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4/29/13 McGraw-Hill Connect | Student Performance

Score: 10.01 out of 10.01 points (100%)

[The following information applies to the questions displayed below.]

Assume that you are the president of APEC Aerospace Corporation. At the end of the first year of
operations (December 31, 2012), the following financial data for the company are available:

Accounts Payable $ 35,030


Accounts Receivable 11,400
Cash 15,800
Contributed Capital 11,900
Dividends 2,200
Equipment 98,000
Notes Payable 54,070
Operating Expenses 79,000
Other Expenses 9,800
Sales Revenue 126,100
Supplies 10,900

aw ard:

1. 1.43 out of
1.43 points
correct in your previous attempt

Required:
1. Prepare an income statement for the year ended December 31, 2012.

APEC AEROSPACE CORPORATION


Income Statement
For the Year Ended December 31, 2012
Revenues:
Sales Revenue $ 126,100

Total Revenues 126,100


Expenses:
Operating Expenses 79,000
Other Expenses 9,800

Total Expenses 88,800


Net Income $ 37,300

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Medium structure, and content of the four basic financial
statements.

Required:
1. Prepare an income statement for the year ended December 31, 2012.

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4/29/13 McGraw-Hill Connect | Student Performance
APEC AEROSPACE CORPORATION
Income Statement
For the Year Ended December 31, 2012
Revenues:
Sales Revenue $ 126,100

Total Revenues 126,100


Expenses:
Operating Expenses 79,000
Other Expenses 9,800

Total Expenses 88,800


Net Income $ 37,300

Explanation:

No further explanation details are available for this problem.

aw ard:

2. 1.43 out of
1.43 points
correct in your previous attempt

2. Prepare a statement of retained earnings for the year ended December 31, 2012.

APEC AEROSPACE CORPORATION


Statement of Retained Earnings
For the Year Ended December 31, 2012
Retained Earnings, January 1, 2012
Add: Net Income 37,300
Less: Dividends 2,200
Retained Earnings, December 31, 2012 $ 35,100

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Medium structure, and content of the four basic financial
statements.

2. Prepare a statement of retained earnings for the year ended December 31, 2012.

APEC AEROSPACE CORPORATION


Statement of Retained Earnings
For the Year Ended December 31, 2012
Retained Earnings, January 1, 2012
Add: Net Income 37,300
Less: Dividends (2,200)
Retained Earnings, December 31, 2012 $ 35,100

Explanation:

No further explanation details are available for this problem.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

3. 1.43 out of
1.43 points
correct in your previous attempt

3. Prepare a balance sheet at December 31, 2012.

APEC AEROSPACE CORPORATION


Balance Sheet
At December 31, 2012
Assets
Cash $ 15,800
Accounts Receivable 11,400
Supplies 10,900
Equipment 98,000

Total Assets $ 136,100


Liabilities
Accounts Payable $ 35,030
Notes Payable 54,070

Total Liabilities 89,100


Stockholders' Equity
Contributed Capital 11,900
Retained Earnings 35,100

Total Stockholders' Equity 47,000


Total Liabilities and Stockholders' Equity $ 136,100

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Medium structure, and content of the four basic financial
statements.

3. Prepare a balance sheet at December 31, 2012.

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4/29/13 McGraw-Hill Connect | Student Performance
APEC AEROSPACE CORPORATION
Balance Sheet
At December 31, 2012
Assets
Cash $ 15,800
Accounts Receivable 11,400
Supplies 10,900
Equipment 98,000

Total Assets $ 136,100


Liabilities
Accounts Payable $ 35,030
Notes Payable 54,070

Total Liabilities 89,100


Stockholders' Equity
Contributed Capital 11,900
Retained Earnings 35,100

Total Stockholders' Equity 47,000


Total Liabilities and Stockholders' Equity $ 136,100

Explanation:

No further explanation details are available for this problem.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

4. 1.43 out of
1.43 points
correct in your previous attempt

Required:
1-a. What net income or loss did the company report?

Net Income $ 37,300

1-b. Is the company profitable?

Yes

ebook & resources

Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Hard structure, and content of the four basic financial
statements.

Required:
1-a. What net income or loss did the company report?

Net Income $ 37,300

1-b. Is the company profitable?

Yes

Explanation:

1.
APEC Aerospace Corporation’s income statement reported net income of $37,300, suggesting that the
company was profitable because revenues exceeded expenses.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

5. 1.43 out of
1.43 points
You did NOT receive full credit for this question in previous attempt.
2. The company has paid $2,200 as dividend. What is the maximum amount of additional dividend the
company could have paid? (Note: The company will not borrow any additional cash.)

Maximum Additional Dividend $ 15,800

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Hard structure, and content of the four basic financial
statements.

2. The company has paid $2,200 as dividend. What is the maximum amount of additional dividend the
company could have paid? (Note: The company will not borrow any additional cash.)

