$101,114 $40,915 = 2.47

SOLUTION (concluded) 4. Working Capital = $101,114 $40,915 = $60,199 Current Ratio = $101,114 $40,915 = 2.47 DISCUSSION QUESTIONS Suggested Responses 1. Current assets are listed in the order of their liquidity (or convertibility into cash). 2. The cost of goods available for sale is the cost of goods that could be sold. The cost of goods sold, on the other hand, is the cost of goods that were actually sold. The difference between the cost of goods available for sale and the cost of goods sold is the amount of the ending inventory. 3. The basic classifications found on an income statement for a merchandising business are Revenue from Sales, Cost of Goods Sold, Operating Expenses, Other Income, and Other Expenses. 4. Current liabilities are debts that will become due within a company s normal operating cycle, usually within one year. An example of a current liability is Accounts Payable. Long-term liabilities are debts that are payable over a comparatively long period, usually more than one year. An example of a long-term liability is Mortgage Payable. 5. The difference between income from operations and net income is Other Income and Other Expenses. Income from Operations + Other Income Other Expenses = Net Income In comparing the results of operations over a number of years, income from operations is more useful, because it represents a company s regular recurring revenue and expenses. 6. Net Sales = Sales Sales Returns and Allowances Sales Discounts Net Purchases = Purchases Purchases Returns and Allowances Purchases Discounts These calculations show the true amounts actually earned and the amount actually added to inventory. 7. (a) Purchases Discounts is debited in the first closing entry, in which revenue accounts are closed. (b) Sales Returns and Allowances is credited in the second closing entry, in which expense accounts are closed. (c) Freight In is credited in the second closing entry, in which expense accounts are closed. (d) Gain on Disposal of Property and Equipment is debited in the first closing entry, in which revenue accounts are closed. 8. If an adjusting entry (a) increases an asset account or a liability account (except Merchandise Inventory or a contra account, such as Accumulated Depreciation) and (b) the asset or liability did not have a balance prior to the adjustment, then reverse the adjusting entry. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 625

SOLUTIONS TO EXERCISES Exercise 12-1 a. Net Sales, $242,000 $6,000 = $236,000 Cost of Goods Available for Sale, $152,000 + $170,000 = $322,000 Gross Profit, $236,000 $186,000 = $50,000 b. Sales Returns and Allowances, $304,000 $297,000 = $7,000 Net Purchases, $404,000 $134,000 = $270,000 Gross Profit, $297,000 $228,000 = $69,000 c. Sales, $628,000 + $10,000 = $638,000 Beginning Merchandise Inventory, $486,000 $416,000 = $70,000 Cost of Goods Sold, $486,000 $89,000 = $397,000 Gross Profit, $628,000 $397,000 = $231,000 Exercise 12-2 Merchandise Inventory, Jan. 1, 20-- $185,000 Purchases $476,000 Less: Purchases Returns and Allowances Purchases Discounts $9,000 8,500 17,500 Net Purchases $458,500 Add Freight In 12,000 Delivered Cost of Purchases 470,500 Cost of Goods Available for Sale $655,500 Less Merchandise Inventory, Dec. 31, 20-- 189,000 Cost of Goods Sold $466,500 Exercise 12-3 a. Advertising Expense, SE f. Freight In, CGS b. Rent Expense, GE g. Depreciation Expense, Building, GE c. Purchases Discounts, CGS h. Interest Expense, OE d. Sales Returns and Allowances, S i. Insurance Expense, GE e. Interest Income, OI j. Delivery Expense, SE 626 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Exercise 12-4 Bajia Company Income Statement For Year Ended June 30, 20-- Revenue from Sales: Sales $292,900 Less: Sales Returns and Allowances $ 12,100 Sales Discounts 6,100 18,200 Net Sales $274,700 Cost of Goods Sold: Merchandise Inventory, July 1, 20-- $ 26,000 Purchases $115,000 Less: Purchases Returns and Allowances $1,100 Purchases Discounts 1,200 2,300 Net Purchases $112,700 Add Freight In 6,500 Delivered Cost of Purchases 119,200 Cost of Goods Available for Sale $145,200 Less Merchandise Inventory, June 30, 20-- 22,000 Cost of Goods Sold 123,200 Gross Profit $151,500 Operating Expenses: Selling Expenses $ 57,000 General Expenses 46,000 Total Operating Expenses 103,000 Net Income $ 48,500 Exercise 12-5 a. Accounts Receivable, CA f. Supplies, CA b. Building, PE g. Mortgage Payable (due in 3 years), LTL c. Wages Payable, CL h. Unearned Fees, CL d. Prepaid Taxes, CA i. D. Marlor, Capital, OE e. Mortgage Payable (current), CL j. Notes Payable (due in 3 months), CL 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 627

Exercise 12-6 Current Assets: Current Liabilities: Prepaid Insurance $ 1,600 Unearned Fees $ 800 Merchandise Inventory 72,000 Notes Payable 5,000 Cash 19,000 Accounts Payable 23,000 Store Supplies 1,200 Mortgage Payable Notes Receivable 3,000 (current portion) 3,500 Total $96,800 Salaries Payable 2,700 Total $35,000 Working Capital = $96,800 $35,000 = $61,800 Current Ratio = $96,800 $35,000 = 2.77 Exercise 12-7 GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 Dec. 31 Sales 502,000.00 2 3 Purchases Returns and Allowances 8,600.00 3 4 Purchases Discounts 4,300.00 4 5 Income Summary 514,900.00 5 6 6 7 31 Income Summary 353,400.00 7 8 Sales Returns and Allowances 7,400.00 8 9 Purchases 235,600.00 9 10 Freight In 11,200.00 10 11 Salary Expense 65,000.00 11 12 Rent Expense 22,000.00 12 13 Miscellaneous Expense 12,200.00 13 14 14 15 31 Income Summary 177,500.00 15 16 H. Baylor, Capital 177,500.00 16 17 ( $103,000 + $514,900 ) 17 18 ( $87,000 + $353,400 ) 18 19 19 20 31 H. Baylor, Capital 55,000.00 20 21 H. Baylor, Drawing 55,000.00 21 22 22 628 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Exercise 12-8 GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 Dec. 31 Income Summary 93,000.00 2 3 H. Nishimoto, Capital 93,000.00 3 4 4 5 31 H. Nishimoto, Capital 75,000.00 5 6 H. Nishimoto, Drawing 75,000.00 6 7 7 Nishimoto Company Statement of Owner's Equity For Year Ended December 31, 20-- H. Nishimoto, Capital, January 1, 20-- Investment during the Year Net Income for the Year Subtotal Less Withdrawals for the Year Increase in Capital H. Nishimoto, Capital, December 31, 20-- $ 18,000 93,000 $111,000 75,000 $450,000 36,000 $486,000 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 629

Problem 12-1A The Fan Shop Income Statement For Year Ended December 31, 20-- Revenue from Sales: Sales $324,000 Less: Sales Returns and Allowances $ 3,400 Sales Discounts 2,707 6,107 Net Sales $317,893 Cost of Goods Sold: Merchandise Inventory, Jan. 1, 20-- $ 52,300 Purchases $201,490 Less: Purchases Returns and Allowances 2,880 Net Purchases $198,610 Add Freight In 9,790 Delivered Cost of Purchases 208,400 Cost of Goods Available for Sale $260,700 Less Merchandise Inventory, Dec. 31, 20-- 54,580 Cost of Goods Sold 206,120 Gross Profit $111,773 Operating Expenses: Wages Expense $ 46,240 Rent Expense 12,610 Commissions Expense 8,310 Supplies Expense 1,842 Insurance Expense 1,240 Depreciation Expense, Building 4,600 Depreciation Expense, Equipment 2,600 Total Operating Expenses 77,442 Income from Operations $ 34,331 Other Income: Interest Income $ 1,830 Other Expenses: Interest Expense 854 976 Net Income $ 35,307 630 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-1A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 Dec. 31 Sales 324,000.00 2 3 Purchases Returns and Allowances 2,880.00 3 4 Interest Income 1,830.00 4 5 Income Summary 328,710.00 5 6 6 7 31 Income Summary 295,683.00 7 8 Sales Returns and Allowances 3,400.00 8 9 Sales Discounts 2,707.00 9 10 Purchases 201,490.00 10 11 Freight In 9,790.00 11 12 Wages Expense 46,240.00 12 13 Rent Expense 12,610.00 13 14 Commissions Expense 8,310.00 14 15 Supplies Expense 1,842.00 15 16 Insurance Expense 1,240.00 16 17 Depreciation Expense, Building 4,600.00 17 18 Depreciation Expense, Equipment 2,600.00 18 19 Interest Expense 854.00 19 20 20 21 31 Income Summary 35,307.00 21 22 P. G. Ochoa, Capital 35,307.00 22 23 23 24 31 P. G. Ochoa, Capital 30,500.00 24 25 P. G. Ochoa, Drawing 30,500.00 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 631

Problem 12-2A Eckland Stereo Statement of Owner's Equity For Year Ended December 31, 20-- M. J. Eckland, Capital, January 1, 20-- $57,314 Net Income for the Year $25,485 Less Withdrawals for the Year 23,000 Increase in Capital 2,485 M. J. Eckland, Capital, December 31, 20-- $59,799 Eckland Stereo Balance Sheet December 31, 20-- Assets Current Assets: Cash $14,815 Notes Receivable 7,500 Accounts Receivable 30,170 Merchandise Inventory 50,244 Prepaid Property Taxes 2,115 Prepaid Insurance 1,640 Total Current Assets $106,484 Property and Equipment: Land $16,700 Building $50,000 Less Accumulated Depreciation 15,900 34,100 Computer Equipment $ 6,892 Less Accumulated Depreciation 5,674 1,218 Store Equipment $ 7,230 Less Accumulated Depreciation 4,424 2,806 Delivery Equipment $ 4,300 Less Accumulated Depreciation 3,470 830 Total Property and Equipment 55,654 Total Assets $162,138 632 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-2A (concluded) Eckland Stereo Balance Sheet (concluded) December 31, 20-- Liabilities Current Liabilities: Notes Payable $ 5,215 Mortgage Payable (current portion) 2,800 Accounts Payable 27,140 Wages Payable 1,984 Total Current Liabilities $ 37,139 Long-Term Liabilities: Mortgage Payable 65,200 Total Liabilities $102,339 Owner's Equity M. J. Eckland, Capital 59,799 Total Liabilities and Owner's Equity $162,138 Working Capital = Current Assets Current Liabilities $106,484 $37,139 = $69,345 Current Assets $106,484 Current Ratio = = Current Liabilities $37,139 = 2.87 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 633

