000 Accumulated Depreciation – Buildings 26,400 Accounts Payable 28,500 Income Tax Payable 35,130 Unearned Service Revenue 9,000 Dividends payable 13,560 Preferred Stock 48,000 Paid-in capital in excess of par value- Preferred stock 1,200 Common Stock 89,000 Paid-in capital in excess of par value- Common stock 12,000 Retained Earnings 127,400 Cash dividends 13,560 Treasury Stock 11,200 Service Revenue 347,000 Bad Debt expense 3,700 Depreciation Expense 4,400 Supplies Expense 33,600 Other operating Expense 188,200 Income Tax Expense 35,130 Total 740,690 740,690 Table (31) Explanation: The trial balance as shown in Table (31) is prepared after placing the journal entries and adjusting entries to the ledger account. It will show the ending balance of all the accounts. Here, the total debit balance is matched with the credit balance. Conclusion: Therefore, the total debit balance and credit balance of Company H is $740,690. (c) To Prepare: The income statement, retained earnings statement, and a classified balance sheet of Corporation K for the year ended December 31, 2014. Explanation: Prepare the income statement of Corporation K. Income statement : This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses. Corporation K Income Statement For the Year Ended December 31, 2014 Particulars Amount ($) Amount ($) Service revenue 347,000 Operating expenses Other operating expenses 188,200 Supplies expense 33,600 Depreciation expense 4,400 Bad debt expense 3,700 Total operating expenses 229,900 Income before taxes 117,100 Income tax expense 35,130 Net income 81,970 Table (32) Conclusion: Therefore, the net income of Corporation K for the year ended December 31, 2014 is $81,970. Prepare a retained earnings statement of Corporation K for the year ended December 31, 2014. Retained Earnings Statement is one of the financial statement, which shows the amount of the net income retained by a company at a particular point of time for reinvestment and used to pay its debts and obligations. It shows the amount of earnings that is not paid as dividends to the shareholders. Corporation K Retained Earnings Statement For the Year Ended December 31, 2014 Details Amount ($) Beginning Balance of Retained earnings 127,400 Add: Net Income for the year 81,970 Total Retained Earnings 209,370 Less: Dividends (13,560) Ending balance of Retained Earnings 195,810 Table (33) Conclusion: Therefore, the retained earnings statement of Corporation K for the year ended December 31, 2014 is $195,810. Prepare the balance sheet of Corporation K for the year ended December 31, 2014. The balance sheet : This is a financial statement that shows the assets, liabilities, and stockholders’ equity of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as the Statement of Financial Position. It helps the users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. Corporation K Balance Sheet As of December 31, 2014 Assets Amount ($) Amount ($) Amount ($) Current assets: Cash 175,200 Accounts receivable 87,800 Less: Allowance for doubtful accounts (3500) 84,300 Supplies 5,900 Total current assets 265,400 Property, plant, and equipment: Land 40,000 Buildings 142,000 Less: Accumulated Depreciation-Building (26,400) 115,600 155,600 Total Assets 421,000 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable 28,500 Income taxes payable 35,130 Dividends payable 13,560 Unearned service revenue 9,000 Total current liabilities 86,190 Stockholders’ Equity: Paid-in capital Capital stock Preferred stock 48,000 Common stock 89,000 Total capital stock 137,000 Additional paid-in capital: Paid-in capital in excess of par value—preferred stock 1,200 Paid-in capital in excess of par value—common stock 12,000 Total additional paid-in capital 13,200 Total paid-in capital 150,200 Retained earnings 195,810 Total paid-in capital and retained earnings 346,010 Less: Treasury stock(400 shares) (11,200) Total Stockholders’ Equity 334,810 Total Liabilities and Stockholders’ Equity 421,000 Table (34)