Maximum Additional Dividend $ 15,800

Explanation:

2.
APEC Aerospace Corporation’s statement of retained earnings reported a retained earnings balance of
$35,100, after dividends of $2,200 had been subtracted. This suggests the company could have sustained
additional dividends of $35,100, if sufficient cash were available to pay them. As it turns out, the company’s
balance sheet reports cash of $15,800, suggesting that only $15,800 in additional dividends could be paid
(without borrowing additional cash).

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aw ard:

6. 1.43 out of
1.43 points
You did NOT receive full credit for this question in previous attempt.
3-a. What amount of total assets have been financed by the creditors and by the stockholders?

Financed by Creditors $ 89,100


Financed by Stockholders $ 47,000

3-b. Was the company financed mainly by creditors or stockholders?

Creditors

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Hard structure, and content of the four basic financial
statements.

3-a. What amount of total assets have been financed by the creditors and by the stockholders?

Financed by Creditors $ 89,100


Financed by Stockholders $ 47,000

3-b. Was the company financed mainly by creditors or stockholders?

Creditors

Explanation:

3.
APEC Aerospace Corporation’s balance sheet reports total liabilities of $89,100 and stockholders’ equity of
$47,000, indicating that the company is financed mainly by creditors.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

7. 1.43 out of
1.43 points
correct in your previous attempt

4. Determine the amount of cash increase or decrease that would be shown in the statement of cash
flows.

Cash increased by $ 15,800

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Learning Objective: 01-02 Describe the purpose,


Problem B Difficulty: Hard structure, and content of the four basic financial
statements.

4. Determine the amount of cash increase or decrease that would be shown in the statement of cash
flows.

Cash increased by $ 15,800

Explanation:

4.
APEC Aerospace Corporation was founded at the beginning of the year, so it began with no cash. The
balance sheet reports a cash balance of $15,800 at the end of the year. The reasons for this increase of
$15,800 would be shown in the statement of cash flows.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 9.88 out of 9.96 points (99.20%)

[The following information applies to the questions displayed b elow.]

Starbucks is a coffee company—a big coffee company. During a 10-year period, the number of Starbucks
locations grew from 165 to over 8,800 stores in 50 countries. The following is adapted from Starbucks’s
annual report for the year ended September 30, 2010, and dollars are reported in thousands.

Cash $1,234,000
Accounts Receivable 323,700
Inventories 578,300
Other Current Assets 771,600
Property, Plant, and Equipment 2,500,500
Other Noncurrent Assets 1,269,000
Accounts Payable 349,800
Short-term Bank Loans 1,531,500
Long-term Debt 577,400
Other Noncurrent Liabilities 424,100
Contributed Capital 281,100
Retained Earnings 3,513,200

Assume that the following events occurred in the following quarter, which ended December 31, 2010.
Dollars are in thousands.

a. Paid $17,000 cash for additional other long-term assets.


b. Issued additional shares of stock for $6,500 in cash.
c. Purchased property, plant, and equipment; paid $14,000 in cash and signed additional long-term loans
for $10,900.
d. Sold, at cost, other long-term assets for $13,000 cash.
e. Conducted negotiations to purchase a coffee farm, which is expected to cost $9,800.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

1. 1.66 out of
1.66 points
You did NOT receive full credit for this question in previous attempt.

Required:
1. Analyze transactions (a)–(e) to determine their effects on the accounting equation. (Enter all amounts
as positive values. Enter your answers in thousands.)

Assets = Liabilities + Stockholders’ Equity


a. Other Noncurrent Assets + 17,000
Cash − 17,000
b. Cash + 6,500 Contributed Capital
c. Property, Plant, and Equipment + 24,900 Long-term Debt + 10,900
Cash − 14,000
d. Cash + 13,000
Other Noncurrent Assets − 13,000
e.

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Learning Objective: 02-02 Apply transaction analysis Learning Objective: 02-04 Prepare a classified
Problem B
to accounting transactions. balance sheet.

Learning Objective: 02-03 Use journal entries and T- Learning Objective: 02-05 Interpret the balance sheet
Difficulty: Hard accounts to show how transactions affect the using the current ratio and an understanding of
balance sheet. related concepts.

Required:
1. Analyze transactions (a)–(e) to determine their effects on the accounting equation. (Enter all amounts
as positive values. Enter your answers in thousands.)

Assets = Liabilities + Stockholders’ E


a. Other Noncurrent Assets + 17,000
Cash − 17,000
b. Cash + 6,500 Contributed Capital
c. Property, Plant, and Equipment + 24,900 Long-term Debt + 10,900
Cash − 14,000
d. Cash + 13,000
Other Noncurrent Assets − 13,000
e.

Explanation:

No further explanation details are available for this problem.

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4/29/13 McGraw-Hill Connect | Student Performance
aw ard:

2. 1.58 out of
1.66 points
You did NOT receive full credit for this question in previous attempt.

2. Record the transaction effects determined in part 1 using journal entries. (If no entry is required for a
transaction/event, select "No Journal Entry Required" in the first account field. Enter your
answers in thousands.)