Problem 12-3A GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Adjusting Entries 1 2 June 30 Income Summary 112,200.00 2 3 Merchandise Inventory 112,200.00 3 4 4 5 30 Merchandise Inventory 116,400.00 5 6 Income Summary 116,400.00 6 7 7 8 30 Salary Expense 1,240.00 8 9 Salaries Payable 1,240.00 9 10 10 11 30 Insurance Expense 2,840.00 11 12 Prepaid Insurance 2,840.00 12 13 13 14 30 Depreciation Expense, Delivery 14 15 Equipment 1,400.00 15 16 Accumulated Depreciation, 16 17 Delivery Equipment 1,400.00 17 18 18 19 30 Depreciation Expense, Store 19 20 Equipment 2,600.00 20 21 Accumulated Depreciation, 21 22 Store Equipment 2,600.00 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 634 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-3A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 June 30 Sales 516,000.00 2 3 Purchases Returns and Allowances 9,600.00 3 4 Purchases Discounts 6,800.00 4 5 Income Summary 532,400.00 5 6 6 7 30 Income Summary 480,700.00 7 8 Purchases 399,101.00 8 9 Freight In 14,000.00 9 10 Salary Expense 46,000.00 10 11 Truck Expense 10,600.00 11 12 Supplies Expense 2,700.00 12 13 Miscellaneous Expense 1,459.00 13 14 Insurance Expense 2,840.00 14 15 Depreciation Expense, Delivery 15 16 Equipment 1,400.00 16 17 Depreciation Expense, Store 17 18 Equipment 2,600.00 18 19 19 20 30 Income Summary 55,900.00 20 21 P. R. Masanto, Capital 55,900.00 21 22 22 23 30 P. R. Masanto, Capital 26,000.00 23 24 P. R. Masanto, Drawing 26,000.00 24 25 25 26 26 Reversing Entry 27 July 1 Salaries Payable 1,240.00 27 28 Salary Expense 1,240.00 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 635

Problem 12-4A Celso and Company Work Sheet For Year Ended June 30, 20-- TRIAL 1 Cash 15,349.00 2 Accounts Receivable 13,810.00 3 Merchandise Inventory 50,280.00 4 Prepaid Insurance 1,385.00 5 Store Equipment 18,640.00 6 Accumulated Depreciation, Store Equipment 6,882.00 7 Accounts Payable 10,065.00 8 B. E. Celso, Capital 96,424.00 9 B. E. Celso, Drawing 30,000.00 10 Sales 208,030.00 11 Sales Returns and Allowances 1,740.00 12 Purchases 133,050.00 13 Purchases Returns and Allowances 4,295.00 14 Purchases Discounts 3,853.00 15 Freight In 8,350.00 16 Wages Expense 35,400.00 17 Advertising Expense 7,710.00 18 Rent Expense 12,000.00 19 Store Supplies Expense 1,835.00 20 329,549.00 329,549.00 21 Income Summary 22 Insurance Expense 23 Depreciation Expense, Store Equipment 24 Wages Payable 25 26 Net Income 27 28 29 30 31 32 33 34 35 36 37 38 NAME 636 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4A (continued) ADJUSTMENTS INCOME STATEMENT SHEET 15,349.00 1 13,810.00 2 (b) 54,600.00 (a) 50,280.00 54,600.00 3 (c) 475.00 910.00 4 18,640.00 5 (d) 4,380.00 11,262.00 6 10,065.00 7 96,424.00 8 30,000.00 9 208,030.00 10 1,740.00 11 133,050.00 12 4,295.00 13 3,853.00 14 8,350.00 15 (e) 1,492.00 36,892.00 16 7,710.00 17 12,000.00 18 1,835.00 19 (a) 50,280.00 (b) 54,600.00 50,280.00 54,600.00 21 (c) 475.00 475.00 22 (d) 4,380.00 4,380.00 23 (e) 1,492.00 1,492.00 24 111,227.00 111,227.00 256,712.00 270,778.00 133,309.00 119,243.00 25 14,066.00 14,066.00 26 270,778.00 270,778.00 133,309.00 133,309.00 27 20 28 29 30 31 32 33 34 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 637

Problem 12-4A (continued) Celso and Company Income Statement For Year Ended June 30, 20-- Revenue from Sales: Sales $208,030 Less Sales Returns and Allowances 1,740 Net Sales $206,290 Cost of Goods Sold: Merchandise Inventory, July 1, 20-- $ 50,280 Purchases $133,050 Less: Purchases Returns and Allowances $4,295 Purchases Discounts 3,853 8,148 Net Purchases $124,902 Add Freight In 8,350 Delivered Cost of Purchases 133,252 Cost of Goods Available for Sale $183,532 Less Merchandise Inventory, June 30, 20-- 54,600 Cost of Goods Sold 128,932 Gross Profit $ 77,358 Operating Expenses: Wages Expense $ 36,892 Advertising Expense 7,710 Rent Expense 12,000 Store Supplies Expense 1,835 Insurance Expense 475 Depreciation Expense, Store Equipment 4,380 Total Operating Expenses 63,292 Net Income $ 14,066 638 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4A (continued) Celso and Company Statement of Owner's Equity For Year Ended June 30, 20-- B. E. Celso, Capital, July 1, 20-- $96,424 Net Income for the Year $14,066 Less Withdrawals for the Year 30,000 Decrease in Capital 15,934 B. E. Celso, Capital, June 30, 20-- $80,490 Celso and Company Balance Sheet June 30, 20-- Assets Current Assets: Cash $15,349 Accounts Receivable 13,810 Merchandise Inventory 54,600 Prepaid Insurance 910 Total Current Assets $84,669 Property and Equipment: Store Equipment $18,640 Less Accumulated Depreciation 11,262 7,378 Total Assets $92,047 Liabilities Current Liabilities: Accounts Payable $10,065 Wages Payable 1,492 Total Liabilities $11,557 Owner's Equity B. E. Celso, Capital 80,490 Total Liabilities and Owner's Equity $92,047 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 639

Problem 12-4A (continued) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Adjusting Entries 1 2 June 30 Income Summary 50,280.00 2 3 Merchandise Inventory 50,280.00 3 4 4 5 30 Merchandise Inventory 54,600.00 5 6 Income Summary 54,600.00 6 7 7 8 30 Insurance Expense 475.00 8 9 Prepaid Insurance 475.00 9 10 10 11 30 Depreciation Expense, Store Equipment 4,380.00 11 12 Accumulated Depreciation, Store 12 13 Equipment 4,380.00 13 14 14 15 30 Wages Expense 1,492.00 15 16 Wages Payable 1,492.00 16 17 17 18 18 Closing Entries 19 30 Sales 208,030.00 19 20 Purchases Returns and Allowances 4,295.00 20 21 Purchases Discounts 3,853.00 21 22 Income Summary 216,178.00 22 23 23 24 30 Income Summary 206,432.00 24 25 Sales Returns and Allowances 1,740.00 25 26 Purchases 133,050.00 26 27 Freight In 8,350.00 27 28 Wages Expense 36,892.00 28 29 Advertising Expense 7,710.00 29 30 Rent Expense 12,000.00 30 31 Store Supplies Expense 1,835.00 31 32 Insurance Expense 475.00 32 33 Depreciation Expense, Store 33 34 Equipment 4,380.00 34 35 35 36 36 37 37 38 38 39 39 40 40 640 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4A (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 June 30 Income Summary 14,066.00 2 3 B. E. Celso, Capital 14,066.00 3 4 4 5 30 B. E. Celso, Capital 30,000.00 5 6 B. E. Celso, Drawing 30,000.00 6 7 7 8 8 Reversing Entry 9 July 1 Wages Payable 1,492.00 9 10 Wages Expense 1,492.00 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 641

Problem 12-1B McKnight Music Store Income Statement For Year Ended December 31, 20-- Revenue from Sales: Sales $315,483 Less: Sales Returns and Allowances $ 4,348 Sales Discounts 1,817 6,165 Net Sales $309,318 Cost of Goods Sold: Merchandise Inventory, Jan. 1, 20-- $ 48,473 Purchases $185,272 Less: Purchases Returns and Allowances 1,547 Net Purchases $183,725 Add Freight In 9,173 Delivered Cost of Purchases 192,898 Cost of Goods Available for Sale $241,371 Less Merchandise Inventory, Dec. 31, 20-- 48,850 Cost of Goods Sold 192,521 Gross Profit $116,797 Operating Expenses: Wages Expense $ 40,615 Rent Expense 10,840 Commissions Expense 8,220 Supplies Expense 1,826 Insurance Expense 2,624 Depreciation Expense, Building 4,220 Depreciation Expense, Equipment 4,500 Total Operating Expenses 72,845 Income from Operations $ 43,952 Other Income: Interest Income $ 925 Other Expenses: Interest Expense 1,258 (333) Net Income $ 43,619 642 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-1B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 Dec. 31 Sales 315,483.00 2 3 Purchases Returns and Allowances 1,547.00 3 4 Interest Income 925.00 4 5 Income Summary 317,955.00 5 6 6 7 31 Income Summary 274,713.00 7 8 Sales Returns and Allowances 4,348.00 8 9 Sales Discounts 1,817.00 9 10 Purchases 185,272.00 10 11 Freight In 9,173.00 11 12 Wages Expense 40,615.00 12 13 Rent Expense 10,840.00 13 14 Commissions Expense 8,220.00 14 15 Supplies Expense 1,826.00 15 16 Insurance Expense 2,624.00 16 17 Depreciation Expense, Building 4,220.00 17 18 Depreciation Expense, Equipment 4,500.00 18 19 Interest Expense 1,258.00 19 20 20 21 31 Income Summary 43,619.00 21 22 W. J. McKnight, Capital 43,619.00 22 23 23 24 31 W. J. McKnight, Capital 40,000.00 24 25 W. J. McKnight, Drawing 40,000.00 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 643

Problem 12-2B Meyer Mountain Shop Statement of Owner's Equity For Year Ended December 31, 20-- M. E. Meyer, Capital, January 1, 20-- $75,085 Net Income for the Year $24,351 Less Withdrawals for the Year 35,250 Decrease in Capital 10,899 M. E. Meyer, Capital, December 31, 20-- $85,984 Meyer Mountain Shop Balance Sheet December 31, 20-- Assets Current Assets: Cash $18,525 Notes Receivable 4,500 Accounts Receivable 22,680 Merchandise Inventory 53,542 Prepaid Taxes 1,820 Prepaid Insurance 2,450 Total Current Assets $103,517 Property and Equipment: Land $18,600 Building $42,000 Less Accumulated Depreciation 22,500 19,500 Computer Equipment $ 4,424 Less Accumulated Depreciation 2,250 2,174 Store Equipment $ 7,480 Less Accumulated Depreciation 5,085 2,395 Delivery Equipment $ 5,740 Less Accumulated Depreciation 3,225 2,515 Total Property and Equipment 45,184 Total Assets $148,701 644 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-2B (concluded) Meyer Mountain Shop Balance Sheet (concluded) December 31, 20-- Liabilities Current Liabilities: Notes Payable $ 6,500 Mortgage Payable (current portion) 2,500 Accounts Payable 19,455 Wages Payable 1,460 Total Current Liabilities $ 29,915 Long-Term Liabilities: Mortgage Payable 54,600 Total Liabilities $ 84,515 Owner's Equity M. E. Meyer, Capital 64,186 Total Liabilities and Owner's Equity $148,701 Working Capital = Current Assets Current Liabilities $103,517 $29,915 = $73,602 Current Assets $103,517 Current Ratio = = Current Liabilities $29,915 = 3.46 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 645

