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Copy of Chap004 1.doc
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Copy of Chap004 1.doc-Chapter 04 - Adjustments, Fi...
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Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Page 30
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
E4–20.
Req. 1
The purposes of “closing the books” at the end of the accounting period are to:
Transfer the balance in the temporary accounts to a permanent account
(Retained Earnings).
Create a zero balance in each of the temporary accounts for accumulation of
activities in the next accounting period.
Req. 2
Revenues (
R)
.............................................................
84
Expenses ($32 + $4 + $8 + $5 + $9) (
E)
.........
58
Retained earnings (+SE)
..................................
26
4-30
Page 31
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
PROBLEMS
P4–1.
Req. 1
Dell Inc.
Adjusted Trial Balance
At January 31, 2012
(in millions of dollars)
Debit
Credit
Cash
$
8,352
Marketable securities
740
Accounts receivable
6,443
Inventories
867
Property, plant, and equipment
4,510
Accumulated depreciation
$
2,233
Other assets
7,821
Accounts payable
8,309
Accrued expenses payable
3,788
Long-term debt
1,898
Other liabilities
8,234
Contributed capital
11,189
Retained earnings (deficit)
9,396
Sales revenue
61,101
Other income
134
Cost of sales
50,144
Selling, general, and administrative expenses
7,102
Research and development expense
665
Income tax expense
846
Totals
$ 96,886
$ 96,886
Req. 2
Since debits are supposed to equal credits in a trial balance, the balance in Retained
Earnings is determined as the amount in the debit column necessary to make debits
equal credits (a “plugged” figure).
4-31
Page 32
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
P4–2.
Req. 1
a.
Deferred revenue
e.
Deferred expense
b.
Accrued expense
f.
Accrued revenue
c.
Deferred expense
g.
Accrued expense
d.
Deferred revenue
h.
Accrued expense
Req. 2
a.
Unearned rent revenue (
L)
..........................................
5,600
Rent revenue (+R, +SE)
.....................................
5,600
($8,400 ÷ 6 months = $1,400 per month x 4 months)
b.
Interest expense (+E,
SE)
............................................
540
Interest payable (+L)
.............................................
540
($18,000 x .12 x 3/12)
c.
Depreciation expense (+E,
SE)
...................................
2,500
Accumulated depreciation (+XA,
A)
...................
2,500
d.
Unearned service revenue (
L)
.....................................
500
Service revenue (+R, +SE)
..................................
500
($3,000 x 2/12)
e.
Insurance expense (+E,
SE)
........................................
1,500
Prepaid insurance (
A)
.......................................
1,500
($9,000 ÷ 12 months = $750 per month x 2 months of coverage)
f.
Accounts receivable (+A)
..............................................
4,000
Service revenue (+R, +SE)
.................................
4,000
g.
Wage expense (+E,
SE)
..............................................
14,000
Wages payable (+L)
............................................
14,000
h.
Property tax expense (+E,
SE)
....................................
500
Property tax payable (+L)
.....................................
500
4-32
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