
1.
Prepare journal entries to record the transactions from January to March.
1.

Explanation of Solution
Prepare journal entries to record the transactions from January to March.
Date | Account title and explanation | PR | Amount | |
Debit | Credit | |||
2016 | ||||
4-Jan | Wages Expense | 623 | $125 | |
Wages Payable | 210 | $500 | ||
Cash | 101 | $625 | ||
(To record the Paid employee) | ||||
5-Jan | Cash | 101 | $25,000 | |
Common Stock | 307 | $25,000 | ||
(To record the Additional investment by owner for stock.) | ||||
7-Jan | Merchandise Inventory | 119 | $5,800 | |
Accounts Payable - Corporation K | 201 | $5,800 | ||
(To record the Purchase of merchandise on credit) | ||||
9-Jan | Cash | 101 | $2,668 | |
106.6 | $2,668 | |||
(To record the Collected accounts receivable) | $5,500 | |||
11-Jan | Accounts Receivable—Company AE | 106.1 | $5,500 | |
Unearned Computer Services Revenue | 236 | $1,500 | ||
Computer Services Revenue | 403 | $7,000 | ||
( To record the Completed work on project) | ||||
13-Jan | Accounts Receivable—Corporation L | 106.5 | $5,200 | |
Sales | 413 | $5,200 | ||
(To record the merchandise sold on credit.) | ||||
13-Jan | Cost of Goods Sold | 502 | $3,560 | |
Merchandise Inventory | 119 | $3,560 | ||
( To Record the cost of January 13 sale) | ||||
15-Jan | Merchandise Inventory | 119 | $600 | |
Cash | 101 | $600 | ||
( To record the freight paid on incoming merchandise) | ||||
16-Jan | Cash | 101 | $4,000 | |
Computer Services Revenue | 403 | $4,000 | ||
(To record the cash collected revenue from customer) | ||||
17-Jan | Accounts Payable - Corporation K | 201 | $5,800 | |
Merchandise Inventory | 119 | $58 | ||
Cash | 101 | $5,742 | ||
(To record the payment of account payable within discount period) | ||||
20-Jan | Sales Returns and Allowances | 414 | $500 | |
Accounts Receivable—Corporation L | 106.5 | $500 | ||
( To record the defective goods returned from customers) | ||||
22-Jan | Cash | 101 | $4,653 | |
Sales Discounts | 415 | $47 | ||
Accounts Receivable—Corporation L | 106.5 | $4,700 | ||
(To record the Collections from accounts receivable) | ||||
24-Jan | Accounts Payable | 201 | $496 | |
Merchandise Inventory | 119 | $496 | ||
(To record the return of merchandise for credit) | ||||
26-Jan | Merchandise Inventory | 119 | $9,000 | |
Accounts Payable - Corporation K | 201 | $9,000 | ||
( To record the purchase of merchandise for resale) | ||||
26-Jan | Accounts Receivable—Incorporation KC | 106.8 | $5,800 | |
Sales | 413 | $5,800 | ||
(To record the merchandise sold on credit) | ||||
26-Jan | Cost of Goods Sold | 502 | $4,640 | |
Merchandise Inventory | 119 | $4,640 | ||
( To record the cost of January 26 sales) | ||||
31-Jan | Wages Expense | 623 | $1,250 | |
Cash | 101 | $1,250 | ||
( To record the payment of employee wages) | ||||
1-Feb | Prepaid Rent | 131 | $2,475 | |
Cash | 101 | $2,475 | ||
( To record the payment of three months’ rent in advance) | ||||
3-Feb | Accounts Payable | 201 | $8,504 | |
Merchandise Inventory | 119 | $90 | ||
Cash | 101 | $8,414 | ||
(To record the payment of account payable within discount period) | ||||
5-Feb | Advertising Expense | 655 | $600 | |
Cash | 101 | $600 | ||
( To record the payment for advertising expense) | ||||
11-Feb | Cash | 101 | $5,500 | |
Accounts Receivable—Company AE | 106.1 | $5,500 | ||
( To record the collection of cash from customers) | ||||
15-Feb | Dividends | 319 | $4,800 | |
Cash | 101 | $4,800 | ||
(To record the payment of dividends) | ||||
23-Feb | Accounts Receivable—Corporation D | 106.7 | $3,220 | |
Sales | 413 | $3,220 | ||
( To record the sale of merchandise on credit) | ||||
23-Feb | Cost of Goods Sold | 502 | $2,660 | |
Merchandise Inventory | 119 | $2,660 | ||
( To record the cost of February 23 sales) | ||||
26-Feb | Wages Expense | 623 | $1,000 | |
Cash | 101 | $1,000 | ||
