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Copy of Chap004 1.doc
Copy_of_Chap004_1.doc
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Copy of Chap004 1.doc-Chapter 04 - Adjustments, Fi...
Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
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Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Page 22
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
E4–13.
Req. 1
(a)
Cash paid on accrued income taxes payable.
(b)
Accrual of additional income tax expense.
(c)
Cash paid on dividends payable.
(d)
Amount of dividends declared for the period.
(e)
Cash paid on accrued interest payable.
(f)
Accrual of additional interest expense.
Req. 2
Computations:
(a)
Beg. Bal.
+
accrued income taxes
-
cash paid
=
End. bal.
$135
+
656
-
?
=
$79
?
=
$712 paid
(c)
Beg. Bal.
+
dividends declared
-
cash paid
=
End. bal.
$110
+
456
-
?
=
$118
?
=
$448 paid
(f)
Beg. Bal.
+
accrued interest expense
-
cash paid
=
End. bal.
$140
+
?
-
1,127
=
$150
?
=
$1,137 accrued
4-22
Page 23
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
E4–14.
Req. 1
Adjusting entries that were or should have been made at December 31:
(a)
No entry was made.
Entry that should have been made:
Rent receivable (+A)
....................................................
1,400
Rent revenue (+R, +SE)
...................................
1,400
(b)
No entry was made.
Entry that should have been made:
Depreciation expense (+E,
SE)
..................................
15,000
Accumulated depreciation (+XA,
A) ………….
15,000
(c)
No entry was made. Entry that should have been made:
Unearned fee revenue (
L)
..........................................
1,500
Fee revenue (+R, +SE)
.....................................
1,500
(d)
Entry that was already made:
Interest expense (+E,
SE)
.........................................
1,530
Interest payable (+L)
........................................
1,530
($17,000 x .09 x 12/12 months)
Entry that should have been made:
Interest expense (+E,
SE)
..........................................
255
Interest payable (+L)
.........................................
255
($17,000 x .09 x 2/12 months)
(e)
No entry was made.
Entry that should have been made:
Insurance expense (+E,
SE)
......................................
650
Prepaid insurance (
A)
......................................
650
Req. 2
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
(a)
U 1,400
NE
U 1,400
U 1,400
NE
U 1,400
(b)
O 15,000
NE
O 15,000
NE
U 15,000
O 15,000
(c)
NE
O 1,500
U 1,500
U 1,500
NE
U 1,500
(d)
NE
O 1,275
U 1,275
NE
O 1,275
U 1,275
(e)
O 650
NE
O 650
NE
U 650
O 650
4-23
Page 24
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
E4–15.
Items
Net
Income
Total
Assets
Total
Liabilities
Stockholders’
Equity
Balances reported
$60,000
$170,000
$80,000
$90,000
Additional adjustments:
a.
Wages
(39,000)
39,000
(39,000)
b.
Depreciation
(17,000)
(17,000)
(17,000)
c.
Rent revenue
3,200
(3,200)
3,200
Adjusted balances
7,200
153,000
115,800
37,200
d.
Income taxes
(2,160)
2,160
(2,160)
Correct balances
$ 5,040
$153,000
$117,960
$35,040
Computations:
a.
Given, $39,000 accrued and unpaid.
b
.
Given, $17,000 depreciation expense.
c
.
$9,600 x 1/3 = $3,200 rent revenue earned. The remaining $6,400 in unearned
revenue is a liability for two months of occupancy "owed'' to the renter.
d.
$7,200 income before taxes x 30% = $2,160.
4-24
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