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Exercise 13.1 Classifying income statement items. LO 13-1
 
The accounts listed below appear on the worksheet of Heritage Crafts.
Indicate the section of the classified income statement in which each account will be reported.
 

   
Exercise 13.2 Classifying balance sheet items. LO 13-3
The following accounts appear on the worksheet of Heritage Crafts at December 31, 2019.
Indicate the section of the classified balance sheet in which each account will be reported.
 

   
Exercise 13.3 Preparing a classified income statement. LO 13-1
 
The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts.
The merchandise inventory amounted to $59,275 on January 1, 2019, and $52,225 on December 31, 2019.
The expense accounts numbered 611 through 617 represent selling expenses,
and those numbered 631 through 646 represent general and administrative expenses.
 

	Accounts
401	Sales	$	246,600	Cr.
451	Sales Returns and Allowances		4,300	Dr.
491	Miscellaneous Income		350	Cr.
501	Purchases		103,100	Dr.
502	Freight In		1,925	Dr.
503	Purchases Returns and Allowances		3,550	Cr.
504	Purchases Discounts		1,750	Cr.
611	Salaries Expense—Sales		44,800	Dr.
614	Store Supplies Expense		2,260	Dr.
617	Depreciation Expense—Store Equipment		1,460	Dr.
631	Rent Expense		13,000	Dr.
634	Utilities Expense		2,950	Dr.
637	Salaries Expense—Office		20,600	Dr.
640	Payroll Taxes Expense		5,500	Dr.
643	Depreciation Expense—Office Equipment		520	Dr.
646	Uncollectible Accounts Expense		670	Dr.
691	Interest Expense		640	Dr.

Prepare a classified income statement for this firm for the year ended December 31, 2019.
 


   
Exercise 13.4 Preparing a statement of owner's equity. LO 13-2
 
The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts.
The merchandise inventory amounted to $59,175 on January 1, 2019, and $52,125 on December 31, 2019.
The expense accounts numbered 611 through 617 represent selling expenses,
and those numbered 631 through 646 represent general and administrative expenses.
 

	Accounts
401	Sales	$	246,400	Cr.
451	Sales Returns and Allowances		4,290	Dr.
491	Miscellaneous Income		340	Cr.
501	Purchases		103,000	Dr.
502	Freight In		1,915	Dr.
503	Purchases Returns and Allowances		3,540	Cr.
504	Purchases Discounts		1,740	Cr.
611	Salaries Expense—Sales		44,700	Dr.
614	Store Supplies Expense		2,250	Dr.
617	Depreciation Expense—Store Equipment		1,450	Dr.
631	Rent Expense		12,900	Dr.
634	Utilities Expense		2,940	Dr.
637	Salaries Expense—Office		20,500	Dr.
640	Payroll Taxes Expense		5,400	Dr.
643	Depreciation Expense—Office Equipment		510	Dr.
646	Uncollectible Accounts Expense		660	Dr.
691	Interest Expense		620	Dr.

The worksheet of Bridget's Office Supplies contains the following owner’s equity accounts.
No additional investments were made during the period.
 

	Accounts
301	Bridget Swanson, Capital	$	63,160	Cr.
302	Bridget Swanson, Drawing		40,400	Dr.

Net income for the year $43,835.

Prepare a statement of owner's equity for the year ended December 31, 2019.
 

   
Exercise 13.5 Preparing a classified balance sheet. LO 13-3
 
The worksheet of Bridget's Office Supplies contains the following revenue, cost, and expense accounts.
The merchandise inventory amounted to $57,775 on January 1, 2019, and $50,725 on December 31, 2019.
The expense accounts numbered 611 through 617 represent selling expenses,
and those numbered 631 through 646 represent general and administrative expenses.
 

	Accounts
401	Sales	$	243,600	Cr.
451	Sales Returns and Allowances		4,150	Dr.
491	Miscellaneous Income		200	Cr.
501	Purchases		101,600	Dr.
502	Freight In		1,775	Dr.
503	Purchases Returns and Allowances		3,400	Cr.
504	Purchases Discounts		1,600	Cr.
611	Salaries Expense—Sales		43,300	Dr.
614	Store Supplies Expense		2,110	Dr.
617	Depreciation Expense—Store Equipment		1,310	Dr.
631	Rent Expense		11,500	Dr.
634	Utilities Expense		2,800	Dr.
637	Salaries Expense—Office		19,100	Dr.
640	Payroll Taxes Expense		4,000	Dr.
643	Depreciation Expense—Office Equipment		370	Dr.
646	Uncollectible Accounts Expense		520	Dr.
691	Interest Expense		340	Dr.