( To record the payment of wages to employee) | ||||
27-Feb | Mileage Expense | 676 | $192 | |
Cash | 101 | $192 | ||
(To record the Reimbursement of business mileage) | ||||
8-Mar | Computer Supplies | 126 | $2,730 | |
Accounts Payable-Company H | 201 | $2,730 | ||
( To record the purchase of supplies on credit) | ||||
9-Mar | Cash | 101 | $3,220 | |
Accounts Receivable—Corporation D | 106.7 | $3,220 | ||
( To record the collection of accounts receivable) | ||||
11-Mar | Repairs Expense–Computer | 684 | $960 | |
Cash | 101 | $960 | ||
(To record the payment for computer repairs) | ||||
16-Mar | Cash | 101 | $5,260 | |
Computer Services Revenue | 403 | $5,260 | ||
( To record the collection cash revenue from customer) | ||||
19-Mar | Accounts Payable | 201 | $3,830 | |
Cash | 101 | $3,830 | ||
( To record the payment of accounts payable | ||||
24-Mar | Accounts Receivable—Company EL | 106.3 | $9,047 | |
Computer Services Revenue | 403 | $9,047 | ||
(To record the billed customer for services) | ||||
25-Mar | Accounts Receivable—Company WS | 106.2 | $2,800 | |
Sales | 413 | $2,800 | ||
( To record the sale of merchandise on credit) | ||||
25-Mar | Cost of Goods Sold | 502 | $2,002 | |
Merchandise Inventory | 119 | $2,002 | ||
( To record the cost of sales of March 25 ) | ||||
30-Mar | Accounts Receivable—Company IFM | 106.4 | $2,220 | |
Sales | 413 | $2,220 | ||
( To record the sale of merchandise on credit) | ||||
30-Mar | Cost of Goods Sold | 502 | $1,048 | |
Merchandise Inventory | 119 | $1,048 | ||
( To record the cost of sales of March 30 ) | ||||
31-Mar | Mileage Expense | 676 | $128 | |
Cash | 101 | $128 | ||
(To record the Reimbursement of business mileage) |
Table (1)
2.
2.

Explanation of Solution
Account: A record, that documents or records the change in assets, liabilities, or equity for a particular period, is referred to as an account.
Cash No. 101 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | $48,372 | ||||
4-Jan | $625 | $47,747 | |||
5-Jan | $25,000 | $72,747 | |||
9-Jan | $2,668 | $75,415 | |||
15-Jan | $600 | $74,815 | |||
16-Jan | $4,000 | $78,815 | |||
17-Jan | $5,742 | $73,073 | |||
22-Jan | $4,653 | $77,726 | |||
31-Jan | $1,250 | $76,476 | |||
1-Feb | $2,475 | $74,001 | |||
3-Feb | $8,414 | $65,587 | |||
5-Feb | $600 | $64,987 | |||
11-Jan | $5,500 | $70,487 | |||
15-Feb | $4,800 | $65,687 | |||
26-Feb | $1,000 | $64,687 | |||
27-Feb | $192 | $64,495 | |||
9-Mar | $3,220 | $67,715 | |||
11-Mar | $960 | $66,755 | |||
16-Mar | $5,260 | $72,015 | |||
19-Mar | $3,830 | $68,185 | |||
31-Mar | $128 | $68,057 | |||
Accounts Receivable—Company AE No. 106.1 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
11-Jan | $5,500 | $5,500 | |||
11-Feb | $5,500 | $0 | |||
Accounts Receivable—Company WS No. 106.2 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
25-Mar | $2,800 | $2,800 | |||
Accounts Receivable—Company EL No. 106.3 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
24-Mar | $9,047 | $9,047 | |||
Accounts Receivable—Company IFM No. 106.4 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $3,000 | |||
30-Mar | $2,220 | $5,220 | |||
Accounts Receivable—Corporation L No. 106.5 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
13-Jan | $5,200 | $5,200 | |||
20-Jan | $500 | $4,700 | |||
22-Jan | $4,700 | $0 | |||
Accounts Receivable—Company G 106.6 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $2,668 | |||
9-Jan | $2,668 | $0 | |||
Accounts Receivable—Company D No. 106.7 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
23-Feb | $3,220 | $3,220 | |||
9-Mar | $3,220 | $0 | |||
Accounts Receivable—Incorporation KC No. 106.8 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
26-Jan | $5,800 | $0 | $5,800 | ||
Accounts Receivable—Incorporation D No. 106.8 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
