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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 35
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
P4–5.
Req. 1
a.
Deferred expense
e.
Accrued revenue
b.
Deferred expense
f.
Deferred expense
c.
Accrued expense
g.
Accrued expense
d.
Accrued expense
h.
Accrued expense
Req. 2
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
4,000
NE
4,000
NE
+ 4,000
4,000
b.
1,150
NE
1,150
NE
+ 1,150
– 1,150
c.
NE
+ 1,200
1,200
NE
+ 1,200
1,200
d.
NE
+ 1,500
1,500
NE
+ 1,500
1,500
e.
+ 6,000
NE
+ 6,000
+ 6,000
NE
+ 6,000
f.
200
NE
200
NE
+ 200
200
g.
NE
+ 385
385
NE
+ 385
385
h.
NE
+8,270
8,270
NE
+ 8,270
8,270
Computations:
a.
Amount is given.
b.
Beg. inventory, $400 + Purchases, $1,000 - Ending inventory, $250 = $1,150 used
c.
Amount is given.
d.
Amount is given.
e.
Amount is given.
f.
$1,200 x 6/36 = $200 used
g.
$11,000 x 14% x 3/12 = $385 interest expense for the period
h.
Adjusted income = $30,000 - $4,000 - $1,150 - $1,200 - $1,500 + $6,000 - $200 -
$385 = $27,565 x 30% tax rate = $8,270 income tax expense.
4-35
Page 36
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
P4–6.
Req. 1
December 31, 2012,
Adjusting Entries
(1)
Accounts receivable (+A)
..........................................
560
(
b
)
Service revenue (+R, +SE)
............................
560
(i)
To record service revenue earned, but not collected.
(2)
Insurance expense (+E,
SE)
..................................
280
(
l
)
Prepaid insurance (
A)
...................................
280
(
c
)
To record insurance expired as an expense.
(3)
Depreciation expense (+E,
SE)
...............................
11,900
(
k
)
Accumulated depreciation, equipment (+XA,
A)
11,900
(e)
To record depreciation expense.
(4)
Income tax expense (+E,
SE)
.................................
6,580
(
m
)
Income taxes payable (+L)
............................
6,580
(f)
To record income taxes for 2012.
Req. 2
Amounts before
Adjusting Entries
Amounts after
Adjusting Entries
Revenues:
Service revenue
$64,400
$64,960
Expenses:
Salary expense
56,380
56,380
Depreciation expense
11,900
Insurance expense
280
Income tax expense
6,580
Total expense
56,380
75,140
Net income (loss)
$
8,020
$(10,180)
Net loss is $10,180 because this amount includes all revenues and all expenses (after
the adjusting entries).
This amount is correct because it incorporates the effects of the
revenue and matching principles applied to all transactions whose effects extend
beyond the period in which the transactions occurred.
Net income of $8,020 was not
correct because expenses of $18,760 and revenues of $560 were excluded that should
have been recorded in 2012.
Req. 3
Earnings (loss) per share = $(10,180) net loss
3,000 shares = $(3.39) per share
4-36
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