(a) Accounting Cycle: The accounting cycle refers to the entire process of recording the accounting transactions of an organization and then processing them. The accounting cycle starts when a transaction takes places and it ends at the time when these transactions are recorded in the financial statements of the company. Journal entry : Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side. In addition, it is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements. The following are the rules of debit and credit: 1. Increase in assets and expenses accounts are debited. Decrease in liabilities and stockholders’ equity accounts are debited. 2. Increase in liabilities, revenues, and stockholders’ equity accounts are credited. Decreases in all asset accounts are credited. To Prepare: The journal entries and adjusting entries in booksduring 2014. Answers: Prepare the journal entries for Corporation Kduring 2014: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 1 Cash 49,200 Preferred Stock 48,000(1) Paid-in-Capital in Excess of par value – Preferred Stock 1,200(2) (To record the issuance of preferred stock) 2 Cash 21,000 Common Stock 9,000 Paid-in-Capital in Excess of par value – Common Stock 12,000 (To record the issuance of common stock) 3 Accounts Receivable 320,000 Service revenue 320,000 (To record service revenue) 4 Cash 36,000 Unearned Service Revenue 36,000 (To record unearned service revenue) 5 Cash 276,000 Accounts Receivable 276,000 (To record cash received for accounts receivable) 6 Supplies 35,100 Accounts Payable 35,100 (To record purchase of supplies on account) 7 Accounts Payable 32,200 Cash 32,200 (To record the payment for accounts payable) 8 Treasury Stock 11,200(3) Cash 11,200 (To record purchase of treasury stock) 9 Other operating expense 188,200 Cash 188,200 (To record other operating expense) 10 Cash dividends 13,560 Dividends payable 13,560(4) (To record the dividends payable) 11 Allowance for doubtful accounts 1,700 Accounts Receivable 1,700 (To record the settlement of allowance for doubtful accounts) Table (1) Working Notes: Calculate the amount of preferred stock. Total number of share issued = 1,200 Price per share = $40 Preferred stock = 1,200 × $40 = $48,000 (1) Calculate the amount of paid-in capital. Preferred stock = $48,000(1) Cash received for preferred stock = $49,200 Paid-in capital = $49,200 – $48,000 = $1,200 (2) Calculate the amount of treasury stock. Number of shares purchased = 400 Price per share = $28 Amount of treasury stock = 400 × $28 = $11,200 (3) Calculate the amount of dividends payable. Dividend per share (common stock) = $1.20 Common stock outstanding = 8,500 7% preferred stock = $3,360 ( $48,000 × 7% ) Dividends payable = 7% preferred stock + ( Dividend per share × Common stock outstanding ) = $3,360 + ( $ 1.20 × 8 , 500 ) = $3,360 + $10,200 = $13,560 (4) Adjusting entries are the journal entries that are recorded at an end of an accounting period. It adjusts the income and expense account to comply with the accrual based accounting. This accounting system states that the revenues should be recognized when it is earned, and the expenses should be recognized when it is incurred, irrespective to cash received or paid for it. To Prepare: The adjusting entries of Corporation K during 2014. 1. Answer: Journalize the adjusting entries. The following is the adjusting entry for the suppliesduring the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 1 Supplies Expense 33,600 (5) Supplies 33,600 (To adjust for supplies expense) Table (2) Working Note: Calculate the amount of supplies expense. Beginning balance = $4,400 Purchase = $35,100 (Refer Table 1) Ending balance = $5,900 Supplies expense = Begining balance + Purchase – Ending balance = $4,400 + $35,100 – $5,900 = $33,600 (5) Explanation: Supplies expense is an expense and it is increased by $33,600. Therefore, debit supplies expense account with $33,600. Supplies is an asset and it is decreased by $33,600. Therefore, credit supplies account with $33,600. 2. Explanation: The following is the adjusting entry for the unearned revenueduring the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Unearned service revenue 27,000 Service revenue 27,000(6) (To adjust for unearned service revenue) Table (3) Working Note: Calculate the amount of service revenue adjusted. Fees collected in advance for April 2014 to March 2015 = $36,000 Months adjusted for unearned service revenue = 9 (April 2014 to December 2014) Amount of service revenue adjusted = $36,000 × 9 12 = $ 27 , 000 (6) Unearned service revenue is a liability and it is decreased by $27,000. Therefore, debit unearned service revenue account with $27,000. Service revenue is revenue and it increases the value of equity by $27,000. Therefore, credit service revenue with $27,000. 3. Answer: The following is the adjusting entry for the bad debt expense during the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Bad Debts Expense 3,700(7) Allowance for doubtful accounts 3,700 ( To record the amount of bad debt expense for the year ) Table (4) Working Note: Ending balance of allowance for doubtful accounts = $3,500 Amount written off as uncollectible = $1,700 Beginning balance of allowance for doubtful accounts = $1,500 Bad debt expense = $3,500 + $1,500 – $1,700 = $3,700 (7) Explanation: Bad debt expense is an expense and it is increased by $3,700. Therefore, debit bad debt expense account with $3,700. Allowance for doubtful accounts is a contra asset account and would have a credit balance. Therefore credit allowance for doubtful account with $3,700. 