Problem 12-3B GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Adjusting Entries 1 2 June 30 Income Summary 113,202.00 2 3 Merchandise Inventory 113,202.00 3 4 4 5 30 Merchandise Inventory 117,274.00 5 6 Income Summary 117,274.00 6 7 7 8 30 Salary Expense 1,645.00 8 9 Salaries Payable 1,645.00 9 10 10 11 30 Insurance Expense 2,940.00 11 12 Prepaid Insurance 2,940.00 12 13 13 14 30 Depreciation Expense, Delivery 14 15 Equipment 2,800.00 15 16 Accumulated Depreciation, 16 17 Delivery Equipment 2,800.00 17 18 18 19 30 Depreciation Expense, Store 19 20 Equipment 2,718.00 20 21 Accumulated Depreciation, 21 22 Store Equipment 2,718.00 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 646 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-3B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 June 30 Sales 532,262.00 2 3 Purchases Returns and Allowances 8,817.00 3 4 Purchases Discounts 6,935.00 4 5 Income Summary 548,014.00 5 6 6 7 30 Income Summary 498,096.00 7 8 Purchases 397,830.00 8 9 Freight In 23,400.00 9 10 Salary Expense 54,700.00 10 11 Truck Expense 9,492.00 11 12 Supplies Expense 2,416.00 12 13 Miscellaneous Expense 1,800.00 13 14 Insurance Expense 2,940.00 14 15 Depreciation Expense, Delivery 15 16 Equipment 2,800.00 16 17 Depreciation Expense, Store 17 18 Equipment 2,718.00 18 19 19 20 30 Income Summary 53,990.00 20 21 J. Ketcher, Capital 53,990.00 21 22 22 23 30 J. Ketcher, Capital 40,350.00 23 24 J. Ketcher, Drawing 40,350.00 24 25 25 26 26 Reversing Entry 27 July 1 Salaries Payable 1,645.00 27 28 Salary Expense 1,645.00 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 647

Problem 12-4B Sheldon Company Work Sheet For Year Ended January 31, 20-- TRIAL 1 Cash 16,400.00 2 Accounts Receivable 15,100.00 3 Merchandise Inventory 55,500.00 4 Prepaid Insurance 3,080.00 5 Store Equipment 24,900.00 6 Accumulated Depreciation, Store Equipment 3,860.00 7 Accounts Payable 14,400.00 8 M. E. Sheldon, Capital 126,384.00 9 M. E. Sheldon, Drawing 36,000.00 10 Sales 227,000.00 11 Sales Returns and Allowances 2,000.00 12 Purchases 172,000.00 13 Purchases Returns and Allowances 2,375.00 14 Purchases Discounts 3,567.00 15 Freight In 7,491.00 16 Wages Expense 24,800.00 17 Advertising Expense 5,912.00 18 Rent Expense 12,900.00 19 Store Supplies Expense 1,503.00 20 377,586.00 377,586.00 21 Income Summary 22 Insurance Expense 23 Depreciation Expense, Store Equipment 24 Wages Payable 25 26 Net Loss 27 28 29 30 31 32 33 34 35 36 37 38 NAME 648 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4B (continued) ADJUSTMENTS INCOME STATEMENT SHEET 16,400.00 1 15,100.00 2 (b) 55,750.00 (a) 55,500.00 55,750.00 3 (c) 1,285.00 1,795.00 4 24,900.00 5 (d) 5,482.00 9,342.00 6 14,400.00 7 126,384.00 8 36,000.00 9 227,000.00 10 2,000.00 11 172,000.00 12 2,375.00 13 3,567.00 14 7,491.00 15 (e) 1,503.00 26,303.00 16 5,912.00 17 12,900.00 18 1,503.00 19 (a) 55,500.00 (b) 55,750.00 55,500.00 55,750.00 21 (c) 1,285.00 1,285.00 22 (d) 5,482.00 5,482.00 23 (e) 1,503.00 1,503.00 24 119,520.00 119,520.00 290,376.00 288,692.00 149,945.00 151,629.00 25 1,684.00 1,684.00 26 290,376.00 290,376.00 151,629.00 151,629.00 27 20 28 29 30 31 32 33 34 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 649

Problem 12-4B (continued) Sheldon Company Income Statement For Year Ended January 31, 20-- Revenue from Sales: Sales $227,000 Less Sales Returns and Allowances 2,000 Net Sales $225,000 Cost of Goods Sold: Merchandise Inventory, February 1, 20-- $ 55,500 Purchases $172,000 Less: Purchases Returns and Allowances $2,375 Purchases Discounts 3,567 5,942 Net Purchases $166,058 Add Freight In 7,491 Delivered Cost of Purchases 173,549 Cost of Goods Available for Sale $229,049 Less Merchandise Inventory, January 31, 20-- 55,750 Cost of Goods Sold 173,299 Gross Profit $ 51,701 Operating Expenses: Wages Expense $ 26,303 Advertising Expense 5,912 Rent Expense 12,900 Store Supplies Expense 1,503 Insurance Expense 1,285 Depreciation Expense, Store Equipment 5,482 Total Operating Expenses 53,385 Net Loss $ (1,684) 650 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4B (continued) Sheldon Company Statement of Owner's Equity For Year Ended January 31, 20-- M. E. Sheldon, Capital, February 1, 20-- $126,384 Net Loss for the Year $ 1,684 Less Withdrawals for the Year 36,000 Decrease in Capital 37,684 M. E. Sheldon, Capital, January 31, 20-- $ 88,700 Sheldon Company Balance Sheet January 31, 20-- Assets Current Assets: Cash $16,400 Accounts Receivable 15,100 Merchandise Inventory 55,750 Prepaid Insurance 1,795 Total Current Assets $ 89,045 Property and Equipment: Store Equipment $24,900 Less Accumulated Depreciation 9,342 15,558 Total Assets $104,603 Liabilities Current Liabilities: Accounts Payable $14,400 Wages Payable 1,503 Total Liabilities $ 15,903 Owner's Equity M. E. Sheldon, Capital 88,700 Total Liabilities and Owner's Equity $104,603 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 651

Problem 12-4B (continued) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Adjusting Entries 1 2 Jan. 31 Income Summary 55,500.00 2 3 Merchandise Inventory 55,500.00 3 4 4 5 31 Merchandise Inventory 55,750.00 5 6 Income Summary 55,750.00 6 7 7 8 31 Insurance Expense 1,285.00 8 9 Prepaid Insurance 1,285.00 9 10 10 11 31 Depreciation Expense, Store Equipment 5,482.00 11 12 Accumulated Depreciation, Store 12 13 Equipment 5,482.00 13 14 14 15 31 Wages Expense 1,503.00 15 16 Wages Payable 1,503.00 16 17 17 18 18 Closing Entries 19 31 Sales 227,000.00 19 20 Purchases Returns and Allowances 2,375.00 20 21 Purchases Discounts 3,567.00 21 22 Income Summary 232,942.00 22 23 23 24 31 Income Summary 234,876.00 24 25 Sales Returns and Allowances 2,000.00 25 26 Purchases 172,000.00 26 27 Freight In 7,491.00 27 28 Wages Expense 26,303.00 28 29 Advertising Expense 5,912.00 29 30 Rent Expense 12,900.00 30 31 Store Supplies Expense 1,503.00 31 32 Insurance Expense 1,285.00 32 33 Depreciation Expense, Store 33 34 Equipment 5,482.00 34 35 35 36 36 37 37 38 38 39 39 40 40 652 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Problem 12-4B (concluded) GENERAL JOURNAL PAGE DESCRIPTION 1 20-- Closing Entries 1 2 Jan. 31 M. E. Sheldon, Capital 1,684.00 2 3 Income Summary 1,684.00 3 4 4 5 31 M. E. Sheldon, Capital 36,000.00 5 6 M. E. Sheldon, Drawing 36,000.00 6 7 7 8 8 Reversing Entry 9 Feb. 1 Wages Payable 1,503.00 9 10 Wages Expense 1,503.00 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 653

NOTES AND CALCULATIONS 654 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) GENERAL JOURNAL PAGE 89 DESCRIPTION 1 20-- Reversing Entry 1 2 Feb. 1 Salaries Payable 230 620.00 2 3 Salary Expense 611 620.00 3 4 Reversed the adjusting entry for 4 5 accrued salaries. 5 6 6 7 1 Accounts Receivable, Hotel Beritz 113/ 12,520.86 7 8 Sales 411 12,520.86 8 9 Sold merchandise to Hotel Beritz, 9 10 invoice No. 5221. 10 11 11 12 2 Accounts Payable, Kingston Fabrics 221/ 16,932.10 12 13 Purchases Discounts 513 338.64 13 14 Cash 111 16,593.46 14 15 Paid Kingston Fabrics for invoice no. 15 16 D1739 less discount, Ck. No. 7216. 16 17 17 18 5 Purchases 511 4,874.80 18 19 Freight In 514 158.00 19 20 Accounts Payable, Magnuson Textiles 221/ 5,032.80 20 21 Purchased merchandise from 21 22 Magnuson Textiles, invoice no. RE275, 22 23 invoice dated February 2, terms 1/10, 23 24 n/30. 24 25 25 26 5 Utilities Expense 614 358.00 26 27 Cash 111 358.00 27 28 Paid Countrywide Power for electric bill, 28 29 Ck. No. 7217. 29 30 30 31 6 Cash 111 10,780.51 31 32 Accounts Receivable, Jason and Waldon 113/ 10,780.51 32 33 Received payment of account from 33 34 Jason and Waldon. 34 35 35 36 7 Accounts Payable, Magnuson Textiles 221/ 9,782.00 36 37 Purchases Discounts 513 97.82 37 38 Cash 111 9,684.18 38 39 Paid Magnuson Textiles for invoice no. 39 40 RE64 less discount, Ck. No. 7218. 40 41 41 42 42 43 43 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 655