Transaction General Journal Debit Credit


a Other Noncurrent Assets 17,000
Cash 17,000

b Cash 6,500
Contributed Capital 6,500

c Property, Plant, and Equipment 14,000


Cash 14,000
Long-term Debt 10,900

d Cash 13,000
Other Noncurrent Assets 13,000

e No Journal Entry Required

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Learning Objective: 02-02 Apply transaction analysis Learning Objective: 02-04 Prepare a classified
Problem B
to accounting transactions. balance sheet.

Learning Objective: 02-03 Use journal entries and T- Learning Objective: 02-05 Interpret the balance sheet
Difficulty: Hard accounts to show how transactions affect the using the current ratio and an understanding of
balance sheet. related concepts.

2. Record the transaction effects determined in part 1 using journal entries. (If no entry is required for a
transaction/event, select "No Journal Entry Required" in the first account field. Enter your
answers in thousands.)

Transaction General Journal Debit Credit


a Other Noncurrent Assets 17,000
Cash 17,000

b Cash 6,500
Contributed Capital 6,500

c Property, Plant, and Equipment 24,900


Cash 14,000
Long-term Debt 10,900

d Cash 13,000
Other Noncurrent Assets 13,000

e No Journal Entry Required

Explanation:

No further explanation details are available for this problem.

aw ard:

3. 1.66 out of
1.66 points
You did NOT receive full credit for this question in previous attempt.

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4/29/13 McGraw-Hill Connect | Student Performance
3. Summarize the journal entry effects from part 2 using T-accounts. (Enter your answers in thousands.)

Cash Accounts Receivable


Beg. Bal. 1,234,000 Beg. Bal. 323,700
(b) 6,500 17,000 (a)
(d) 13,000 14,000 (c)

End. Bal. 1,222,500 End. Bal. 323,700

Inventories Other Current Assets


Beg. Bal. 578,300 Beg. Bal. 771,600

End. Bal. 578,300 End. Bal. 771,600

Property, Plant, and Equipment Other Noncurrent Assets


Beg. Bal. 2,500,500 Beg. Bal. 1,269,000
(c) 24,900 (a) 17,000 13,000 (d)

End. Bal. 2,525,400 End. Bal. 1,273,000

Accounts Payable Short-term Bank Loans


Beg. Bal. 349,800 Beg. Bal. 1,531,500

End. Bal. 349,800 End. Bal. 1,531,500

Long-term Debt Other Noncurrent Liabilities


Beg. Bal. 577,400 Beg. Bal. 424,100
10,900 (c)

End. Bal. 588,300 End. Bal. 424,100

Contributed Capital Retained Earnings


Beg. Bal. 281,100 Beg. Bal. 3,513,200
6,500 (b)

End. Bal. 287,600 End. Bal. 3,513,200

ebook & resources

Learning Objective: 02-02 Apply transaction analysis Learning Objective: 02-04 Prepare a classified
Problem B
to accounting transactions. balance sheet.

Learning Objective: 02-03 Use journal entries and T- Learning Objective: 02-05 Interpret the balance sheet
Difficulty: Hard accounts to show how transactions affect the using the current ratio and an understanding of
balance sheet. related concepts.

3. Summarize the journal entry effects from part 2 using T-accounts. (Enter your answers in thousands.)

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4/29/13 McGraw-Hill Connect | Student Performance
Cash Accounts Receivable
Beg. Bal. 1,234,000 Beg. Bal. 323,700
(b) 6,500 17,000 (a)
(d) 13,000 14,000 (c)

End. Bal. 1,222,500 End. Bal. 323,700

Inventories Other Current Assets


Beg. Bal. 578,300 Beg. Bal. 771,600

End. Bal. 578,300 End. Bal. 771,600

Property, Plant, and Equipment Other Noncurrent Assets


Beg. Bal. 2,500,500 Beg. Bal. 1,269,000
(c) 24,900 (a) 17,000 13,000 (d)

End. Bal. 2,525,400 End. Bal. 1,273,000

Accounts Payable Short-term Bank Loans


Beg. Bal. 349,800 Beg. Bal. 1,531,500

End. Bal. 349,800 End. Bal. 1,531,500

Long-term Debt Other Noncurrent Liabilities


Beg. Bal. 577,400 Beg. Bal. 424,100
10,900 (c)

End. Bal. 588,300 End. Bal. 424,100

Contributed Capital Retained Earnings


Beg. Bal. 281,100 Beg. Bal. 3,513,200
6,500 (b)

End. Bal. 287,600 End. Bal. 3,513,200

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Explanation:

No further explanation details are available for this problem.

aw ard:

4. 1.66 out of
1.66 points
correct in your previous attempt

4. With respect to event (e), which of the following is correct?

It does not involve exchange of cash, goods, or services.


It does involve exchange of cash, goods, or services.