4. The following is the adjusting entry for the depreciation expired during the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Depreciation Expense 4,400(8) Accumulated Depreciation - Building 4,400 ( To record the amount of depreciation for the year ) Table (5) Working Note: Calculate the amount of depreciation expense. Building value = $142,000 Salvage value = $10,000 Life of building = 30 years Depreciation expense = $142,000 − $ 10 , 000 30 years = $ 132 , 000 30 = $ 4 , 400 (8) Explanation: Depreciation expense is an expense and it is increased by $4,400. Therefore, debit depreciation expense account with $4,400. Accumulated Depreciation-Building is a contra asset account and would have a credit balance. Therefore credit accumulated depreciation-equipment account with $4,400. 5. The following is the adjusting entry for the accrued income tax for the year: Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Income Tax Expense 35,130 Income Tax Payable 35,130 ( To record the amount of accrued income tax for the year ) Table (6) Income tax expense is an expense and it is increased by $35,130. Therefore, debit income tax expense account with $35,130. Income tax payable is a liability and it is increased by $35,130. Therefore, credit income tax payable account with $35,130. (b) T Accounts: T- accounts are prepared for all the business transactions. First, journal entries are passed and then transferred to the respective ledger accounts where they are recorded, and summarized in either side of the ‘T’ format. It is divided into two parts by a vertical line, that is, the left side and the right side. The left side of the T-account is known as the debit side, and the right side of the T-account is known as the credit side. The account name appears on the top of the T-account. To Post: The above journal entries and adjusting entries to T-accounts of Corporation K. Explanation: The following are the T-accounts. Cash Account: Cash Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 24,600 Accounts Payable 32,200 Preferred stock 48,000 Treasury stock 11,200 Paid-in capital in Excess of par value – Preferred stock 1,200 Other operating expenses 188,200 Common stock 9,000 Ending Balance 175,200 Paid-in capital in Excess of par value – Common stock 12,000 Unearned service revenue 36,000 Accounts Receivable 276,000 Total 406,800 Total 406,800 Table (7) Accounts Receivable Account: Accounts Receivable Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning Balance 45,500 Cash 276,000 Sales Revenue 320,000 Sales discounts 1,700 Ending Balance 87,800 Total 365,500 Total 365,500 Table (8) Allowance for Doubtful Accounts: Allowance for doubtful Accounts Date Particulars Debit ($) Date Particulars Credit ($) Accounts receivable 1,700 Beginning Balance 1,500 Ending Balance 3,500 Bad debt expense 3,700 Total 5,200 Total 5,200 Table (9) Supplies Account: Supplies Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 4,400 Adjustment 33,600 Accounts Payable 35,100 Ending Balance 5,900 Total 39,500 Total 39,500 Table (10) Land Account: Land Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 40,000 Ending Balance 40,000 Total 40,000 Total 40,000 Table (11) Building Account: Building Account Date Particulars Debit ($) Date Particulars Credit ($) Beginning balance 142,000 Ending Balance 142,000 Total 142,000 Total 142,000 Table (12) Accumulated Depreciation - Building Account: Accumulated Depreciation - Building Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 26,400 Beginning balance 22,000 Adjustment 4,400 Total 26,400 Total 26,400 Table (13) Accounts Payable Account: Accounts Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 32,200 Beginning balance 25,600 Ending Balance 28,500 Supplies 35,100 Total 60,700 Total 60,700 Table (14) Income Tax Payable Account: Income Tax Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 35,130 Adjustment 35,130 Total 35,130 Total 35,130 Table (15) Unearned Service Revenue Account: Unearned Service Revenue Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 27,000 Cash 36,000 Ending Balance 9,000 Total 36,000 Total 36,000 Table (16) Dividends Payable Account: Dividends Payable Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 