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) GENERAL JOURNAL PAGE 90 DESCRIPTION 1 20-- 1 2 Feb. 9 Cash 111 9,745.40 2 3 Sales 411 9,745.40 3 4 Cash sales, February 1 9. 4 5 5 6 12 Salary Expense 611 5,214.00 6 7 Employees' Income Tax Payable 226 503.00 7 8 FICA Taxes Payable 227 398.87 8 9 Salaries Payable 230 4,312.13 9 10 Payroll register for semimonthly 10 11 period ended February 12. 11 12 12 13 12 Salaries Payable 230 4,312.13 13 14 Cash, R. W. Harris 111 2,335.74 14 15 Cash, T. L. Newkirk 111 1,976.39 15 16 Issued Ck. No. 7219 to R. W. Harris 16 17 for $2,335.74, and Ck. No. 7220 to 17 18 T. L. Newkirk for $1,976.39 for the 18 19 February 12 payroll. 19 20 20 21 12 Payroll Tax Expense 612 641.23 21 22 FICA Taxes Payable 227 398.87 22 23 State Unemployment Tax Payable 228 211.09 23 24 Federal Unemployment Tax Payable 229 31.27 24 25 To record employer's share of FICA 25 26 taxes and employer's federal and 26 27 state unemployment taxes. 27 28 28 29 12 Accounts Payable, Magnuson Textiles 221/ 692.00 29 30 Purchases Returns and Allowances 512 692.00 30 31 Credit memo no. 916 for defective 31 32 merchandise. 32 33 33 34 14 Employees' Income Taxes Payable 226 1,285.00 34 35 FICA Taxes Payable 227 1,615.80 35 36 Cash 111 2,900.80 36 37 Issued Ck. No. 7221 to Mid-State 37 38 Bank for monthly deposit of January 38 39 employees federal income tax 39 40 withheld. 40 41 41 42 42 43 43 656 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) GENERAL JOURNAL PAGE 91 DESCRIPTION 1 20-- 1 2 Feb. 14 Accounts Receivable, Jason and Waldon 113/ 15,781.30 2 3 Sales 411 15,781.30 3 4 Sold merchandise to Jason and 4 5 Waldon, invoice no. 5222. 5 6 6 7 14 Accounts Payable, Magnuson Textiles 221/ 4,340.80 7 8 Purchases Discounts 513 41.83 8 9 Cash 111 4,298.97 9 10 Paid Magnuson Textiles for invoice 10 11 no. RE275, Ck. No. 7222. 11 12 12 13 18 Purchases 511 21,375.20 13 14 Freight In 514 1,242.00 14 15 Accounts Payable, Brandon, Inc. 221/ 22,617.20 15 16 Purchased merchandise from Brandon, 16 17 Inc., invoice no. 164M, invoice dated 17 18 February 14, terms 2/10, n/30. 18 19 19 20 18 Cash 111 7,889.24 20 21 Sales 411 7,889.24 21 22 Cash sales, February 10 18. 22 23 23 24 19 Supplies Expense 616 336.00 24 25 Cash 111 336.00 25 26 Bought invoice forms from Quicker 26 27 Printing, Ck. No. 7223. 27 28 28 29 19 Cash 111 4,830.65 29 30 Accounts Receivable, Fashion Decor 113/ 4,830.65 30 31 Received payment on account. 31 32 32 33 22 Accounts Payable, Tyson Manufacturing 33 34 Company 221/ 12,540.00 34 35 Cash 111 12,540.00 35 36 Paid Tyson Manufacturing Company for 36 37 invoice no. 9264D, Ck. No. 7224. 37 38 38 39 22 Accounts Receivable, Fashion Decor 113/ 17,435.32 39 40 Sales 411 17,435.32 40 41 Sold merchandise to Fashion Decor, 41 42 invoice no. 5223. 42 43 43 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 657

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) GENERAL JOURNAL DESCRIPTION PAGE 92 1 20-- 1 2 Feb. 24 Sales Returns and Allowances 412 185.00 2 3 Accounts Receivable, Fashion Decor 113/ 185.00 3 4 Credit memo no. 214 for return of 4 5 merchandise. 5 6 6 7 24 Purchases 511 16,536.90 7 8 Accounts Payable, Kingston Fabrics 221/ 16,536.90 8 9 Purchased merchandise from 9 10 Kingston Fabrics, invoice no. D1797, 10 11 invoice dated February 22, terms 11 12 2/10, n/30. 12 13 13 14 26 Salary Expense 611 5,214.00 14 15 Employees' Income Tax Payable 226 503.00 15 16 FICA Taxes Payable 227 398.87 16 17 Salaries Payable 230 4,312.13 17 18 Payroll register for semimonthly 18 19 period ended February 26. 19 20 20 21 26 Salaries Payable 230 4,312.13 21 22 Cash, R. W. Harris 111 2,335.74 22 23 Cash, T. L. Newkirk 111 1,976.39 23 24 Issued Ck. No. 7225 to R. W. Harris 24 25 for $2,335.74, and Ck. No. 7226 to 25 26 T. L. Newkirk for $1,976.39 for the 26 27 February 26 payroll. 27 28 28 29 26 Payroll Tax Expense 612 401.72 29 30 FICA Taxes Payable 227 398.87 30 31 State Unemployment Tax Payable 228 2.48 31 32 Federal Unemployment Tax Payable 229 0.37 32 33 To record employer's share of FICA 33 34 taxes and employer's federal and 34 35 state unemployment taxes. 35 36 36 37 27 Freight In 514 1,035.00 37 38 Cash 111 1,035.00 38 39 Paid JIT Freight Line for 39 40 transportation charges on 40 41 merchandise purchased from 41 42 Kingston Fabrics, Ck. No. 7228. 42 43 43 658 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) GENERAL JOURNAL PAGE 93 DESCRIPTION 1 20-- 1 2 Feb. 28 Supplies Expense 616 30.24 2 3 Miscellaneous Expense 619 25.36 3 4 Cash 111 55.60 4 5 Issued Ck. No. 7229 to reimburse the 5 6 petty cash fund. 6 7 7 8 28 Cash 111 8,986.60 8 9 Sales 411 8,986.60 9 10 Cash sales, February 19 28. 10 11 11 12 28 Rent Expense 613 2,290.00 12 13 Cash 111 2,290.00 13 14 Paid Global Rental Agency for monthly 14 15 rent, Ck. No. 7230. 15 16 16 17 28 M. L. Langdon, Drawing 312 5,000.00 17 18 Cash 111 5,000.00 18 19 Owner withdrew cash for personal use, 19 20 Ck. No. 7231. 20 21 21 GENERAL JOURNAL PAGE 94 DESCRIPTION 1 20-- Adjusting Entries 1 2 Feb. 28 Income Summary 313 52,640.00 2 3 (a) Merchandise Inventory 114 52,640.00 3 4 4 5 (b) 28 Merchandise Inventory 114 45,484.00 5 6 Income Summary 313 45,484.00 6 7 7 8 (c) 28 Salary Expense 611 2,084.00 8 9 Salaries Payable 230 2,084.00 9 10 10 11 (d) 28 Insurance Expense 617 210.00 11 12 Prepaid Insurance 118 210.00 12 13 13 14 (e) 28 Depreciation Expense, Equipment 618 1,885.00 14 15 Accumulated Depreciation, Equipment 123 1,885.00 15 16 16 17 17 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 659

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) DESCRIPTION GENERAL JOURNAL PAGE 95 1 20-- Closing Entries 1 2 Feb. 28 Sales 411 72,358.72 2 3 Purchases Returns and Allowances 512 692.00 3 4 Purchases Discounts 513 478.29 4 5 Income Summary 313 73,529.01 5 6 6 7 28 Income Summary 313 63,476.45 7 8 Sales Returns and Allowances 412 185.00 8 9 Purchases 511 42,786.90 9 10 Freight In 514 2,435.00 10 11 Salary Expense 611 11,892.00 11 12 Payroll Tax Expense 612 1,042.95 12 13 Rent Expense 613 2,290.00 13 14 Utilities Expense 614 358.00 14 15 Supplies Expense 616 366.24 15 16 Insurance Expense 617 210.00 16 17 Depreciation Expense, Equipment 618 1,885.00 17 18 Miscellaneous Expense 619 25.36 18 19 19 20 28 Income Summary 313 2,896.56 20 21 M. L. Langdon, Capital 311 2,896.56 21 22 22 23 28 M. L. Langdon, Capital 311 5,000.00 23 24 M. L. Langdon, Drawing 312 5,000.00 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 660 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) GENERAL LEDGER Cash NO. 111 Feb. 1 Balance 34,641.34 2 J89 16,593.46 18,047.88 5 J89 358.00 17,689.88 6 J89 10,780.51 28,470.39 7 J89 9,684.18 18,786.21 9 J90 9,745.40 28,531.61 12 J90 2,335.74 26,195.87 12 J90 1,976.39 24,219.48 14 J90 2,900.80 21,318.68 14 J91 4,298.97 17,019.71 18 J91 7,889.24 24,908.95 19 J91 336.00 24,572.95 19 J91 4,830.65 29,403.60 22 J91 12,540.00 16,863.60 26 J92 2,335.74 14,527.86 26 J92 1,976.39 12,551.47 27 J92 1,035.00 11,516.47 28 J93 55.60 11,460.87 28 J93 8,986.60 20,447.47 28 J93 2,290.00 18,157.47 28 J93 5,000.00 13,157.47 Petty Cash Fund NO. 112 Feb. 1 Balance 70.00 Accounts Receivable NO. 113 Feb. 1 Balance 15,611.16 1 J89 12,520.86 28,132.02 6 J89 10,780.51 17,351.51 14 J91 15,781.30 33,132.81 19 J91 4,830.65 28,302.16 22 J91 17,435.32 45,737.48 24 J92 185.00 45,552.48 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 661

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Merchandise Inventory NO. 114 Feb. 1 Balance 52,640.00 28 Adj. J94 52,640.00 28 Adj. J94 45,484.00 45,484.00 Prepaid Insurance NO. 118 Feb. 1 Balance 2,480.00 28 Adj. J94 210.00 2,270.00 Equipment NO. 122 Feb. 1 Balance 9,324.00 Accumulated Depreciation, Equipment NO. 123 Feb. 1 Balance 5,328.00 28 Adj. J94 1,885.00 7,213.00 Accounts Payable NO. 221 Feb. 1 Balance 39,254.10 2 J89 16,932.10 22,322.00 5 J89 5,032.80 27,354.80 7 J89 9,782.00 17,572.80 12 J90 692.00 16,880.80 14 J91 4,340.80 12,540.00 18 J91 22,617.20 35,157.20 22 J91 12,540.00 22,617.20 24 J92 16,536.90 39,154.10 662 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Employees' Income Tax Payable NO. 226 Feb. 1 Balance 1,285.00 12 J90 503.00 1,788.00 14 J90 1,285.00 503.00 26 J92 503.00 1,006.00 FICA Taxes Payable NO. 227 Feb. 1 Balance 1,615.80 12 J90 398.87 2,014.67 12 J90 398.87 2,413.54 14 J90 1,615.80 797.74 26 J92 398.87 1,196.61 26 J92 398.87 1,595.48 State Unemployment Tax Payable NO. 228 Feb. 1 Balance 536.76 12 J90 211.09 747.85 26 J92 2.48 750.33 Federal Unemployment Tax Payable NO. 229 Feb. 1 Balance 79.52 12 J90 31.27 110.79 26 J92 0.37 111.16 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 663