The worksheet of Bridget's Office Supplies contains the following owner’s equity accounts.
 

	Accounts
301	Bridget Swanson, Capital	$	61,760	Cr.
302	Bridget Swanson, Drawing		41,200	Dr.

Net income for the year $48,875.

The worksheet of Bridget's Office Supplies contains the following asset and liability accounts.
The balance of the Notes Payable account consists of notes that are due within a year.
 

	Accounts
101	Cash	$	12,805	Dr.
107	Change Fund		300	Dr.
111	Accounts Receivable		4,940	Dr.
112	Allowance for Doubtful Accounts		660	Cr.
121	Merchandise Inventory		50,725	Dr.
131	Store Supplies		900	Dr.
133	Prepaid Interest		30	Dr.
141	Store Equipment		9,200	Dr.
142	Accum. Depreciation—Store Equipment		980	Cr.
151	Office Equipment		3,000	Dr.
152	Accum. Depreciation—Office Equipment		300	Cr.
201	Notes Payable		5,300	Cr.
203	Accounts Payable		3,525	Cr.
216	Interest Payable		10	Cr.
231	Sales Tax Payable		1,690	Cr.

Prepare a balance sheet dated December 31, 2019.
 

 

   
Exercise 13.6 Recording closing entries. LO 13-5
 
On December 31, 2019, the Income Statement section of the worksheet for Capeletti Distributors contained the following information.
 

Income Statement Section	Debit			Credit
Income Summary	$	38,200		$	41,500
Sales					252,500
Sales Returns and Allowances		3,700
Sales Discounts		2,700
Interest Income					150
Purchases		134,000
Freight In		2,000
Purchases Returns and Allowances					1,800
Purchases Discounts					1,490
Rent Expense		8,300
Utilities Expense		2,890
Telephone Expense		1,500
Salaries Expense		65,700
Payroll Taxes Expense		5,230
Supplies Expense		1,660
Depreciation Expense		2,300
Interest Expense		300
Totals	$	268,480		$	297,440

Assume further that the owner of the firm is John Capeletti and that the John Capeletti, Drawing
account had a balance of $26,000 on December 31, 2019.

Prepare the entries that should be made in the general journal to close the revenue,
cost of goods sold, expense, and other temporary accounts.
 

   
Exercise 13.7 Journalizing reversing entries. LO 13-7
 

				Debit			Credit
2019			(Adjustment a)
	Dec.	31	Uncollectible Accounts Expense		2,864.00
			Allowance for Doubtful Accounts					2,864.00
			To record estimated loss from Uncollectible accounts based on 0.4% of net credit sales, $716,000
			(Adjustment b)
		31	Supplies Expense		3,800.00
			Supplies					3,800.00
			To record supplies used during the year
			(Adjustment c)
		31	Insurance Expense		1,080.00
			Prepaid Insurance					1,080.00
			To record expired insurance on 1-year $4,320 policy purchased on Oct. 1
			(Adjustment d)
		31	Depreciation. Exp.—Store Equipment		13,400.00
			Accum. Depreciation—Store Equip.					13,400.00
			To record depreciation
			(Adjustment e)
		31	Salaries Expense—Office		1,900.00
			Salaries Payable					1,900.00
			To record accrued salaries for Dec. 29–31
			(Adjustment f)
		31	Payroll Taxes Expense		145.35
			Social Security Tax Payable					117.80
			Medicare Tax Payable					27.55
			To record accrued payroll taxes on accrued salaries: social security, 6.2% × 1,900 = $117.80; Medicare, 1.45% × 1,900 = $27.55
			(Adjustment g)
		31	Interest Expense		110.00
			Interest Payable					110.00
			To record accrued interest on a 4-month, 6% trade note payable dated Nov. 1: $11,000 × 0.06 × 2/12 = $110.00
			(Adjustment h)
		31	Interest Receivable		158.00
			Interest Income					158.00
			To record interest earned on 6-month, 8% note receivable dated Oct. 1: $7,900 × 0.08 × 3/12 = $158.00

Examine the above adjusting entries and determine which ones should be reversed.
Show the reversing entries that should be recorded in the general journal as of January 1, 2020.
(Record the entries in the order given. Round your answers to 2 decimal places.)
 

