Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781260158595
Author: Wild
Publisher: MCG
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Chapter 4, Problem 4BPSB
To determine

Concept Introduction:

Income Statement: The financial statement concerned with computation net income during an accounting period is called income statement. Net income is the excess amount of revenue over the expenses of a company and when the expenses are more than the revenue is termed as net loss.

Statement of Owner's Equity: It is a financial statement which shows the portion of owner's fund in the total capital of a company.

Classified Balance Sheet: A classified balance sheet interprets the financial position of a business during particular period under different categories i.e. current assets, current liabilities, non-current assets, long-term liabilities, property, plant and equipment and owner's equity.

Requirement 1:

To Prepare:

Income statement, statement of owner's equity and the classified balance sheet for the year ended December 31, 2019.

Expert Solution
Check Mark

Answer to Problem 4BPSB

    ParticularsAmount
    Net Income$4,300
    Statement of Owner's Equity$117,700
    Balance Sheet Total$218,100

Explanation of Solution

    ANARA CO.Income Statement

    December 31, 2019

    Revenue:
    Professional Fees Earned$59,600
    Rent Earned4,500
    Dividends Earned1,000
    Interest Earned1,320
    Total Revenue$66,420
    Expenses:
    Depreciation expense − Building2,000
    Depreciation expense − Equipment1,000
    Wages expense18,500
    Interest expense1,550
    Insurance expense1,525
    Rent expense3,600
    Supplies expense1,000
    Postage expense410
    Property taxes expense4,825
    Repairs expense679
    Telephone expense521
    Utilities expense1,920
    Total Expense$37,530
    Net Income$28,890
    ANARA CO.Statement of Owner's Equity

    December 31, 2019

    P. Anara, Capital; December 31, 2018$92,800
    Add:Net Income28, 890
    Subtotal121,690
    Less: P. Anara, Withdrawals8,000
    P. Anara, Capital; December 31, 2019$113,690
    ANARA CO.Balance Sheet

    December 31, 2019

    Assets
    Current Assets:
    Cash$7,400
    Short-Term Investment11,200
    Supplies4,600
    Prepaid Insurance1,000
    Total Current Assets$24,200
    Property, Plant and Equipment
    Equipment24,000
    Less: Accumulated Depreciation4,00020,000
    Building100,000
    Less: Accumulated Depreciation10,00090,000
    Land30,500
    Total Property, Plant and Equipment140,500
    Total Assets$164,700
    Liabilities and Owner's Equity
    Liabilities
    Current Liabilities:
    Accounts Payable3,500
    Interest Payable1,750
    Rent Payable400
    Wages Payable1,280
    Property taxes payable3,330
    Unearned Professional Fees750
    Current Portion of Long-Term Note Payable8,400
    Total Current Liabilities$19,410
    Long-Term Liabilities
    Long-term notes payable31,600
    Total Long-Term Liabilities31,600
    Total Liabilities51,010
    Owner's Equity
    P. Anara, Capital; December 31, 2019113,690
    Total Liabilities and Owner's Equity$164,700
To determine

Concept Introduction:

Closing Entries:

The journal entry which closes all the temporary accounts of a business organization is termed as closing entries.

Requirement 2:

Journalize the closing entries at December 31, 2019.

Expert Solution
Check Mark

Answer to Problem 4BPSB

    Account TitleBalance
    Cash$7,400
    Short-Term Investment11,200
    Supplies4,600
    Prepaid Insurance1,000
    Equipment24,000
    Accumulated Depreciation − Equipment4,000
    Building100,000
    Accumulated Depreciation − Building10,000
    Land30,500
    Accounts Payable3,500
    Interest Payable1,750
    Rent Payable400
    Wages Payable1,280
    Property taxes payable3,330
    Unearned Professional Fees750
    Current Portion of Long-Term Note Payable8,400
    Long-term notes payable31,600
    P. Anara, Capital113,690
    P. Anara, Withdrawals0
    Professional Fees Earned0
    Rent Earned0
    Dividends Earned0
    Interest Earned0
    Depreciation expense − Building0
    Depreciation expense − Equipment0
    Wages expense0
    Interest expense0
    Insurance expense0
    Rent expense0
    Supplies expense0
    Postage expense0
    Property taxes expense0
    Repairs expense0
    Telephone expense0
    Utilities expense0

Explanation of Solution

    DateParticularsDebitCredit
    2019
    Dec. 31
    A.Professional Fees Earned$59,600
    Rent Earned4,500
    Dividends Earned1,000
    Interest Earned1,320
    Income Summary$66,420
    B.Income Summary$37,530
    Depreciation expense − Building2,000
    Depreciation expense − Equipment1,000
    Wages expense18,500
    Interest expense1,550
    Insurance expense1,525
    Rent expense3,600
    Supplies expense1,000
    Postage expense410
    Property taxes expense4,825
    Repairs expense679
    Telephone expense521
    Utilities expense1,920
    C.Income Summary28, 890
    P. Anara, Capital28, 890
    D.P. Anara, Capital8,000
    P. Anara, Withdrawals8,000
To determine

Concept Introduction:

Return on Asset:

Return on asset is a financial ratio which measures the amount of returns generated by the assets of the company.