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Salaries Payable 230 NO. Feb. 1 Balance 620.00 1 Reversing J89 620.00 12 J90 4,312.13 4,312.13 12 J90 4,312.13 26 J92 4,312.13 4,312.13 26 J92 4,312.13 28 Adj. J94 2,084.00 2,084.00 M. L. Langdon, Capital NO. 311 Feb. 1 Balance 66,047.32 28 Closing J95 2,896.56 68,943.88 28 Closing J95 5,000.00 63,943.88 M. L. Langdon, Drawing NO. 312 20-- Feb. 28 J93 5,000.00 5,000.00 28 Closing J95 5,000.00 Income Summary NO. 313 20-- Feb. 28 Adj. J94 52,640.00 52,640.00 28 Adj. J94 45,484.00 7,156.00 28 Closing J95 73,529.01 66,373.01 28 Closing J95 63,476.45 2,896.56 28 Closing J95 2,896.56 664 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Sales NO. 411 20-- Feb. 1 J89 12,520.86 12,520.86 9 J90 9,745.40 22,266.26 14 J91 15,781.30 38,047.56 18 J91 7,889.24 45,936.80 22 J91 17,435.32 63,372.12 28 J93 8,986.60 72,358.72 28 Closing J95 72,358.72 Sales Returns and Allowances NO. 412 20-- Feb. 24 J92 185.00 185.00 28 Closing J95 185.00 Purchases NO. 511 20-- Feb. 5 J89 4,874.80 4,874.80 18 J91 21,375.20 26,250.00 24 J92 16,536.90 42,786.90 28 Closing J92 42,786.90 Purchases Returns and Allowances NO. 512 20-- Feb. 12 J90 692.00 692.00 28 Closing J95 692.00 Purchases Discounts NO. 513 20-- Feb. 2 J89 338.64 338.64 7 J89 97.82 436.46 14 J91 41.83 478.29 28 Closing J95 478.29 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 665

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Freight In NO. 514 20-- Feb. 5 J89 158.00 158.00 18 J91 1,242.00 1,400.00 27 J92 1,035.00 2,435.00 28 Closing J95 2,435.00 Salary Expense NO. 611 20-- Feb. 1 Reversing J89 620.00 620.00 12 J90 5,214.00 4,594.00 26 J92 5,214.00 9,808.00 28 Adj. J94 2,084.00 11,892.00 28 Closing J95 11,892.00 Payroll Tax Expense 612 NO. 20-- Feb. 12 J90 641.23 641.23 26 J92 401.72 1,042.95 28 Closing J95 1,042.95 Rent Expense NO. 613 20-- Feb. 28 J93 2,290.00 2,290.00 28 Closing J95 2,290.00 Utilities Expense 614 NO. 20-- Feb. 5 J89 358.00 358.00 28 Closing J95 358.00 666 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Supplies Expense NO. 616 20-- Feb. 19 J91 336.00 336.00 28 J93 30.24 366.24 28 Closing J95 366.24 Insurance Expense NO. 617 20-- Feb. 28 Adj. J94 210.00 210.00 28 Closing J95 210.00 Depreciation Expense, Equipment NO. 618 20-- Feb. 28 Adj. J94 1,885.00 1,885.00 28 Closing J95 1,885.00 Miscellaneous Expense NO. 619 20-- Feb. 28 J93 25.36 25.36 28 Closing J95 25.36 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 667

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) S RECEIVABLE LEDGER Fashion Decor 642 Guthrie St. Dallas, TX 75294 NAME ADDRESS Feb. 1 Balance 4,830.65 19 J91 4,830.65 22 J91 17,435.32 17,435.32 24 J92 185.00 17,250.32 NAME ADDRESS Hotel Beritz 4600 Beaumont Drive Dallas, TX 75294 20-- Feb. 1 J89 12,520.86 12,520.86 NAME ADDRESS Jason and Waldon 1420 Favela Road Dallas, TX 75294 Feb. 1 Balance 10,780.51 6 J89 10,780.51 14 J91 15,781.30 15,781.30 668 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) NAME ADDRESS Brandon, Inc. 400 W. Tatum St. Amarillo, TX 79178 S PAYABLE LEDGER 20-- Feb. 18 J91 22,617.20 22,617.20 NAME ADDRESS Kingston Fabrics 1464 Harding Drive Dallas, TX 75294 Feb. 1 Balance 16,932.10 2 J89 16,932.10 24 J92 16,536.90 16,536.90 NAME ADDRESS Magnuson Textiles 620 W. Huber St. Corpus Christi, TX 78410 Feb. 1 Balance 9,782.00 5 J89 5,032.80 14,814.80 7 J89 9,782.00 5,032.80 12 J90 692.00 4,340.80 14 J91 4,340.80 NAME ADDRESS Tyson Manufacturing Company 842 N. Howard Ave. Fort Worth, TX 76196 Feb. 1 Balance 12,540.00 22 J91 12,540.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 669

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Schedule of Accounts Receivable February 28, Fashion Decor Hotel Beritz Jason and Waldon Total Accounts Receivable $17,250.32 12,520.86 15,781.30 $45,552.48 670 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Schedule of Accounts Payable February 28, Brandon, Inc. Kingston Fabrics Total Accounts Payable $22,617.20 16,536.90 $39,154.10 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 671

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Work Sheet For Month Ended February 28, TRIAL 1 Cash 13,157.47 2 Petty Cash Fund 70.00 3 Accounts Receivable 45,552.48 4 Merchandise Inventory 52,640.00 5 Prepaid Insurance 2,480.00 6 Equipment 9,324.00 7 Accumulated Depreciation, Equipment 5,328.00 8 Accounts Payable 39,154.10 9 Employees' Income Tax Payable 1,006.00 10 FICA Taxes Payable 1,595.48 11 State Unemployment Tax Payable 750.33 12 Federal Unemployment Tax Payable 111.16 13 M. L. Langdon, Capital 66,047.32 14 M. L. Langdon, Drawing 5,000.00 15 Sales 72,358.72 16 Sales Returns and Allowances 185.00 17 Purchases 42,786.90 18 Purchases Returns and Allowances 692.00 19 Purchases Discounts 478.29 20 Freight In 2,435.00 21 Salary Expense 9,808.00 22 Payroll Tax Expense 1,042.95 23 Rent Expense 2,290.00 24 Utilities Expense 358.00 25 Supplies Expense 366.24 26 Miscellaneous Expense 25.36 27 187,521.40 187,521.40 28 Income Summary 29 Salaries Payable 30 Insurance Expense 31 Depreciation Expense, Equipment 32 33 Net Income 34 35 36 37 38 NAME 672 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) ADJUSTMENTS INCOME STATEMENT SHEET 13,157.47 1 70.00 2 45,552.48 3 (b) 45,484.00 (a) 52,640.00 45,484.00 4 (d) 210.00 2,270.00 5 9,324.00 6 (e) 1,885.00 7,213.00 7 39,154.10 8 1,006.00 9 1,595.48 10 750.33 11 111.16 12 66,047.32 13 5,000.00 14 72,358.72 15 185.00 16 42,786.90 17 692.00 18 478.29 19 2,435.00 20 (c) 2,084.00 11,892.00 21 1,042.95 22 2,290.00 23 358.00 24 366.24 25 25.36 26 (a) 52,640.00 (b) 45,484.00 52,640.00 45,484.00 28 (c) 2,084.00 2,084.00 29 (d) 210.00 210.00 30 (e) 1,885.00 1,885.00 31 102,303.00 102,303.00 116,116.45 119,013.01 120,857.95 117,961.39 32 2,896.56 2,896.56 33 119,013.01 119,013.01 120,857.95 120,857.95 34 27 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 673

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Income Statement For Month Ended February 28, Revenue from Sales: Sales $72,358.72 Less Sales Returns and Allowances 185.00 Net Sales $72,173.72 Cost of Goods Sold: Merchandise Inventory, Feb. 1, 20-- $52,640.00 Purchases $42,786.90 Less: Purchases Returns and Allowances $692.00 Purchases Discounts 478.29 1,170.29 Net Purchases $41,616.61 Add Freight In 2,435.00 Delivered Cost of Purchases 44,051.61 Cost of Goods Available for Sale $96,691.61 Less Merchandise Inventory, Feb. 28, 20-- 45,484.00 Cost of Goods Sold 51,207.61 Gross Profit $20,966.11 Operating Expenses: Salary Expense $11,892.00 Payroll Tax Expense 1,042.95 Rent Expense 2,290.00 Utilities Expense 358.00 Supplies Expense 366.24 Insurance Expense 210.00 Depreciation Expense, Equipment 1,885.00 Miscellaneous Expense 25.36 Total Operating Expenses 18,069.55 Net Income $ 2,896.56 674 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Statement of Owner's Equity For Month Ended February 28, M. L. Langdon, Capital, February 1, 20-- $66,047.32 Net Income for February $2,896.56 Less Withdrawals for February 5,000.00 Decrease in Capital 2,103.44 M. L. Langdon, Capital, February 28, 20-- $63,943.88 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 675

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) Fabulous Furnishings Balance Sheet February 28, Assets Current Assets: Cash $13,157.47 Petty Cash Fund 70.00 Accounts Receivable 45,552.48 Merchandise Inventory 45,484.00 Prepaid Insurance 2,270.00 Total Current Assets $106,533.95 Property and Equipment: Equipment $ 9,324.00 Less Accumulated Depreciation 7,213.00 2,111.00 Total Assets $108,644.95 Liabilities Current Liabilities: Accounts Payable $39,154.10 Employees' Income Tax Payable 1,006.00 FICA Taxes Payable 1,595.48 State Unemployment Tax Payable 750.33 Federal Unemployment Tax Payable 111.16 Salaries Payable 2,084.00 Total Liabilities $ 44,701.07 Owner's Equity M. L. Langdon, Capital 63,943.88 Total Liabilities and Owner's Equity $108,644.95 676 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (General Journal) (continued) NAME Fabulous Furnishings Post-Closing Trial Balance February 28, Cash 13,157.47 Petty Cash Fund 70.00 Accounts Receivable 45,552.48 Merchandise Inventory 45,484.00 Prepaid Insurance 2,270.00 Equipment 9,324.00 Accumulated Depreciation, Equipment 7,213.00 Accounts Payable 39,154.10 Employees' Income Tax Payable 1,006.00 FICA Taxes Payable 1,595.48 State Unemployment Tax Payable 750.33 Federal Unemployment Tax Payable 111.16 Salaries Payable 2,084.00 M. L. Langdon, Capital 63,943.88 115,857.95 115,857.95 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 677