13,560 Cash dividends 13,560 Total 13,560 Total 13,560 Table (17) Preferred Stock Account: Preferred Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 48,000 Cash 48,000 Total 48,000 Total 48,000 Table (18) Paid-In Capital in Excess of Par Value - Preferred Stock Account: Paid-In Capital in Excess of Par Value - Preferred Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 1,200 Cash 1,200 Total 1,200 Total 1,200 Table (19) Common Stock Account: Common Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 89,000 Beginning balance 80,000 Cash 9,000 Total 89,000 Total 89,000 Table (20) Paid-In Capital in Excess of Par Value - Common Stock Account: Paid-In Capital in Excess of Par Value - Common Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 12,000 Cash 12,000 Total 12,000 Total 12,000 Table (21) Retained Earnings Account: Retained Earnings Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 127,400 Beginning balance 127,400 Total 127,400 Total 127,400 Table (22) Cash Dividends Account: Cash Dividends Account Date Particulars Debit ($) Date Particulars Credit ($) Dividends payable 13,560 Ending Balance 13,560 Total 13,560 Total 13,560 Table (23) Treasury Stock Account: Treasury Stock Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 11,200 Ending Balance 11,200 Total 11,200 Total 11,200 Table (24) Service Revenue Account: Service Revenue Account Date Particulars Debit ($) Date Particulars Credit ($) Ending Balance 347,000 Accounts receivable 320,000 Unearned Service Revenue 27,000 Total 347,000 Total 347,000 Table (25) Bad Debt Expense Account: Bad Debt Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 3,700 Ending Balance 3,700 Total 3,700 Total 3,700 Table (26) Depreciation Expense Account: Depreciation Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 4,400 Ending Balance 4,400 Total 4,400 Total 4,400 Table (27) Supplies Expense Account: Supplies Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 33,600 Ending Balance 33,600 Total 33,600 Total 33,600 Table (28) Other Operating Expense Account: Other Operating Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Cash 188,200 Ending Balance 188,200 Total 188,200 Total 188,200 Table (29) Income Tax Expense Account: Income Tax Expense Account Date Particulars Debit ($) Date Particulars Credit ($) Adjustment 35,130 Ending Balance 35,130 Total 35,130 Total 35,130 Table (30) (b) Trial balance: This is a statement prepared to show all the year-end account balances of a business. The balances are shown in separate columns as debit and credit. Trial balance is made to check whether books of accounts of the business are arithmetically accurate. To determine: Prepare an adjusted trial balance for Corporation K as on December 31, 2014. Answer: The following is the adjusted trial balance of Corporation K as on December 31, 2014. Corporation K Adjusted Trial Balance At December 31, 2014 Account Title Balance ($) Debit Credit Cash 175,200 Accounts Receivable 87,800 Allowance for doubtful accounts 3,500 Supplies 5,900 Land 40,000 Buildings 142,000 Accumulated Depreciation – Buildings 26,400 Accounts Payable 28,500 Income Tax Payable 35,130 Unearned Service Revenue 9,000 Dividends payable 13,560 Preferred Stock 48,000 Paid-in capital in excess of par value- Preferred stock 1,200 Common Stock 89,000 Paid-in capital in excess of par value- Common stock 12,000 Retained Earnings 127,400 Cash dividends 13,560 Treasury Stock 11,200 Service Revenue 347,000 Bad Debt expense 3,700 Depreciation Expense 4,400 Supplies Expense 33,600 Other operating Expense 188,200 Income Tax Expense 35,130 Total 740,690 740,690 Table (31) Explanation: The trial balance as shown in Table (31) is prepared after placing the journal entries and adjusting entries to the ledger account. It will show the ending balance of all the accounts. Here, the total debit balance is matched with the credit balance. Conclusion: Therefore, the total debit balance and credit balance of Company H is $740,690. (c) To Prepare: The income statement, retained earnings statement, and a classified balance sheet of Corporation K for the year ended December 31, 2014. Explanation: Prepare the income statement of Corporation K. Income statement : This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses. Corporation K Income Statement For the Year Ended December 31, 2014 Particulars Amount ($) Amount ($) Service revenue 347,000 Operating expenses Other operating expenses 188,200 Supplies expense 33,600 Depreciation expense 4,400 Bad debt expense 3,700 Total operating expenses 229,900 Income before taxes 117,100 Income tax expense 