The negotiations to purchase a coffee farm were not included in the transactions. Because event (e)
involves only negotiations, it does not constitute an exchange of cash, goods, or services and thus is not a
transaction.
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Learning Objective: 02-02 Apply transaction analysis Learning Objective: 02-04 Prepare a classified
Multiple Choice
to accounting transactions. balance sheet.

Learning Objective: 02-03 Use journal entries and T- Learning Objective: 02-05 Interpret the balance sheet
Difficulty: Hard accounts to show how transactions affect the using the current ratio and an understanding of
balance sheet. related concepts.

aw ard:

5. 1.66 out of
1.66 points

Question disqualified by instructor.


Full credit has been awarded to all students.

aw ard:

6. 1.66 out of
1.66 points
correct in your previous attempt

6. As of December 31, 2010, has the financing for the investment in assets made by Starbucks primarily
come from liabilities or stockholders’ equity?

Liabilities
Stockholders' Equity

As of December 31, 2010, financing for Starbucks’ assets has come primarily from stockholders equity.
Stockholders’ equity financed $3,800,800,000 of the company’s total assets and liabilities financed
$2,893,700,000.
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Learning Objective: 02-02 Apply transaction analysis Learning Objective: 02-04 Prepare a classified
Multiple Choice
to accounting transactions. balance sheet.

Learning Objective: 02-03 Use journal entries and T- Learning Objective: 02-05 Interpret the balance sheet
Difficulty: Hard accounts to show how transactions affect the using the current ratio and an understanding of
balance sheet. related concepts.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 8.11 out of 10 points (81.10%)

aw ard:

1. 8.11 out of
10.00 points
Jessica Pothier opened FunFlatables on June 1, 2013. The company rents out moon walks and inflatable
slides for parties and corporate events. The company also has obtained the use of an abandoned ice rink
located in a local shopping mall, where its rental products are displayed and available for casual hourly
rental by mall patrons. The following transactions occurred during the first month of operations.

a. Jessica contributed $34,000 cash to the company in exchange for its stock.
b. Purchased inflatable rides and inflation equipment, paying $20,850 cash.
c. Received $5,750 cash from casual hourly rentals at the mall.
d. Rented rides and equipment to customers for $12,200. Received cash of $2,450 and the rest is due from
customers.
e. Received $4,200 from a large corporate customer as a deposit on a party booking for July 4.
f. Began to prepare for the July 4 party by purchasing various party supplies on account for $1,540.
g. Paid $6,100 in cash for renting the mall space this month.
h. Prepaid next month’s mall space rental charge of $6,100.
i. Received $2,350 from customers on accounts receivable.
j. Paid $4,350 in wages to employees for work done during the month.
k. Paid $2,250 for running a television ad this month.

Required:
2. Record in the T-accounts the effects of each transaction for FunFlatables in June, referencing each
transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T-
accounts.

Cash Accounts Receivable


(a) 34,000 20,850 (b) (f) 1,540 2,350 (i)
(c) 5,750 6,100 (g)
(d) 2,450 6,100 (h)
(i) 2,350 4,350 (j) 810
2,250 (k)

4,900

Supplies Prepaid Rent


(f) 1,540 (h) 6,100

1,540 6,100

Equipment Accounts Payable


(b) 20,850 9,750 (d)

20,850 9,750

Unearned Revenue Contributed Capital


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Unearned Revenue Contributed Capital
4,200 (e) 34,000 (a)

4,200 34,000

Service Revenue Rent Expense


5,750 (c) (g) 6,100
12,200 (d) (h) 6,100

17,950 12,200

Salaries and Wages Expense Advertising Expense


(j) 4,350 (k) 2,250

4,350 2,250
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points deduc ted.

3. Prepare an unadjusted trial balance for the end of June 2013.

FUNFLATABLES
Unadjusted Trial Balance
At June 30, 2013
Account Name Debit Credit
Cash $ 4,900
Accounts Receivable 810
Supplies 1,540
Prepaid Rent 6,100
Equipment 20,850
Accounts Payable 9,750
Unearned Revenue 4,200
Contributed Capital 34,000
Service Revenue 17,950
Rent Expense 12,200
Salaries and Wages Expense 4,350
Advertising Expense 2,250
Total $ 52,190 $ 66,710
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no
points deduc ted.

4. Refer to the revenues and expenses shown on the unadjusted trial balance to calculate preliminary net
income

Preliminary Net Income $ 3,350

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Learning Objective: 03-03 Analyze, record, and


Learning Objective: 03-01 Describe common
summarize the effects of operating transactions
Problem B operating transactions and select appropriate
using the accounting equation, journal entries, and
income statement account titles.
T-accounts.

Learning Objective: 03-02 Explain and apply the Learning Objective: 03-04 Prepare an unadjusted
Difficulty: Medium
revenue and expense recognition principles. trial balance.

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Score: 7.74 out of 10 points (77.40%)

aw ard:

1. 7.74 out of
10.00 points
You did NOT receive full credit for this question in previous attempt.
Learn to Play, Inc., is a one-person company that provides private piano lessons. Its unadjusted trial
balance at December 31, 2013, follows along with information about selected accounts.