COMPREHENSIVE REVIEW PROBLEM (General Journal) (concluded) PAYROLL REGISTER FOR SEMIMONTHLY PERIOD ENDED February 12, 20-- PAGE 12 TAXABLE EARNINGS DEDUCTIONS PAYMENTS NAME TOTAL HOURS BEGINNING CUMULATIVE EARNINGS TOTAL EARNINGS ENDING CUMULATIVE EARNINGS UNEMPLOY- MENT SOCIAL SECURITY MEDICARE FEDERAL INCOME TAX SOCIAL SECURITY TAX MEDICARE TAX TOTAL NET AMOUNT CK. NO. SALARY EXPENSE R. W. Harris 40 5,465.00 2,840.00 8,305.00 1,535.00 2,840.00 2,840.00 287.00 176.08 41.18 504.26 2,335.74 7219 2,840.00 T. L. Newkirk 40 4,580.00 2,374.00 6,954.00 2,374.00 2,374.00 2,374.00 216.00 147.19 34.42 397.61 1,976.39 7220 2,374.00 10,045.00 5,214.00 15,259.00 3,909.00 5,214.00 5,214.00 503.00 323.27 75.60 901.87 4,312.13 5,214.00 PAYROLL REGISTER FOR SEMIMONTHLY PERIOD ENDED February 26, 20-- PAGE 13 TAXABLE EARNINGS DEDUCTIONS PAYMENTS NAME TOTAL HOURS BEGINNING CUMULATIVE EARNINGS TOTAL EARNINGS ENDING CUMULATIVE EARNINGS UNEMPLOY- MENT SOCIAL SECURITY MEDICARE FEDERAL INCOME TAX SOCIAL SECURITY TAX MEDICARE TAX TOTAL NET AMOUNT CK. NO. SALARY EXPENSE R. W. Harris 40 8,305.00 2,840.00 11,145.00 0.00 2,840.00 2,840.00 287.00 176.08 41.18 504.26 2,335.74 7225 2,840.00 T. L. Newkirk 40 6,954.00 2,374.00 9,328.00 46.00 2,374.00 2,374.00 216.00 147.19 34.42 397.61 1,976.39 7226 2,374.00 15,259.00 5,214.00 20,473.00 46.00 5,214.00 5,214.00 503.00 323.27 75.60 901.87 4,312.13 5,214.00 678 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) SALES JOURNAL PAGE 56 INV. NO. CUSTOMER'S NAME S RECEIVABLE DR. SALES CR. 1 20-- 1 2 Feb. 1 5221 Hotel Beritz 12,520.86 2 3 14 5222 Jason and Waldon 15,781.30 3 4 22 5223 Fashion Decor 17,435.32 4 5 28 Total 45,737.48 5 6 (113) (411) 6 7 7 8 8 PURCHASES JOURNAL PAGE 62 SUPPLIER'S NAME INV. NO. INV. TERMS S PAYABLE FREIGHT IN PURCHASES 1 20-- 1 2 Feb. 5 Magnuson Text. RE275 2/2 1/10, n/30 5,032.80 158.00 4,874.80 2 3 18 Brandon, Inc. 164M 2/14 2/10, n/30 22,617.20 1,242.00 21,375.20 3 4 24 Kingston Fabrics D1797 2/22 2/10, n/30 16,536.90 16,536.90 4 5 28 Totals 44,186.90 1,400.00 42,786.90 5 6 (221) (514) (511) 6 7 7 8 8 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 679

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) CASH RECEIPTS JOURNAL PAGE 69 ED CASH S RECEIVABLE SALES OTHER S 1 20-- 1 2 Feb. 6 Jason and Waldon 10,780.51 10,780.51 2 3 9 9,745.40 9,745.40 3 4 18 7,889.24 7,889.24 4 5 19 Fashion Decor 4,830.65 4,830.65 5 6 28 8,986.60 8,986.60 6 7 28 Totals 42,232.40 15,611.16 26,621.24 7 8 (111) (113) (411) 8 9 9 10 10 11 11 12 12 13 13 14 14 680 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) CASH PAYMENTS JOURNAL PAGE 75 CK. NO. NAME CASH OTHER S S PAYABLE PURCHASES DISCOUNTS 1 20-- 1 2 Feb. 2 7216 Kingston Fabrics 16,593.46 16,932.10 338.64 2 3 5 7217 Utilities Expense 614 358.00 358.00 3 4 7 7218 Magnuson Textiles 9,684.18 9,782.00 97.82 4 5 12 7219 Salaries Payable 230 2,335.74 4,312.13 5 6 7220 1,976.39 6 7 14 7221 Employees' Income Tax Payable 226 1,285.00 7 8 FICA Taxes Payable 227 2,900.80 1,615.80 8 9 14 7222 Magnuson Textiles 4,298.97 41.83 41.83 9 10 19 7223 Supplies Expense 616 336.00 336.00 10 11 22 7224 Tyson Manufacturing Co. 12,540.00 12,540.00 11 12 26 7225 Salaries Payable 230 2,335.74 4,312.13 12 13 7226 1,976.39 13 14 26 7227 Void 14 15 27 7228 Freight In 514 1,035.00 1,035.00 15 16 28 7229 Supplies Expense 616 30.24 16 17 Miscellaneous Expense 619 55.60 25.36 17 18 28 7230 Rent Expense 613 2,290.00 2,290.00 18 19 28 7231 M. L. Langdon, Drawing 312 5,000.00 5,000.00 19 20 28 Totals 63,716.27 20,599.66 39,295.93 478.29 20 21 (111) (X) (221) (513) 21 22 22 23 23 24 24 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 681

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) DESCRIPTION GENERAL JOURNAL PAGE 89 1 20-- Reversing Entries 1 2 Feb. 1 Salaries Payable 230 620.00 2 3 Salary Expense 611 620.00 3 4 Reversed the adjusting entry for 4 5 accrued salaries. 5 6 6 7 12 Salary Expense 611 5,214.00 7 8 Employees' Income Tax Payable 226 503.00 8 9 FICA Taxes Payable 227 398.87 9 10 Salaries Payable 230 4,312.13 10 11 Payroll register for semimonthly 11 12 period ended February 12. 12 13 13 14 12 Payroll Tax Expense 612 641.23 14 15 FICA Taxes Payable 227 398.87 15 16 State Unemployment Tax Payable 228 211.09 16 17 Federal Unemployment Tax Payable 229 31.27 17 18 To record employer's share of FICA 18 19 taxes and employer's federal and 19 20 state unemployment taxes. 20 21 21 22 12 Accounts Payable, Magnuson Textiles 221/ 692.00 22 23 Purchases Returns and Allowances 512 692.00 23 24 Credit memo no. 916 for defective 24 25 merchandise. 25 26 26 27 24 Sales Returns and Allowances 412 185.00 27 28 Accounts Receivable, Fashion Decor 113/ 185.00 28 29 Credit memo no. 214 for return of 29 30 merchandise. 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 682 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) GENERAL JOURNAL PAGE 90 DESCRIPTION 1 20-- 1 2 Feb. 26 Salary Expense 611 5,214.00 2 3 Employees' Income Tax Payable 226 503.00 3 4 FICA Taxes Payable 227 398.87 4 5 Salaries Payable 230 4,312.13 5 6 Payroll register for semimonthly 6 7 period ended February 26. 7 8 8 9 26 Payroll Tax Expense 612 401.72 9 10 FICA Taxes Payable 227 398.87 10 11 State Unemployment Tax Payable 228 2.48 11 12 Federal Unemployment Tax Payable 229 0.37 12 13 To record employer's share of FICA 13 14 taxes and employer's federal and 14 15 state unemployment taxes. 15 16 16 17 17 18 18 19 19 20 20 21 21 GENERAL JOURNAL PAGE 91 DESCRIPTION 1 20-- Adjusting Entries 1 2 Feb. 28 Income Summary 313 52,640.00 2 3 (a) Merchandise Inventory 114 52,640.00 3 4 4 5 (b) 28 Merchandise Inventory 114 45,484.00 5 6 Income Summary 313 45,484.00 6 7 7 8 (c) 28 Salary Expense 611 2,084.00 8 9 Salaries Payable 230 2,084.00 9 10 10 11 (d) 28 Insurance Expense 617 210.00 11 12 Prepaid Insurance 118 210.00 12 13 13 14 (e) 28 Depreciation Expense, Equipment 618 1,885.00 14 15 Accumulated Depreciation, Equipment 123 1,885.00 15 16 16 17 17 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 683

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) DESCRIPTION GENERAL JOURNAL PAGE 92 1 20-- Closing Entries 1 2 Feb. 28 Sales 411 72,358.72 2 3 Purchases Returns and Allowances 512 692.00 3 4 Purchases Discounts 513 478.29 4 5 Income Summary 313 73,529.01 5 6 6 7 28 Income Summary 313 63,476.45 7 8 Sales Returns and Allowances 412 185.00 8 9 Purchases 511 42,786.90 9 10 Freight In 514 2,435.00 10 11 Salary Expense 611 11,892.00 11 12 Payroll Tax Expense 612 1,042.95 12 13 Rent Expense 613 2,290.00 13 14 Utilities Expense 614 358.00 14 15 Supplies Expense 616 366.24 15 16 Insurance Expense 617 210.00 16 17 Depreciation Expense, Equipment 618 1,885.00 17 18 Miscellaneous Expense 619 25.36 18 19 19 20 28 Income Summary 313 2,896.56 20 21 M. L. Langdon, Capital 311 2,896.56 21 22 22 23 28 M. L. Langdon, Capital 311 5,000.00 23 24 M. L. Langdon, Drawing 312 5,000.00 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 684 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) GENERAL LEDGER Cash NO. 111 Feb. 1 Balance 34,641.34 28 CR69 42,232.40 76,873.74 28 CP75 63,716.27 13,157.47 Petty Cash Fund NO. 112 Feb. 1 Balance 70.00 Accounts Receivable NO. 113 Feb. 1 Balance 15,611.16 24 J89 185.00 15,426.16 28 S56 45,737.48 61,163.64 28 CR69 15,611.16 45,552.48 Merchandise Inventory NO. 114 Feb. 1 Balance 52,640.00 28 Adj. J91 52,640.00 28 Adj. J91 45,484.00 45,484.00 Prepaid Insurance NO. 118 Feb. 1 Balance 2,480.00 28 Adj. J91 210.00 2,270.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 685

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Equipment Feb. 1 Balance 9,324.00 NO. 122 Accumulated Depreciation, Equipment NO. 123 Feb. 1 Balance 5,328.00 28 Adj. J91 1,885.00 7,213.00 Accounts Payable NO. 221 Feb. 1 Balance 39,254.10 12 J89 692.00 38,562.10 28 P62 44,186.90 82,749.00 28 CP75 43,594.90 39,154.10 Employees' Income Tax Payable NO. 226 Feb. 1 Balance 1,285.00 12 J89 503.00 1,788.00 14 CP75 1,285.00 503.00 26 J90 503.00 1,006.00 FICA Taxes Payable NO. 227 Feb. 1 Balance 1,615.80 12 J89 398.87 2,014.67 12 J89 398.87 2,413.54 14 CP75 1,615.80 797.74 26 J90 398.87 1,196.61 26 J90 398.87 1,595.48 686 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) State Unemployment Tax Payable NO. 228 Feb. 1 Balance 536.76 12 J89 211.09 747.85 26 J90 2.48 750.33 Federal Unemployment Tax Payable NO. 229 Feb. 1 Balance 79.52 12 J89 31.27 110.79 26 J90 0.37 111.16 Salaries Payable NO. 230 Feb. 1 Balance 620.00 1 Reversing J89 620.00 12 J89 4,312.13 4,312.13 12 CP75 4,312.13 26 J90 4,312.13 4,312.13 26 CP75 4,312.13 28 Adj. J91 2,084.00 2,084.00 M. L. Langdon, Capital NO. 311 Feb. 1 Balance 66,047.32 28 Closing J92 2,896.56 68,943.88 28 Closing J92 5,000.00 63,943.88 M. L. Langdon, Drawing NO. 312 20-- Feb. 28 CP75 5,000.00 5,000.00 28 Closing J92 5,000.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 687

