Survey Of Accounting
Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 2, Problem 35P
To determine

Record the transactions in general ledger accounts under the accounting equation and identify the amounts that would be reported in the financial statements.

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Explanation of Solution

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below.

Assets= Liabilities+Stockholders' equity

Prepare general ledger accounts under the accounting equation as given below:

Survey Of Accounting, Chapter 2, Problem 35P

Table (1)

Working Note (1):

Determine the amount of prepaid rent.

Prepaid rent= Rent expense ×Number of monthsMonths in year=$6,000×1112=$5,500

Working note (2):

Determine the amount of unearned revenue.

Unearned revenue= Revenue income ×Number of monthsMonths in year=$9,600×612=$4,800

  1. a. The additional two transactions are prepaid rent on February 1 and unearned revenue on July 1.
  2. b. Company W’s reported value of land on its balance sheet is $36,000 (Refer Table (1)).
  3. c. The net cash flow from operating activities would be reported on the statement of cash flows amounts to $44,100(Refer Table (1)).

Working note (3):

Determine the amount of net cash flow from operating activities.

  Net cash flows from operating activities}=(Decrease in accounts receivable)+(Increase in unearned revenue)(Increase in prepaid rent)(Decrease in accounts payable)=$46,000+$9,600$6,000$5,500=$44,100

  1. d. The amount of rent expense would be reported on the income statement is $5,500 (2).
  2. e. The amount of total liabilities that would be reported on the balance sheet $43,800($32,500+$6,500+$4,800).
  3. f. The amount of supplies expense that would be reported on the income statement is $2,450($2,500$50).
  4. g. The amount of unearned revenue that would be reported on the balance sheet is $4,800 (3).
  5. h. The net cash flow from investing activities that would be reported on the statement of cash flows is $15,000(($15,000)+$30,000).
  6. i. The amount of total expenses that would be reported on the income statement is $42,450($28,000+$6,500+$2,450+$5,500).
  7. j. The amount of service revenue that would be reported on the income statement is $62,800($58,000+$4,800).
  8. k. The net cash flow from financing activities that would be reported on the statement of cash flows is $18,000($20,000$2,000).
  9. l. The net income that would be reported on the income statement is $20,850($62,800+500$42,450).
  10. m. The retained earnings that would be reported on the balance sheet amounts to $66,350 (4).

    Working note (4):

    Determine the amount of retained earnings.

    Ending retained earnings}=(Beginning retained earnings)+(Net Income)(Dividends paid)=$47,500+$20,850$2,000=$66,350

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Chapter 2 Solutions

Survey Of Accounting

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