Merchandise inventory—Incorporation D No. 119 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
7-Jan | $5,800 | $5,800 | |||
13-Jan | $3,560 | $2,240 | |||
15-Jan | $600 | $2,840 | |||
17-Jan | $58 | $2,782 | |||
24-Jan | $496 | $2,286 | |||
26-Jan | $9,000 | $11,286 | |||
26-Jan | $4,640 | $6,646 | |||
3-Feb | $90 | $6,556 | |||
23-Feb | $2,660 | $3,896 | |||
25-Mar | $2,002 | $1,894 | |||
30-Mar | $1,048 | $846 | |||
Compute supplies No. 126 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $580 | |||
8-Mar | Balance | $2,730 | $3,310 | ||
Prepaid Insurance No. 128 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,665 | |||
Prepaid Rent No. 131 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $825 | |||
1-Feb | $2,475 | $3,300 | |||
Office equipment No. 163 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $8,000 | |||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $400 | |||
Computer equipment No. 167 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $20,000 | |||
Accumulated depreciation- Computer equipment No. 168 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,250 | |||
Accounts payable No. 201 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,100 | |||
7-Jan | Balance | $5,800 | $6,900 | ||
17-Jan | Balance | $5,800 | $1,100 | ||
24-Jan | Balance | $496 | $604 | ||
26-Jan | Balance | $9,000 | $9,604 | ||
3-Feb | Balance | $8,504 | $1,100 | ||
8-Mar | Balance | $2,730 | $3,830 | ||
9-Mar | Balance | $3,830 | $0 | ||
Wages payable No. 210 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $500 | |||
4-Jan | $500 | $0 | |||
Unearned computer services revenue No. 236 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,500 | |||
11-Jan | $1,500 | $0 | |||
Common stock No. 307 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $73,000 | |||
5-Jan | $25,000 | $98,000 | |||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $7,360 | |||
Dividends No. 319 | |||||
Date | PR | Debit | Credit | Balance | |
15-Feb | $4,800 | $4,800 | |||
Computer services revenue No. 403 | |||||
Date | PR | Debit | Credit | Balance | |
11-Jan | $7,000 | $7,000 | |||
16-Jan | $4,000 | $11,000 | |||
16-Mar | $5,260 | $16,260 | |||
24-Mar | $9,047 | $25,307 | |||
Sales No. 413 | |||||
Date | PR | Debit | Credit | Balance | |
13-Jan | $5,200 | $5,200 | |||
26-Jan | $5,800 | $11,000 | |||
23-Feb | $3,220 | $14,220 | |||
25-Mar | $2,800 | $17,020 | |||
30-Mar | $2,220 | $19,240 | |||
Sales returns and allowances No. 414 | |||||
Date | PR | Debit | Credit | Balance | |
20-Jan | $500 | $500 | |||
Sales discounts No. 415 | |||||
Date | PR | Debit | Credit | Balance | |
20-Jan | $47 | $0 | $47 | ||
Cost of goods sold No. 502 | |||||
Date | PR | Debit | Credit | Balance | |
13-Jan | $3,560 | $3,560 | |||
26-Jan | $4,640 | $8,200 | |||
23-Feb | $2,660 | $10,860 | |||
25-Mar | $2,002 | $12,862 | |||
30-Mar | $1,048 | $13,910 | |||
Depreciation expense - Office equipment No. 612 | |||||
Date | PR | Debit | Credit | Balance | |
Depreciation expense - Computer equipment No. 613 | |||||
Date | PR | Debit | Credit | Balance | |
Wages expense No. 623 | |||||
Date | PR | Debit | Credit | Balance | |
4-Jan | $125 | $125 | |||
31-Jan | $1,250 | $1,375 | |||
26-Feb | $1,000 | $2,375 | |||
Insurance expense No. 637 | |||||
Date | PR | Debit | Credit | Balance | |
Rent expense No. 640 | |||||
Date | PR | Debit | Credit | Balance | |
Computer supplies expense No. 652 | |||||
Date | PR | Debit | Credit | Balance | |
Advertising expense No. 655 | |||||
Date | PR | Debit | Credit | Balance | |
5-Feb | $600 | $600 | |||
Mileage expense No. 676 | |||||
Date | PR | Debit | Credit | Balance | |
27-Feb | $192 | $192 | |||
31-Mar | $128 | $320 | |||
Miscellaneous Expenses No. 677 | |||||
Date | PR | Debit | Credit | Balance | |
Repairs Expense—Computer No. 684 | |||||
Date | PR | Debit | Credit | Balance | |
11-Mar | $960 | $960 |
3.
