1 Ch. 1-4 Review Problems For each account listed below: 1. Indicate the account type: Current Asset (CA), LT Investment (LTI), Property Plant & Equipment (PPE), Intangible Asset (IA) ,Current Liability (CL), LT Liability (LTL), Stockholders’ Equity (SE), Dividend (DIV), Revenue (REV), or Expense (EXP) 2. Financial statement where it would be located: Income Statement (IS), Stmt. Of Retained Earnings (SORE), or Balance Sheet (BS) Accounts payable Dividends Maintenance expense Salaries & wages exp. Accounts receivable Equipment Mortgages payable Salaries/Wages payable Accum. Deprec.-Build. Franchises Office expense Sales Accum. Deprec.-Equip. Furniture Patents Sales revenue Accum. Deprec.-Furn. Goodwill Pension liabilities Service revenue Advertising expense Income tax expense Prepaid advertising ST investments Bonds payable Income tax payable Prepaid expenses ST notes payable Building Insurance expense Prepaid insurance ST notes receivable Cash Interest expense Prepaid rent Stock investments Common stock Interest payable Printing expense Supplies Copyrights Interest revenue Real estate invest. Supplies expense Cost of goods sold Inventory Rent expense Trademarks/names Current maturities of LT debt Land Rent revenue Unearned revenue Deferred income tax Lease liabilities Repairs expense Utilities expense Delivery/Freight-Out expense LT notes payable Retained earnings Depreciation expense Dividend income2 What is the basic accounting equation? What is the expanded accounting equation? What are the Debit/Credit rules? How do the following transactions impact the accounting equation? Which financial statements are impacted? 1. Issue shares of stock for cash 2. Company pays for an expense 3. Company incurs an expense on account 4. Company receives payment in advance for services not yet performed 5. Company pays a dividend 6. Company provides services to a client on account 7. Company purchases supplies on account 8. Company pays off an amount due to a vendor3 How does Net Income impact Stockholders’ Equity? What about Net Loss? If assets increased by $12,000 & liabilities decreased by $5,000, how much did stockholders’ equity change by? Tipco Industries has assets of $450,000 and liabilities of $300,000. What is their equity balance? • If they have common stock of $10,000, then what else do we know about their equity balance? Rust Company’s retained earnings increased by $100,000 from Jan. 1 to Dec. 31. If they paid out $10,000 in dividends during this period, what was their net income/loss for the period? Based on the following information, what is the amount of current assets, LT investments, net PP&E, intangible assets, current liabilities, & LT liabilities? Stock investments (plan to hold over 1 year) 2,000 Land 5,000 Accounts Payable 3,000 Furniture 1,000 Notes Payable (due more than 1 year from now) 4,000 Patents 6,000 Wages payable 3,000 Buildings 9,000 Investments (plan to hold less than 1 year) 2,000 Inventory 4,000 Accounts Receivable 3,000 Total Accumulated Depreciation 7,000 Prepaid insurance/rent/expense 4,000 Notes receivable (due in less than 1 year) 3,000 Cash 4,000 Equipment 3,000 Unearned Revenue 5,0004 Indicate if the accounts are increased by a credit or a debit (i.e. what is the account’s NORMAL balance?): Cash Retained earnings Building Dividends Revenues Expenses Accounts payable Accumulated depreciation Wages payable Accounts receivable Unearned service revenue Patent Common stock Prepaid insurance/rent/other Supplies Entertainment Plus Co. has a concert scheduled in July. Tickets were available for order in May, and customers paid for their tickets in June. When does the company recognize the revenue? What are the journal entries for these transactions & how do they impact the accounting equation? What is the impact if we fail to record these entries? 1. Received $5,000 of printing services but haven’t received a bill or paid the printing company. 2. Pre-pay next year’s rent for $10,000. 3. Receive a $7,000 payment from a customer for an amount owed to you. 4. Receive a bill for repair work completed last month that your company will pay next month. 5. Record $5,000 of depreciation on the company’s building. 6. Perform $6,000 of services for a client on account. 7. $8,000 of supplies were on hand at the beginning of the period. At the end of the period, only $2,000 of supplies remain on hand.5 Answer the following questions using the below trial balance: 1. How much is net income? 2. How much is ending retained earnings? 3. How much is total stockholders’ equity? JONES CO. ADJUSTED TRIAL BALANCE 12-31-08 DEBIT CREDIT Cash 30,500 Accounts Receivable 15,000 Supplies on Hand 2,500 Prepaid Insurance 3,000 Equipment 42,500 Accumulated Depreciation 20,000 Accounts Payables 6,000 Wages Payable 3,500 Unearned Revenues 6,000 Long Term Notes Payable 10,000 Common Stock 33,000 Retained Earnings (1-1-08) 3,000 Dividends 1,000 Sales 97,000 Cost of Goods Sold 34,000 Rent Expense 13,000 Insurance Expense 5,500 Depreciation Expense 3,500 Wages Expense 14,000 Supplies Expense 2,000 Interest Expense 3,000 Income Tax Expense 9,000 Total 178,500 178,5006 ABC Corp is a new company. Record the following journal entries, post them to the ledgers (using T-Accounts), and prepare a trial balance. 1. July 1: Issued common stock in exchange for $35,000 cash from investors. 2. July 4: Purchased equipment for $8,000, paying $2,000 down and the balance still due on account. 3. July 7: Performed services on account for $9,000. 4. July 10: Paid salaries of $2,000. 5. July 12: Paid remainder of amount owned on July 4 equipment purchase. 6. July 13: Received full payment from customer in July 7 entry. 7. July 14: Purchased $3,000 of supplies on account. 8. July 30: Paid $200 cash