   
Exercise 13.8 Preparing a postclosing trial balance. LO 13-6
 
The Adjusted Trial Balance section of the worksheet for Van Zant Janitorial Supplies follows.
The owner made no additional investments during the year.
 

Accounts		Debit			Credit
Cash	$	19,300
Accounts Receivable		60,500
Allowance for Doubtful Accounts				$	190
Merchandise Inventory		186,900
Supplies		7,210
Prepaid Insurance		3,130
Equipment		51,700
Accumulated Depreciation—Equipment					18,500
Accounts Payable					9,400
Social Security Tax Payable					1,460
Medicare Tax Payable					380
Steven Van Zant, Capital					280,380
Steven Van Zant, Drawing		74,700
Income Summary		180,700			186,900
Sales					776,500
Sales Returns and Allowances		15,100
Purchases		487,600
Freight In		6,100
Purchases Returns and Allowances					9,200
Purchases Discounts					6,000
Rent Expense		34,500
Telephone Expense		6,310
Salaries Expense		123,840
Payroll Taxes Expense		12,400
Supplies Expense		7,300
Insurance Expense		1,630
Depreciation Expense—Equipment		8,800
Uncollectible Accounts Expense		1,190
Totals	$	1,288,910		$	1,288,910

 
Prepare a postclosing trial balance for the firm on December 31, 2019.
 


   
Exercise 13.9 Calculating ratios. LO 13-6
 
The following selected accounts were taken from the financial records of Los Olivos Distributors at December 31, 2019.
All accounts have normal balances.
 

Cash	$	22,810
Accounts receivable		45,800
Note receivable, due 2020		7,600
Merchandise inventory		33,800
Prepaid insurance		2,160
Supplies		1,220
Equipment		41,600
Accumulated depreciation, equipment		21,600
Note payable to bank, due 2020		16,000
Accounts payable		33,140
Interest payable		160
Sales		520,500
Sales discounts		1,300
Cost of goods sold		330,325

Accounts Receivable at December 31, 2018, was $57,300. Merchandise inventory at December 31, 2018, was $56,700.
Based on the account balances above, calculate the following:
 
The gross profit percentage.
Working capital.
The current ratio.
The inventory turnover.
The accounts receivable turnover. All sales were on credit.
The gross profit percentage.
 

 
Working capital.
 

The current ratio.

 
The inventory turnover.

 
The accounts receivable turnover. All sales were on credit.
 

   
Exercise 13.10 Calculating the accounts receivable turnover and the inventory turnover. LO 13-6
 
Solomon Company reports the following in its most recent year of operations:
 
Sales, $1,081,600 (all on account)
Cost of goods sold, $633,600
Gross profit, $448,000
Accounts receivable, beginning of year, $94,000
Accounts receivable, end of year, $114,000
Merchandise inventory, beginning of year, $59,000
Merchandise inventory, end of year, $69,000.

Based on these balances, compute:
The accounts receivable turnover.
The inventory turnover.
The accounts receivable turnover.

 
The inventory turnover.
 


Roberto company has sales of $1,000,000, sales returns and allowances of $10,000, sales discounts of $2,000,
and salary expense-sales of $120,000. what is the amount of net sales?

a) $1,012,000
b) $988,000
c) $1,132,000
d) $868,000
 
1,000,000 - 12,000 = 988,000
   
kelley company has beginning inventory of $125,000, purchases of $950,000, purchases returns and allowances of $25,000, freight-in of $10,000, and ending inventory of $118,000. what is the amount of the cost of goods sold?
a) $922,000
b) $928,000
c) $992,000
d) $942,000
 
950,000 - 25,000 + 10,000 + 7,000 = 942,000
   
Chen company has net sales of $500,000, cost of gods sold of $300,000, and interest expense of $10,000.
What is the amount of gross profit on sales?

a) $200,000
b) $198,000
c) $202,000
d) none of these
 
 500,000 - 300,000 = 200,000
   
The balance of James Wilson, Capital at the beginning of the period was 50,000. During the period, his company had net income
of 40,000, and he withdrew 35,000 from the business for personal use.
What is the amount of the James Wilson, Capital account at the end of the accounting period?

a) $125,000
b) $5,000
c) $45,000
d) $55,000
 
40,000 - 35,000 = 5,000
5,000 + 50,000 = 55,000
   
How should purchases returns and allowances be shown on the income statement?

a) as other income
b) as an addition to the delivered cost of purchases
c) as a deduction from the delivered cost of purchases
d) as other expenses
c) as a deduction from the delivered cost of purchases
   