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Income Summary NO. 313 20-- Feb. 28 Adj. J91 52,640.00 52,640.00 28 Adj. J91 45,484.00 7,156.00 28 Closing J92 73,529.01 66,373.01 28 Closing J92 63,476.45 2,896.56 28 Closing J92 2,896.56 Sales NO. 411 20-- Feb. 28 S56 45,737.48 45,737.48 28 CR69 26,621.24 72,358.72 28 Closing J92 72,358.72 Sales Returns and Allowances NO. 412 20-- Feb. 24 J89 185.00 185.00 28 Closing J92 185.00 Purchases NO. 511 20-- Feb. 28 P62 42,786.90 42,786.90 28 Closing J92 42,786.90 Purchases Returns and Allowances NO. 512 20-- Feb. 12 J89 692.00 692.00 28 Closing J92 692.00 688 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Purchases Discounts NO. 513 20-- Feb. 28 CP75 478.29 478.29 28 Closing J92 478.29 Freight In NO. 514 20-- Feb. 27 CP75 1,035.00 1,035.00 28 P62 1,400.00 2,435.00 28 Closing J92 2,435.00 Salary Expense NO. 611 20-- Feb. 1 Reversing J89 620.00 620.00 12 J89 5,214.00 4,594.00 26 J90 5,214.00 9,808.00 28 Adj. J91 2,084.00 11,892.00 28 Closing J92 11,892.00 Payroll Tax Expense 612 NO. 20-- Feb. 12 J89 641.23 641.23 26 J90 401.72 1,042.95 28 Closing J92 1,042.95 Rent Expense NO. 613 20-- Feb. 28 CP75 2,290.00 2,290.00 28 Closing J92 2,290.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 689

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Utilities Expense NO. 614 20-- Feb. 5 CP75 358.00 358.00 28 Closing J92 358.00 Supplies Expense NO. 616 20-- Feb. 19 CP75 336.00 336.00 28 CP75 30.24 366.24 28 Closing J92 366.24 Insurance Expense NO. 617 20-- Feb. 28 Adj. J91 210.00 210.00 28 Closing J92 210.00 Depreciation Expense, Equipment NO. 618 20-- Feb. 28 Adj. J91 1,885.00 1,885.00 28 Closing J92 1,885.00 Miscellaneous Expense NO. 619 20-- Feb. 28 CP75 25.36 25.36 28 Closing J92 25.36 690 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) NAME ADDRESS Fashion Decor 642 Guthrie St. Dallas, TX 75294 S RECEIVABLE LEDGER Feb. 1 Balance 4,830.65 19 CR69 4,830.65 22 S56 17,435.32 17,435.32 24 J89 185.00 17,250.32 NAME ADDRESS Hotel Beritz 4600 Beaumont Drive Dallas, TX 75294 20-- Feb. 1 S56 12,520.86 12,520.86 NAME ADDRESS Jason and Waldon 1420 Favela Road Dallas, TX 75294 Feb. 1 Balance 10,780.51 6 CR69 10,780.51 14 S56 15,781.30 15,781.30 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 691

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) S PAYABLE LEDGER NAME ADDRESS Brandon, Inc. 400 W. Tatum St. Amarillo, TX 79178 20-- Feb. 18 P62 22,617.20 22,617.20 NAME ADDRESS Kingston Fabrics 1464 Harding Drive Dallas, TX 75294 Feb. 1 Balance 16,932.10 2 CP75 16,932.10 24 P62 16,536.90 16,536.90 NAME ADDRESS Magnuson Textiles 620 W. Huber St. Corpus Christi, TX 78410 Feb. 1 Balance 9,782.00 5 P62 5,032.80 14,814.80 7 CP75 9,782.00 5,032.80 12 J89 692.00 4,340.80 14 CP75 4,340.80 NAME ADDRESS Tyson Manufacturing Company 842 N. Howard Ave. Fort Worth, TX 76196 Feb. 1 Balance 12,540.00 22 CP75 12,540.00 692 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Fabulous Furnishings Schedule of Accounts Receivable February 28, Fashion Decor Hotel Beritz Jason and Waldon Total Accounts Receivable $17,250.32 12,520.86 15,781.30 $45,552.48 Fabulous Furnishings Schedule of Accounts Payable February 28, Brandon, Inc. Kingston Fabrics Total Accounts Payable $22,617.20 16,536.90 $39,154.10 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 693

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Fabulous Furnishings Work Sheet For Month Ended February 28, TRIAL 1 Cash 13,157.47 2 Petty Cash Fund 70.00 3 Accounts Receivable 45,552.48 4 Merchandise Inventory 52,640.00 5 Prepaid Insurance 2,480.00 6 Equipment 9,324.00 7 Accumulated Depreciation, Equipment 5,328.00 8 Accounts Payable 39,154.10 9 Employees' Income Tax Payable 1,006.00 10 FICA Taxes Payable 1,595.48 11 State Unemployment Tax Payable 750.33 12 Federal Unemployment Tax Payable 111.16 13 M. L. Langdon, Capital 66,047.32 14 M. L. Langdon, Drawing 5,000.00 15 Sales 72,358.72 16 Sales Returns and Allowances 185.00 17 Purchases 42,786.90 18 Purchases Returns and Allowances 692.00 19 Purchases Discounts 478.29 20 Freight In 2,435.00 21 Salary Expense 9,808.00 22 Payroll Tax Expense 1,042.95 23 Rent Expense 2,290.00 24 Utilities Expense 358.00 25 Supplies Expense 366.24 26 Miscellaneous Expense 25.36 27 187,521.40 187,521.40 28 Income Summary 29 Salaries Payable 30 Insurance Expense 31 Depreciation Expense, Equipment 32 33 Net Income 34 35 36 37 38 NAME 694 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) ADJUSTMENTS INCOME STATEMENT SHEET 13,157.47 1 70.00 2 45,552.48 3 (b) 45,484.00 (a) 52,640.00 45,484.00 4 (d) 210.00 2,270.00 5 9,324.00 6 (e) 1,885.00 7,213.00 7 39,154.10 8 1,006.00 9 1,595.48 10 750.33 11 111.16 12 66,047.32 13 5,000.00 14 72,358.72 15 185.00 16 42,786.90 17 692.00 18 478.29 19 2,435.00 20 (c) 2,084.00 11,892.00 21 1,042.95 22 2,290.00 23 358.00 24 366.24 25 25.36 26 (a) 52,640.00 (b) 45,484.00 52,640.00 45,484.00 28 (c) 2,084.00 2,084.00 29 (d) 210.00 210.00 30 (e) 1,885.00 1,885.00 31 102,303.00 102,303.00 116,116.45 119,013.01 120,857.95 117,961.39 32 2,896.56 2,896.56 33 119,013.01 119,013.01 120,857.95 120,857.95 34 27 35 36 37 38 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 695

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Fabulous Furnishings Income Statement For Month Ended February 28, Revenue from Sales: Sales $72,358.72 Less Sales Returns and Allowances 185.00 Net Sales $72,173.72 Cost of Goods Sold: Merchandise Inventory, Feb. 1, 20-- $52,640.00 Purchases $42,786.90 Less: Purchases Returns and Allowances $692.00 Purchases Discounts 478.29 1,170.29 Net Purchases $41,616.61 Add Freight In 2,435.00 Delivered Cost of Purchases 44,051.61 Cost of Goods Available for Sale $96,691.61 Less Merchandise Inventory, Feb. 28, 20-- 45,484.00 Cost of Goods Sold 51,207.61 Gross Profit $20,966.11 Operating Expenses: Salary Expense $11,892.00 Payroll Tax Expense 1,042.95 Rent Expense 2,290.00 Utilities Expense 358.00 Supplies Expense 366.24 Insurance Expense 210.00 Depreciation Expense, Equipment 1,885.00 Miscellaneous Expense 25.36 Total Operating Expenses 18,069.55 Net Income $ 2,896.56 696 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Fabulous Furnishings Statement of Owner's Equity For Month Ended February 28, M. L. Langdon, Capital, February 1, 20-- $66,047.32 Net Income for February $2,896.56 Less Withdrawals for February 5,000.00 Decrease in Capital 2,103.44 M. L. Langdon, Capital, February 28, 20-- $63,943.88 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 697

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) Fabulous Furnishings Balance Sheet February 28, Assets Current Assets: Cash $13,157.47 Petty Cash Fund 70.00 Accounts Receivable 45,552.48 Merchandise Inventory 45,484.00 Prepaid Insurance 2,270.00 Total Current Assets $106,533.95 Property and Equipment: Equipment $ 9,324.00 Less Accumulated Depreciation 7,213.00 2,111.00 Total Assets $108,644.95 Liabilities Current Liabilities: Accounts Payable $39,154.10 Employees' Income Tax Payable 1,006.00 FICA Taxes Payable 1,595.48 State Unemployment Tax Payable 750.33 Federal Unemployment Tax Payable 111.16 Salaries Payable 2,084.00 Total Liabilities $ 44,701.07 Owner's Equity M. L. Langdon, Capital 63,943.88 Total Liabilities and Owner's Equity $108,644.95 698 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSIVE REVIEW PROBLEM (Special Journals) (continued) NAME Fabulous Furnishings Post-Closing Trial Balance February 28, Cash 13,157.47 Petty Cash Fund 70.00 Accounts Receivable 45,552.48 Merchandise Inventory 45,484.00 Prepaid Insurance 2,270.00 Equipment 9,324.00 Accumulated Depreciation, Equipment 7,213.00 Accounts Payable 39,154.10 Employees' Income Tax Payable 1,006.00 FICA Taxes Payable 1,595.48 State Unemployment Tax Payable 750.33 Federal Unemployment Tax Payable 111.16 Salaries Payable 2,084.00 M. L. Langdon, Capital 63,943.88 115,857.95 115,857.95 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 699