Account Names Debit Credit Further Information


Cash $ 23,500 As reported on December 31 bank statement.
Supplies 270 Based on count, only $185 of supplies still exist.
Unearned Revenue $ 1,470 Of this amount, $470 was received for December lessons and
$1,000 for January lessons.
Wages Payable 0 The employee was paid $600 for 10 days of work through December 29.
She has not yet been paid for work on December 30 and 31.
Income Tax Payable 0 The company has paid last year’s income taxes but not this year’s
taxes.
Interest Payable 0 The company has not paid the $105 of interest owed on its note
payable for the current period.
Note Payable 12,600 This one-year note was taken out this year on December 1.
Contributed Capital 1,100 This amount was contributed to the company in prior years.
Retained Earnings 2,700 This is the balance reported at the end of last year.
Service Revenue 24,470 Most customers pay cash for lessons each time they are provided,
but some customers paid in advance.
Wages Expense 17,800 The company’s employee worked through December 31.
Supplies Expense 770 This is the cost of supplies used through November 30.
Interest Expense 0 The company has not paid the $105 of interest owed on its note
payable for the current period.
Income Tax Expense 0 The company has an average tax rate of 25%.

Totals $ 42,340 $ 42,340

Required:
1. Prepare the (preliminary) unadjusted net income statement for the year ended December 31, 2013.

LEARN TO PLAY, INC.


Unadjusted Income Statement (Preliminary)
For the Year Ended December 31, 2013
Revenues:

Service Revenue 24,470


Total Revenues 24,470
Expenses:
Wages Expense 17,800
Supplies Expense 770
Interest Expense 0
Income Tax Expense 0

Total Expenses 18,570


Net Income $ 5,900

2. Name the five pairs of balance sheet and income statement accounts that require adjustment.

Balance Sheet Account Related Income Statement Account


Unearned Revenue Service Revenue
Supplies Supplies Expense
Wages Payable Wages Expense
Interest Payable Interest Expense
Income Tax Payable Income Tax Expense

3. For each account listed in the unadjusted trial balance, indicate the balance to which the account
should be adjusted. (These balances will represent the desired balances to which accounts will later
be adjusted).

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LEARN TO PLAY, INC.


Adjusted Trial Balance
For the Year Ended December 31, 2013
Account Titles Debit Credit
Cash $ 23,500
Supplies 185

Wages Payable 120


Income Tax Payable 1,475
Interest Payable 105
Note Payable 12,600
Contributed Capital 1,100
Retained Earnings 2,700
Service Revenue 24,470
Wages Expense 17,920
Supplies Expense 770
Interest Expense 105
Income Tax Expense 1,475

Totals $ 43,955 $ 42,570


* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points
deduc ted.

4. Prepare the adjusting journal entries that are required at December 31, 2013. (If no entry is required
for a transaction/event, select "No Journal Entry Required" in the first account field.)

Transaction General Journal Debit Credit


a Supplies Expense 770
Supplies 85

b No Journal Entry Required

c Wages Expense 17,920


Wages Payable 120

d Interest Expense 105


Interest Payable 105

e Income Tax Expense 1,475


Income Tax Payable 1,475

5-a. Prepare the final income statement for the company as of the year ended December 31, 2013.

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LEARN TO PLAY, INC.
Income Statement
For the Year Ended December 31, 2013
Revenues:

Service Revenue 24,900


Total Revenues 24,900
Expenses:
Wages Expense 17,920
Supplies Expense 770
Interest Expense 105
Income Tax Expense 1,475

Total Expenses 20,270


Net Income $ 4,630
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is
inc orrec t; no points deduc ted.

5-b. By how much did the adjustments in requirement (4) cause net income to increase or decrease?

Net income decreased by $ 1,270

rev: 02_01_2013_QC_25878

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Learning Objective: 04-01 Explain why adjustments Learning Objective: 04-03 Prepare an adjusted trial
Problem B
are needed. balance.

Learning Objective: 04-02 Prepare adjustments Learning Objective: 04-06 Explain how adjustments
Difficulty: Hard
needed at the end of the period. affect financial results.

Learn to Play, Inc., is a one-person company that provides private piano lessons. Its unadjusted trial
balance at December 31, 2013, follows along with information about selected accounts.

Account Names Debit Credit Further Information


Cash $ 23,500 As reported on December 31 bank statement.
Supplies 270 Based on count, only $185 of supplies still exist.
Unearned Revenue $ 1,470 Of this amount, $470 was received for December lessons and
$1,000 for January lessons.
Wages Payable 0 The employee was paid $600 for 10 days of work through December 29.
She has not yet been paid for work on December 30 and 31.
Income Tax Payable 0 The company has paid last year’s income taxes but not this year’s
taxes.
Interest Payable 0 The company has not paid the $105 of interest owed on its note
payable for the current period.
Note Payable 12,600 This one-year note was taken out this year on December 1.
Contributed Capital 1,100 This amount was contributed to the company in prior years.
Retained Earnings 2,700 This is the balance reported at the end of last year.
Service Revenue 24,470 Most customers pay cash for lessons each time they are provided,
but some customers paid in advance.
Wages Expense 17,800 The company’s employee worked through December 31.
Supplies Expense 770 This is the cost of supplies used through November 30.
Interest Expense 0 The company has not paid the $105 of interest owed on its note
payable for the current period.
Income Tax Expense 0 The company has an average tax rate of 25%.