Which of the following would not be classified as a Plant and Equipment on a balance sheet?

a) prepaid insurance
b) autos
c) store equipment
d) office equipment
   
Which of the following is not a current asset?

a) a merchandise inventory
b) a note receivable due in 11 months
c) prepaid insurance covering the next eight months
d) a note receivable due in 13 months
   
Arrange the accounting cycle:
 
1. analyze transactions
2. journalize the data about transactions
3. post the data about transactions
4. prepare a worksheet
5. prepare financial statements
6. journalize and post adjusting entries
7. journalize the post-closing entries
8. prepare a post-closing trial balance
9. interpret the financial info
   
A type of income statement on which several subtotals are computed before the net income is calculated, such as gross profit, is called a _______ income statement.

multiple-step
single-total
multi-total
single-step
   
Which of the following is not a general and administrative expense?

a) rent expense
b) salaries expense-office
c) advertising expense
d) uncollectible accounts expense
   
On October 1, 2011, Paige Turner Publishing received $5,400 in cash for monthly subscriptions covering one year,
recording the entry as a debit to Cash and a credit to Unearned Subscriptions.
The correct adjusting entry at December 31, 2011, is
 
Debit Unearned Subscriptions $1,350
Credit Subscriptions Income $1,350
   
Palmer Company determines its allowances for doubtful accounts by applying an expected loss percentage of 1.8 percent to the
total of accounts receivable $1,500,000. Prior to the adjusting entry the allowance account has a debit balance of $1,180.
How much will be charged to expense in the adjusting entry?
 
$28,180
   
On December 1, 20X1, a firm accepted a 6-month, 12 percent note for $10,000 from a customer.
The adjusting entry on December 31 to record the interest earned on the note is:
 
a debit to Interest Receivable for $100
a credit to Interest Income for $100.
   
Thompson Industries determines its provision for uncollectible accounts by applying an estimated loss percentage of 1 percent to net credit sales.
In 2011, net credit sales were $5,800,000. Prior to the adjusting entry, Allowances for Doubtful Accounts contained a credit balance of $5,000.
How much will be charged to Uncollectible Accounts Expense in 2011?
 
$58,000
   
Vanessa Company reported net sales of $1,000,000, cost of goods sold of $600,000, and gross profit of $400,000.
Merchandise Inventory was $50,000 and $70,000 at the beginning and end of the period, respectively.
What is the inventory turnover, rounded to two decimal places?
 
6.67 times
   
Marco Company reported net sales of $1,500,000, cost of goods sold of $800,000, and gross profit of $700,000.
Accounts Receivable were $175,000 and $225,000 at the beginning and end of the period, respectively.
What is the accounts receivable turnover, rounded to two decimal places?
 
7.50 times
   
Chen Company has net sales of $500,000, cost of goods sold of $300,000, and interest expense of $10,000.
What is the amount of gross profit on sales?
 
$200,000
   
On October 1, 2011, Paige Turner Publishing received $58,800 in cash for monthly subscriptions covering one year,
recording the entry as a debit to Cash and a credit to Unearned Subscriptions. The correct adjusting entry at December 31, 20X1, is
 
Debit Unearned Subscriptions   $14,700
Credit Subscriptions Income       $14,700.
   
Robin Banks, incorporated owns an armored truck which was purchased for $88,000.
The Accumulated Depreciation on the truck is $60,000. The book value of the armored truck is
 
$28,000
   
On September 1, 20X1, a firm accepted a 6-month, 6% note for $50,000 from a customer with an overdue account balance.
The accrued interest recorded for this note on December 31, 20X1, is
 
$1,000.00
   
If an account has a credit balance of $8,400 in the Trial Balance section of a worksheet and there is a credit of $700
in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is
 
$9,100 credit.
   
On January 1, 2011, a firm purchased machinery for $28,000. Depreciation expense for the year ending December 31, 2011,
given the straight-line method, a 10-year useful life, and a salvage value of $3,000, is
 
$2,500.
 
   
Rose Bush Nursery purchased a delivery truck for $40,000. The truck is expected to have a useful life of 5 years and a residual value of $2,800.
The company uses the straight-line method of depreciation. If the truck was purchased on June 1, 2011,
what is the amount of depreciation expense for the truck for one full year?
 
$7,440
   
The balance of James Wilson, Capital at the beginning of the period was $50,000. During the period, his company had net income of $40,000,
and he withdrew $35,000 from the business for personal use.
What is the amount of the James Wilson, Capital account at the end of the accounting period?
 
$55,000