COMPREHENSIVE REVIEW PROBLEM (General Journal) (concluded) PAYROLL REGISTER FOR SEMIMONTHLY PERIOD ENDED February 12, 20-- PAGE 12 TAXABLE EARNINGS DEDUCTIONS PAYMENTS NAME TOTAL HOURS BEGINNING CUMULATIVE EARNINGS TOTAL EARNINGS ENDING CUMULATIVE EARNINGS UNEMPLOY- MENT SOCIAL SECURITY MEDICARE FEDERAL INCOME TAX SOCIAL SECURITY TAX MEDICARE TAX TOTAL NET AMOUNT CK. NO. SALARY EXPENSE R. W. Harris 40 5,465.00 2,840.00 8,305.00 1,535.00 2,840.00 2,840.00 287.00 176.08 41.18 504.26 2,335.74 7219 2,840.00 T. L. Newkirk 40 4,580.00 2,374.00 6,954.00 2,374.00 2,374.00 2,374.00 216.00 147.19 34.42 397.61 1,976.39 7220 2,374.00 10,045.00 5,214.00 15,259.00 3,909.00 5,214.00 5,214.00 503.00 323.27 75.60 901.87 4,312.13 5,214.00 PAYROLL REGISTER FOR SEMIMONTHLY PERIOD ENDED February 26, 20-- PAGE 13 TAXABLE EARNINGS DEDUCTIONS PAYMENTS NAME TOTAL HOURS BEGINNING CUMULATIVE EARNINGS TOTAL EARNINGS ENDING CUMULATIVE EARNINGS UNEMPLOY- MENT SOCIAL SECURITY MEDICARE FEDERAL INCOME TAX SOCIAL SECURITY TAX MEDICARE TAX TOTAL NET AMOUNT CK. NO. SALARY EXPENSE R. W. Harris 40 8,305.00 2,840.00 11,145.00 0.00 2,840.00 2,840.00 287.00 176.08 41.18 504.26 2,335.74 7225 2,840.00 T. L. Newkirk 40 6,954.00 2,374.00 9,328.00 46.00 2,374.00 2,374.00 216.00 147.19 34.42 397.61 1,976.39 7226 2,374.00 15,259.00 5,214.00 20,473.00 46.00 5,214.00 5,214.00 503.00 323.27 75.60 901.87 4,312.13 5,214.00 700 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

SOLUTIONS TO ACTIVITIES CONSIDER AND COMMUNICATE Suggested Response Income from operations is the most significant figure for comparing revenue from year to year. The primary operation of the music store is buying and selling instruments. Revenues from this activity are recorded in the Sales account. Consignment sales commissions, while an important source of income, are incidental to the store s primary operation and should be listed under the Other Income classification. In this way, Sales, the primary source of operating revenue, can be isolated at the top of the income statement. The gross profit figure then represents only the profit made on the sale of new merchandise. WHAT S WRONG WITH THIS PICTURE? Suggested Response Yes. It would cause the Freight In account to have a greater balance, therefore causing Cost of Goods Available for Sale and Cost of Goods Sold to be greater. The asset desk would be understated. The freight charge related to the purchase of the desk should be included as part of the cost of this asset. CRITICAL THINKING Suggested Response Since there is no beginning inventory and no ending inventory, Purchases equals Cost of Goods Sold. Beginning Inventory $ Purchases 400 Cost of Goods Available for Sale $400 Less Ending Inventory Cost of Goods Sold $400 A QUESTION OF ETHICS Suggested Response This is not unethical behavior. While there is company information on these financial statements, it is not necessarily confidential information. However, as a general rule, such papers should be kept within the business. It is not wise to remove company information from the business. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 701

ALL ABOUT YOU SPA: Closing Entries and Financial Statements All About You Spa Income Statement For Two Months Ended August 31, 20-- Revenue from Sales: Merchandise Sales $22,489.65 Less Sales Returns and Allowances 88.00 Net Sales $ 22,401.65 Cost of Merchandise Sold: Merchandise Inventory, July 1, 20-- $ 0.00 Purchases $24,101.00 Less Purchases Returns and Allowances 123.00 Net Purchases $23,978.00 Add Freight In 992.00 Delivered Cost of Purchases 24,970.00 Cost of Goods Available for Sale $24,970.00 Less Merchandise Inventory, Aug. 31, 20-- 13,110.00 Cost of Merchandise Sold 11,860.00 Gross Profit $ 10,541.65 Operating Expenses: Wages Expense $16,250.00 Rent Expense 3,300.00 Office Supplies Expense 43.00 Spa Supplies Expense 190.00 Laundry Expense 179.00 Advertising Expense 455.00 Utilities Expense 963.00 Insurance Expense 281.67 Depreciation Expense, Spa Equipment 129.76 Depreciation Expense, Office Equipment 20.00 Miscellaneous Expense 371.90 Total Operating Expenses 22,183.33 Loss from Operations $(11,641.68) Other Income: Income from Services 25,398.00 Net Income $ 13,756.32 702 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (continued) All About You Spa Statement of Owner's Equity For Two Months Ended August 31, 20-- A. Valli, Capital, July 1, 20--* Net Income for July and August Withdrawals for July and August Increase in Capital A. Valli, Capital, August 31, 20-- $13,756.32 5,000.00 $49,884.62 8,756.32 $58,640.94 * Note: The computer-generated report will begin with a balance of $49,884.62, since the data file for this problem was set up with opening balances as of August 1, which reflected the additional investments made in July. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 703

ALL ABOUT YOU SPA (continued) All About You Spa Balance Sheet August 31, 20-- Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Office Supplies Spa Supplies Total Current Assets Property and Equipment: Spa Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Property and Equipment Total Assets $40,361.74 7,196.63 13,110.00 518.33 75.00 345.00 $18,083.00 194.64 $17,888.36 $ 1,570.00 30.00 1,540.00 $61,606.70 19,428.36 $81,035.06 Liabilities Current Liabilities: Accounts Payable Sales Tax Payable Total Current Liabilities Total Liabilities $20,393.00 2,001.12 $22,394.12 $22,394.12 Owner's Equity A. Valli, Capital Total Liabilities and Owner's Equity 58,640.94 $81,035.06 704 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (continued) GENERAL JOURNAL PAGE 17 DESCRIPTION 1 20-- Closing Entries 1 2 Aug. 31 Income from Services 411 25,398.00 2 3 Merchandise Sales 412 22,489.65 3 4 Purchases Returns and Allowances 513 123.00 4 5 Income Summary 313 48,010.65 5 6 6 7 31 Income Summary 313 47,364.33 7 8 Sales Returns and Allowances 414 88.00 8 9 Purchases 511 24,101.00 9 10 Freight In 515 992.00 10 11 Wages Expense 611 16,250.00 11 12 Rent Expense 612 3,300.00 12 13 Office Supplies Expense 613 43.00 13 14 Spa Supplies Expense 614 190.00 14 15 Laundry Expense 615 179.00 15 16 Advertising Expense 616 455.00 16 17 Utilities Expense 617 963.00 17 18 Insurance Expense 618 281.67 18 19 Depreciation Expense, Spa 619 129.76 19 20 Equipment 20 21 Depreciation Expense, Office 620 20.00 21 22 Equipment 22 23 Miscellaneous Expense 630 371.90 23 24 24 25 31 Income Summary 313 13,756.32 25 26 A. Valli, Capital 311 13,756.32 26 27 27 28 31 A. Valli, Capital 311 5,000.00 28 29 A. Valli, Drawing 312 5,000.00 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 705

ALL ABOUT YOU SPA (continued) GENERAL LEDGER Cash NO. 111 Aug. 31 Balance 40,361.74 Accounts Receivable 113 NO. Aug. 31 Balance 7,196.63 Spa Supplies NO. 114 Aug. 31 Adj. J16 345.00 345.00 Office Supplies NO. 115 Aug. 31 Adj. J16 75.00 75.00 Merchandise Inventory NO. 116 Aug. 31 Adj. J16 13,110.00 13,110.00 706 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (continued) Prepaid Insurance NO. 117 Aug. 31 Balance 800.00 31 Adj. J16 281.67 518.33 Spa Equipment NO. 124 Aug. 31 Balance 18,083.00 Accumulated Depreciation, Spa Equipment NO. 125 Aug. 31 Balance 64.88 31 Adj. J16 129.76 194.64 Office Equipment NO. 128 Aug. 1 Balance 1,570.00 Accumulated Depreciation, Office Equipment NO. 129 Aug. 31 Balance 10.00 31 Adj. J16 20.00 30.00 Accounts Payable NO. 211 Aug. 31 Balance 20,393.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 707

ALL ABOUT YOU SPA (continued) Wages Payable 212 NO. Sales Tax Payable NO. 215 Aug. 31 Balance 2,001.12 A. Valli, Capital NO. 311 Aug. 31 Balance 49,884.62 31 Closing J17 13,756.32 63,640.94 31 Closing J17 5,000.00 58,640.94 A. Valli, Drawing NO. 312 Aug. 31 Balance 5,000.00 31 Closing J17 5,000.00 Income Summary 313 NO. Aug. 31 Adj. J16 13,110.00 13,110.00 31 Closing J17 48,010.65 61,120.65 31 Closing J17 47,364.33 13,756.32 31 Closing J17 13,756.32 708 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (continued) Income from Services NO. 411 Aug. 31 Balance 25,398.00 31 Closing J17 25,398.00 Merchandise Sales NO. 412 Aug. 31 Balance 22,489.65 31 Closing J17 22,489.65 Sales Discounts NO. 413 Sales Returns and Allowances NO. 414 Aug. 31 Balance 88.00 31 Closing J17 88.00 Purchases NO. 511 Aug. 31 Balance 24,101.00 31 Closing J17 24,101.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 709

ALL ABOUT YOU SPA (continued) Purchases Discounts NO. 512 Purchases Returns and Allowances NO. 513 Aug. 31 Balance 123.00 31 Closing J17 123.00 Freight In NO. 515 Aug. 31 Balance 992.00 31 Closing J17 992.00 Wages Expense 611 NO. Aug. 31 Balance 16,250.00 31 Closing J17 16,250.00 Rent Expense NO. 612 Aug. 31 Balance 3,300.00 31 Closing J17 3,300.00 710 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (continued) Office Supplies Expense NO. 613 Aug. 31 Balance 118.00 31 Adj. J16 75.00 43.00 31 Closing J17 43.00 Spa Supplies Expense NO. 614 Aug. 31 Balance 535.00 31 Adj. J16 345.00 190.00 31 Closing J17 190.00 Laundry Expense NO. 615 Aug. 31 Balance 179.00 31 Closing J17 179.00 Advertising Expense NO. 616 Aug. 31 Balance 455.00 31 Closing J17 455.00 Utilities Expense NO. 617 Aug. 31 Balance 963.00 31 Closing J17 963.00 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 711

ALL ABOUT YOU SPA (continued) Insurance Expense NO. 618 Aug. 31 Adj. J16 281.67 281.67 31 Closing J17 281.67 Depreciation Expense, Spa Equipment NO. 619 Aug. 31 Adj. J16 129.76 129.76 31 Closing J17 129.76 Depreciation Expense, Office Equipment NO. 620 Aug. 31 Adj. J16 20.00 20.00 31 Closing J17 20.00 Miscellaneous Expense NO. 630 Aug. 31 Balance 371.90 31 Closing J17 371.90 712 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

ALL ABOUT YOU SPA (concluded) NAME All About You Spa Post-Closing Trial Balance August 31, 20-- Cash 40,361.74 Accounts Receivable 7,196.63 Merchandise Inventory 13,110.00 Prepaid Insurance 518.33 Office Supplies 75.00 Spa Supplies 345.00 Spa Equipment 18,083.00 Accumulated Depreciation, Spa Equipment 194.64 Office Equipment 1,570.00 Accumulated Depreciation, Office Equipment 30.00 Accounts Payable 20,393.00 Sales Tax Payable 2,001.12 A. Valli, Capital 58,640.94 81,259.70 81,259.70 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 713

NOTES AND CALCULATIONS 714 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.