Totals $ 42,340 $ 42,340

Required:
1. Prepare the (preliminary) unadjusted net income statement for the year ended December 31, 2013.

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4/29/13 McGraw-Hill Connect | Student Performance
LEARN TO PLAY, INC.
Unadjusted Income Statement (Preliminary)
For the Year Ended December 31, 2013
Revenues:
Service Revenue $ 24,470

Total Revenues 24,470


Expenses:
Wages Expense 17,800
Supplies Expense 770
Interest Expense
Income Tax Expense

Total Expenses 18,570


Net Income $ 5,900

2. Name the five pairs of balance sheet and income statement accounts that require adjustment.

Balance Sheet Account Related Income Statement Account


Supplies Supplies Expense
Unearned Revenue Service Revenue
Wages Payable Wages Expense
Income Tax Payable Income Tax Expense
Interest Payable Interest Expense

3. For each account listed in the unadjusted trial balance, indicate the balance to which the account
should be adjusted. (These balances will represent the desired balances to which accounts will later
be adjusted).

LEARN TO PLAY, INC.


Adjusted Trial Balance
For the Year Ended December 31, 2013
Account Titles Debit Credit
Cash $ 23,500
Supplies 185
Unearned Revenue 1,000
Wages Payable 120
Income Tax Payable 1,515
Interest Payable 105
Note Payable 12,600
Contributed Capital 1,100
Retained Earnings 2,700
Service Revenue 24,940
Wages Expense 17,920
Supplies Expense 855
Interest Expense 105
Income Tax Expense 1,515

Totals $ 44,080 $ 44,080

4. Prepare the adjusting journal entries that are required at December 31, 2013. (If no entry is required

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4/29/13 McGraw-Hill Connect | Student Performance
for a transaction/event, select "No Journal Entry Required" in the first account field.)

Transaction General Journal Debit Credit


a Supplies Expense 85
Supplies 85

b Unearned Revenue 470


Service Revenue 470

c Wages Expense 120


Wages Payable 120

d Interest Expense 105


Interest Payable 105

e Income Tax Expense 1,515


Income Tax Payable 1,515

5-a. Prepare the final income statement for the company as of the year ended December 31, 2013.

LEARN TO PLAY, INC.


Income Statement
For the Year Ended December 31, 2013
Revenues:
Service Revenue $ 24,940

Total Revenues 24,940


Expenses:
Wages Expense 17,920
Supplies Expense 855
Interest Expense 105
Income Tax Expense 1,515

Total Expenses 20,395


Net Income $ 4,545

5-b. By how much did the adjustments in requirement (4) cause net income to increase or decrease?

Net income decreased by $ 1,355

rev: 02_01_2013_QC_25878

Explanation:

3.
Account Names Debit Credit Explanation
Cash 23,500 No adjustment required.
Supplies 185 Based on supplies count
Unearned Revenue 1,000 $470 was earned so that amount moved into Service Revenue
leaving $1,000
Wages Payable 120 Owe employee $60/ day for two days of work
Income Tax Payable 1,515 Adjusted income before tax × Tax rate = ($24,940 – 17,920 – 855
– 105) × 0.25% = $1,515
Interest Payable 105 Interest owing on note payable
Note Payable (short) 12,600 No adjustment required.
Contributed Capital 1,100 No adjustment required.

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Retained Earnings 2,700 No adjustment required.
$470 of lessons given during December plus $24,470 already
Lesson Revenue 24,940
earned
Wages Expense 17,920 Two days of work in December that must be recorded at $60/day
plus $17,800 through Dec. 29
Supplies Expense 855 $85 of supplies used in December, which is added to previous
amount of $770
Interest Expense 105 Amount of interest incurred on note payable
Income Tax Expense 1,515 Amount of income tax

44,080 44,080

5-b.
The adjustments in requirement 4 caused the net income to decrease from $5,900 to $4,545, which is a
difference of $1,355.

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Score: 0 out of 10 points (0%)

aw ard:

1. 0 out of
10.00 points
The September 2014 bank statement and cash T-account for Terrick Company follow:

BANK STATEMENT
Date Checks Deposits Other Balance
Sept. 1 $ 88,900
2 $ 750 88,150
4 3,300 84,850
6 2,150 82,700
11 430 15,000 97,270
13 780 96,490
17 11,300 85,190
23 155 33,500 118,535
26 830 117,705
28 9,300 108,405
29 860 17,500 NSF* $630 124,415
30 530 Interest earned 190 124,075
30 Service charge 50 124,025
*NSF check from B. Frank, a customer.