Prepare a partial worksheet of Company BS for the three months ended March 31, 2016.
3.

Explanation of Solution
Worksheet: A worksheet is the summarized form of accounting information which is made in order to ensure that the accounts are made properly.
Prepare a partial worksheet of Company BS for the three months ended March 31, 2016.
Table (2)
4.
Prepare a single step income statement of Company BS for the three months ended March 31, 2016.
4.

Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Single-step income statement: This statement displays the total revenues as one line item from which the total expenses including cost of goods sold is subtracted to arrive at the net profit /net loss for the period.
Prepare a statement of income of Company BS for the three months ended March 31, 2016.
Company BS | ||
Statement of Income | ||
For the three months ended March 31, 2016 | ||
Particulars | Amount | Amount |
Revenues | ||
Computer services revenue | $25,307 | |
Net sales (1) | $18,693 | |
Total revenues | $44,000 | |
Expenses | ||
Cost of goods sold | $14,052 | |
$400 | ||
Depreciation expense—Computer equipment | $1,250 | |
Wages expense | $3,250 | |
Insurance expense | $555 | |
Rent expense | $2,475 | |
Computer supplies expense | $1,305 | |
Advertising expense | $600 | |
Mileage expense | $320 | |
Repairs expense—Computer | $960 | |
Total expenses | ($25,167) | |
Net income | $18,833 |
Table (3)
The net income of Company BS for the three months ended March 31, 2016 is $18,833.
Working note:
Calculate the amount of net sales:
5.
Prepare a statement of retained earnings of Company BS for the three months ended March 31, 2016.
5.

Explanation of Solution
Statement of retained earnings: This is an equity statement which shows the changes in the
Prepare a statement of retained earnings of Company BS for the three months ended March 31, 2016.
Company BS | ||
Statement of Retained earnings | ||
For the three months ended March 31, 2016 | ||
Particulars | Amount | Amount |
Retained earnings as on December 31, 2015 | $7,360 | |
Add: Net income | $26,193 | |
$33,553 | ||
Less: Dividends | ($4,800) | |
Retained earnings as on March 31, 2016 | $21,393 |
Table (4)
The retained earnings of Company BS for the three months ended March 31, 2016 is $21,393.
6.
Prepare a classified
6.

Explanation of Solution
Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets. Liabilities are classified into two sections current and long-term. Stockholders’ equity comprises of common stock and retained earnings. Thus, the classified balance sheet includes all the elements under different sections.
Prepare a classified balance sheet as of March 31, 2016.
Company BS | ||
Balance sheet | ||
As of March 31, 2016 | ||
Assets | Amount | Amount |
Current assets | ||
Cash | $68,057 | |
Accounts receivable (2) | $22,867 | |
Merchandise inventory | $704 | |
Computer supplies | $2,005 | |
Prepaid insurance | $1,110 | |
Prepaid rent | $825 | |
Total current assets | $95,568 | |
Plant assets | ||
Office equipment | $8,000 | |
Accumulated depreciation—Office equipment | ($800) | $7,200 |
Computer equipment | $20,000 | |
Accumulated depreciation—Computer equipment | ($2,500) | $17,500 |
Total plant assets | $24,700 | |
Total assets | $120,268 | |
Liabilities and Stockholder's Equity | ||
Liabilities | ||
Current liabilities | ||
Wages payable | $875 | |
Stockholders’ Equity | ||
Common stock | $98,000 | |
Retained earnings | $21,393 | |
Total equity | $119,393 | |
Total liabilities and equity | $120,268 |
Table (5)
Calculate the amount of accounts receivable:
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Chapter 5 Solutions
Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
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