35,130 Net income 81,970 Table (32) Conclusion: Therefore, the net income of Corporation K for the year ended December 31, 2014 is $81,970. Prepare a retained earnings statement of Corporation K for the year ended December 31, 2014. Retained Earnings Statement is one of the financial statement, which shows the amount of the net income retained by a company at a particular point of time for reinvestment and used to pay its debts and obligations. It shows the amount of earnings that is not paid as dividends to the shareholders. Corporation K Retained Earnings Statement For the Year Ended December 31, 2014 Details Amount ($) Beginning Balance of Retained earnings 127,400 Add: Net Income for the year 81,970 Total Retained Earnings 209,370 Less: Dividends (13,560) Ending balance of Retained Earnings 195,810 Table (33) Conclusion: Therefore, the retained earnings statement of Corporation K for the year ended December 31, 2014 is $195,810. Prepare the balance sheet of Corporation K for the year ended December 31, 2014. The balance sheet : This is a financial statement that shows the assets, liabilities, and stockholders’ equity of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as the Statement of Financial Position. It helps the users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. Corporation K Balance Sheet As of December 31, 2014 Assets Amount ($) Amount ($) Amount ($) Current assets: Cash 175,200 Accounts receivable 87,800 Less: Allowance for doubtful accounts (3500) 84,300 Supplies 5,900 Total current assets 265,400 Property, plant, and equipment: Land 40,000 Buildings 142,000 Less: Accumulated Depreciation-Building (26,400) 115,600 155,600 Total Assets 421,000 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable 28,500 Income taxes payable 35,130 Dividends payable 13,560 Unearned service revenue 9,000 Total current liabilities 86,190 Stockholders’ Equity: Paid-in capital Capital stock Preferred stock 48,000 Common stock 89,000 Total capital stock 137,000 Additional paid-in capital: Paid-in capital in excess of par value—preferred stock 1,200 Paid-in capital in excess of par value—common stock 12,000 Total additional paid-in capital 13,200 Total paid-in capital 150,200 Retained earnings 195,810 Total paid-in capital and retained earnings 346,010 Less: Treasury stock(400 shares) (11,200) Total Stockholders’ Equity 334,810 Total Liabilities and Stockholders’ Equity 421,000 Table (34)

Financial Accounting

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Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - Prob. 6Q Ch. 11 - Prob. 7Q Ch. 11 - Which is the boiler investmentcommon stock with a...Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

Ch. 11 - Prob. 11Q Ch. 11 - Prob. 12Q Ch. 11 - Indicate how each of these accounts should be...Ch. 11 - What three conditions must be met before a cash...Ch. 11 - Prob. 15Q Ch. 11 - Prob. 16Q Ch. 11 - Prob. 17Q Ch. 11 - Prob. 18Q Ch. 11 - Prob. 19Q Ch. 11 - Prob. 20Q Ch. 11 - Prob. 21Q Ch. 11 - Prob. 22Q Ch. 11 - Prob. 23Q Ch. 11 - Prob. 24Q Ch. 11 - Prob. 25Q Ch. 11 - Prob. 26Q Ch. 11 - Prob. 11.1BE Ch. 11 - Prob. 11.2BE Ch. 11 - Prob. 11.3BE Ch. 11 - Prob. 11.4BE Ch. 11 - Prob. 11.5BE Ch. 11 - Prob. 11.6BE Ch. 11 - Prob. 11.7BE Ch. 11 - Prob. 11.8BE Ch. 11 - Prob. 11.9BE Ch. 11 - Prob. 11.10BE Ch. 11 - Prob. 11.11BE Ch. 11 - Prob. 11.12BE Ch. 11 - Prob. 11.1DIR Ch. 11 - Prob. 11.3DIR Ch. 11 - Prob. 11.4DIR Ch. 11 - Prob. 11.5DIR Ch. 11 - Prob. 11.6DIR Ch. 11 - Prob. 11.1E Ch. 11 - Prob. 11.2E Ch. 11 - Prob. 11.3E Ch. 11 - Prob. 11.4E Ch. 11 - Prob. 11.5E Ch. 11 - Prob. 11.6E Ch. 11 - Prob. 11.7E Ch. 11 - Prob. 11.8E Ch. 11 - Prob. 11.9E Ch. 11 - Prob. 11.10E Ch. 11 - Prob. 11.11E Ch. 11 - Prob. 11.12E Ch. 11 - Prob. 11.13E Ch. 11 - Prob. 11.14E Ch. 11 - Prob. 11.15E Ch. 11 - Prob. 11.16E Ch. 11 - Prob. 11.1AP Ch. 11 - Prob. 11.2AP Ch. 11 - Prob. 11.3AP Ch. 11 - Prob. 11.4AP Ch. 11 - Prob. 11.5AP Ch. 11 - Prob. 11.6AP Ch. 11 - Prob. 11.7AP Ch. 11 - Prob. 11.8AP Ch. 11 - Prob. 11.1BP Ch. 11 - Prob. 11.2BP Ch. 11 - Prob. 11.3BP Ch. 11 - Prob. 11.4BP Ch. 11 - Prob. 11.5BP Ch. 11 - Prob. 11.6BP Ch. 11 - Prob. 11.7BP Ch. 11 - Prob. 11.8BP Ch. 11 - Prob. 1CP Ch. 11 - Prob. 11.1BYP Ch. 11 - Prob. 11.2BYP Ch. 11 - Prob. 11.3BYP Ch. 11 - Prob. 11.5BYP Ch. 11 - Prob. 11.6BYP Ch. 11 - DECISION MAKING ACROSS THE ORGANIZATION During a...Ch. 11 - Prob. 11.8BYP Ch. 11 - Prob. 11.9BYP Ch. 11 - Prob. 11.10BYP Ch. 11 - Prob. 11.13BYP Ch. 11 - Prob. 11.1IFRS Ch. 11 - Prob. 11.2IFRS Ch. 11 - Prob. 11.3IFRS Ch. 11 - Prob. 11.4IFRS

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