Cash (A)
Sept. 1 Balance 88,900 Checks written during September:
Deposits 750 9,300
Sept. 11 15,000 3,300 860
23 33,500 2,150 530
29 17,500 430 630
30 23,600 780 7,300
11,300 155
830
Sept. 30 Balance 140,185

There were no deposits in transit or outstanding checks at August 31.

Required:
1. Calculate the amount of deposits in transit at the end of September.

Deposits in Transit $ 89,600

2. Calculate the amount of outstanding checks at the end of September.

Outstanding Checks $ 16,160

3. Prepare a bank reconciliation for September.

TERRICK COMPANY
Bank Reconciliation
At September 30, 2014
Bank Statement Company's Books
Ending Balance Per Bank Statement Ending Balance Per Cash Account
Additions: Additions:

Deductions: Deductions:

Up-to-Date Cash Balance Up-to-Date Cash Balance

4. Prepare any journal entries that the company should make as a result of the bank reconciliation. (If no
entry is required for a transaction/event, select "No Journal Entry Required" in the first account
field.)

Transaction General Journal Debit Credit


1

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5. After the reconciliation journal entries are posted, what balance will be reflected in the Cash account in
the ledger?

Balance in Cash Account

6. If the company also has $260 on hand, which is recorded in a different account called Cash on Hand,
what total amount of Cash and Cash Equivalents should be reported on the September 30, 2014,
balance sheet?

Total Amount of Cash and Cash Equivalents

ebook & resources

Learning Objective: 06-04 Perform the key control of


Problem B Difficulty: Medium
reconciling cash to bank statements.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 3.58 out of 10 points (35.80%)

aw ard:

1. 3.58 out of
10.00 points
Mojo Industries tracks the number of units purchased and sold throughout each accounting period but
applies its inventory costing method at the end of each period, as if it uses a periodic inventory system.
Assume its accounting records provided the following information at the end of the accounting period,
January 31, 2012. The inventory’s selling price is $14 per unit.

Transactions Unit Cost Units Total Cost


Inventory, January 1, 2012 $5.00 310 $1,550
Sale, January 10 (200)
Purchase, January 12 5.50 360 1,980
Sale, January 17 (150)
Purchase, January 26 6.50 80 520

Assuming that for Specific identification method (item 1d) the January 10 sale was from the beginning
inventory and the January 17 sale was from the January 12 purchase.

Required:
1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January
31, 2012, under each of the following inventory costing methods: (Round your intermediate
calculations to 2 decimal places and the final answers to the nearest dollar value.)

Amount of Goods Cost of Goods


Ending Inventory
Available for Sale Sold

a. Weighted average cost $ 10,500 $ 2,333 $ 1,628


b. First-in, first-out $ 10,500 $ 2,620 $ 1,770
c. Last-in, first-out $ 10,500 $ 2,045 $ 1,485
d. Specific identification $ 10,500 $ 3,075 $ 1,825

2-a. Of the four methods, which will result in the highest gross profit?

Weighted average cost


First-in, first-out
Last-in, first-out
Specific identification

2-b. Of the four methods, which will result in the lowest income taxes?

Weighted average cost


First-in, first-out
Last-in, first-out
Specific identification

ebook & resources

Learning Objective: 07-03 Compute costs using four


Problem B Difficulty: Medium
inventory costing methods.

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Score: 7.44 out of 10 points (74.40%)

aw ard:

1. 7.44 out of
10.00 points
Elite Events Corporation has provided event planning services for several years. The company uses the
percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end
of each quarter, the company adjusts its records using the aging of accounts receivable method.The
company entered into the following partial list of transactions during the first quarter of 2013.

a. During January, the company provided services for $250,000 on credit.


b. On January 31, the company estimated bad debts using 2 percent of credit sales.
c. On February 4, the company collected $200,000 of accounts receivable.
d. On February 15, the company wrote off a $2,500 account receivable.
e. During February, the company provided services for $200,000 on credit.
f. On February 28, the company estimated bad debts using 2 percent of credit sales.
g. On March 1, the company loaned $20,000 to an employee who signed a 6% note, due in 9 months.
h. On March 15, the company collected $2,500 on the account written off one month earlier.
i. On March 31, the company accrued interest earned on the note.
j. On March 31, the company adjusted for uncollectible accounts, based on the following aging analysis.
Allowance for Doubtful Accounts has an unadjusted credit balance of $8,500.

Number of Days Unpaid


Customer Total 0-30 31-60 61-90 Over 90
Aerosmith $ 2,000 $ 1,000 $ 1,000
Biggie Small 2,000 $ 1,000 $ 1,000
Others (not shown to save space) 97,000 38,500 41,500 8,500 8,500
ZZ Top 6,500 6,500

Total Accounts Receivable $ 107,500 $ 46,000 $ 42,500 $ 9,500 $ 9,500


Estimated uncollectible (%) 5% 15% 25% 40%

Required:
1-a. For items a–j, analyze the amount and direction (+ or −) of effects on specific financial statement
accounts and the overall accounting equation. (Enter all amounts as positive values.)