Debt Ratio:

Debt ratio determines the proportion of the total assets financed by debt funds. It is key ratio in measuring the company's leverage.

Profit Margin Ratio:

It indicates the percentage of net income compared with total revenue earned during an accounting year.

Current Ratio:

The liquidity ratio which indicates the ability of company to pay off its short-term liabilities by using their current asset is termed as current ratio.

Requirement 3:

Computation of (a) return on assets (b) debt ratio (c) profit margin ratio (d) current ratio

Expert Solution
Check Mark

Answer to Problem 4BPSB

    Ratios
    Return on Assets17.79%
    Debt Ratio0.31
    Profit Margin Ratio43.50%
    Current Ratio2.20

Explanation of Solution

(a) Return on Assets = Net Income / Average Total Assets

= $28, 890 / $162,350

= 17.79%

Average Total Assets = Beginning Total Assets + Ending Total Assets / 2

= $160,000 + $164,700 / 2

= $162,350

(b) Debt Ratio = Total Liabilities / Total Assets

= $51,010 / $164,700

= 0.31

(c) Profit Margin Ratio = Net Income / Total Revenues

= $28, 890 / $66,420

= 43.50%

(d) Current Ratio = Current Assets / Current Liabilities

= $24,200 / $11,010

= 2.20

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Chapter 4 Solutions

Fundamental Accounting Principles

Ch. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - Prob. 15DQCh. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 1QSCh. 4 - Preparing a work sheet P1 In the blank space...Ch. 4 - Computing ending capital balance using work sheet...Ch. 4 - Preparing a partial work sheet P1 The ledger of...Ch. 4 - Explaining temporary and permanent accounts Choose...Ch. 4 - Preparing closing entries from the ledger P2 The...Ch. 4 - Identifying post-closing accounts P3 Identify...Ch. 4 - Identifying the accounting cycle C2 List the...Ch. 4 - Classifying balance sheet items C3 The following...Ch. 4 - Preparing financial statements C2 Use the...Ch. 4 - Preparing a classified balance sheet C3 Use the...Ch. 4 - Identifying current accounts and computing the...Ch. 4 - Prob. 13QSCh. 4 - Exercise 4-1 Extending adjusted account balances...Ch. 4 - Exercise 4-2 Extending accounts in a work sheet Pl...Ch. 4 - Exercise 4-3 Preparing adjusting entries from a...Ch. 4 - Exercise 4-4 Preparing unadjusted and adjusted...Ch. 4 - Exercise 4-5 Determining effects of closing...Ch. 4 - Exercise 4-6 Completing the income statement...Ch. 4 - Exercise 4-7 Preparing a work sheet and recording...Ch. 4 - Exercise 4-8 Preparing and posting closing...Ch. 4 - Exercise 4-9 Preparing closing entries and a...Ch. 4 - Exercise 4-10 Preparing closing entries and a...Ch. 4 - Prob. 11ECh. 4 - Exercise 4-12 Preparing a classified balance sheet...Ch. 4 - Exercise 4-13 Computing the current ratio A1 Use...Ch. 4 - Exercise 4-14 Preparing closing entries P2...Ch. 4 - Exercise 4-15 Computing and analysing the current...Ch. 4 - Exercise 4.16A Preparing reversing entries P4 Hawk...Ch. 4 - Exercise 4-17APreparing reversing entries P4 The...Ch. 4 - Problem 4-1A Applying the accounting cycle C2 P2...Ch. 4 - Problem 4-2A Preparing a work sheet, adjusting and...Ch. 4 - Problem 4-3A Determining balance sheet...Ch. 4 - Problem 4-4A Preparing closing entries, financial...Ch. 4 - Problem 4-5A Preparing trial balances, closing...Ch. 4 - Problem 4-6AA Preparing adjusting, reversing, and...Ch. 4 - Problem 4-1B Applying the accounting cycle C2 P2...Ch. 4 - Prob. 2BPSBCh. 4 - Problem 4-3B Determining balance sheet...Ch. 4 - Prob. 4BPSBCh. 4 - Problem 4-5B Preparing trial balances, closing...Ch. 4 - Problem 4-6BAPreparing adjusting, reversing, and...Ch. 4 - The December 31. 2019= adjusted trial balance of...Ch. 4 - Transactions from the Fast Forward illustration in...Ch. 4 - Prob. 2GLPCh. 4 - Prob. 3GLPCh. 4 - Based on Problem 4-6ACh. 4 - Prob. 5GLPCh. 4 - Refer to Apple' s financial statements in Appendix...Ch. 4 - Prob. 2AACh. 4 - Prob. 3AACh. 4 - Prob. 1BTNCh. 4 - Prob. 2BTNCh. 4 - Prob. 3BTNCh. 4 - The unadjusted trial balance and information for...Ch. 4 - Prob. 5BTNCh. 4 - Prob. 6BTN
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