Assets = Liabilities +
a. Accounts Receivable + 250,000 Service Revenue
b. Allowance for Doubtful Accounts − 5,000 Bad Debt Expense
c. Accounts Receivable − 200,000 Service Revenue
Cash + 200,000
d. Accounts Receivable − 2,500 Bad Debt Expense
Allowance for Doubtful Accounts + 2,500
e. Accounts Receivable + 200,000 Service Revenue
f. Allowance for Doubtful Accounts − 4,000 Bad Debt Expense
g. Note Receivable + 20,000 Notes Payable (short-
Cash − 20,000
h. Accounts Receivable + 2,500

i. Interest Receivable + 1,200 Interest Payable


j. Allowance for Doubtful Accounts − 6,350 Bad Debt Expense

1-b. Prepare the journal entries for the above items. (If no entry is required for a transaction/event,
select "No Journal Entry Required" in the first account field.)

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Transaction General Journal Debit Credit
a Cash 250,000
Accounts Receivable 250,000

b Bad Debt Expense 5,000


Allowance for Doubtful Accounts 5,000

c Cash 200,000
Accounts Receivable 200,000

d Allowance for Doubtful Accounts 2,500


Accounts Receivable 2,500

e Service Revenue 200,000

f Bad Debt Expense 4,000


Allowance for Doubtful Accounts 4,000

g Note Receivable 20,000


Cash 20,000

h(1) Accounts Receivable 2,500


Allowance for Doubtful Accounts 2,500
Cash 2,500
Accounts Receivable 2,500

h(2) Cash 2,500


Accounts Receivable 2,500

i Interest Receivable 1,200


Interest Revenue 1,200

j Bad Debt Expense 6,350


Allowance for Doubtful Accounts 6,350
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points deduc ted.

2. Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in
the current assets section of a classified balance sheet.

3. Service Revenue is one income statement account that is related to Accounts Receivable. Name two
other accounts related to Accounts Receivable and Note Receivable that would be reported on the
income statement and indicate whether they would appear before, or after, Income from Operations.

rev: 02_07_2013_QC_26422, 02_15_2013_QC_26885

ebook & resources

Learning Objective: 08-02 Estimate and report the


Problem B

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effects of uncollectible accounts.

Learning Objective: 08-03 Compute and report


Difficulty: Hard
interest on notes receivable.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 6.37 out of 10 points (63.70%)

aw ard:

1. 6.37 out of
10.00 points
At the beginning of the year, Oakmont Company bought three used machines from American
Manufacturing, Inc. The machines immediately were overhauled, installed, and started operating. Because
the machines were different, each was recorded separately in the accounts.

Machine A Machine B Machine C


Amount paid for asset $21,300 $11,800 $11,500
Installation costs 1,150 1,000 300
Renovation costs prior to use 950 800 800
Repairs after production began 320 2,600 680

By the end of the first year, each machine had been operating 4,000 hours.

Required:
1. Compute the cost of each machine.

Cost of
Machine
A $ 23,400
B $ 13,600
C $ 12,600

2. Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following: (If
no entry is required for a transaction/event, select "No Journal Entry Required" in the first
account field. Do not round intermediate calculations.)

Estimates
Machine Life Residual Value Depreciation Method
A 5 years $ 1,600 Straight-line
B 20,000 hours 1,500 Units-of-production
C 10 years 1,500 Double-declining-balance

Transaction General Journal Debit Credit


1 Depreciation Expense 4,360
Accumulated Depreciation - Machine A 4,360
Depreciation Expense 5,300
Accumulated Depreciation - Machine B 5,300
Depreciation Expense 2,520
Accumulated Depreciation - Machine C 2,520
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points deduc ted.

ebook & resources

Learning Objective: 09-02 Apply the cost principle to


Problem B the acquisition of long-lived assets.

Learning Objective: 09-03 Apply various depreciation


Difficulty: Medium methods as economic benefits are used up over
time.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 8.11 out of 10 points (81.10%)

aw ard:

1. 8.11 out of
10.00 points
On January 1, 2012, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a
stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2014.
On the issue date, the market interest rate was 4.25 percent, so the total proceeds from the bond issue
was $102,070. Methodical uses the simplified effective interest bond amortization method and adjusts for
any rounding errors when recording interest in the final year.

Required:
1. Prepare a bond amortization schedule. (Make sure that the Carrying value equals to face
value of the bond in the last period. Interest expense in the last period should be
calculated as Cash Interest (+)/(–) Reduction in Bonds Payable, Net. Round your answers
to the nearest whole dollar.)

Beginning of Year Changes During the Period End of Year

Reduction in Bonds
Period Bonds Payable, Net Interest Expense Cash Paid Bonds Payable, Net
Payable, Net

01/01/12-12/31/12 102,070 4,338 5,000 662 101,408


01/01/13-12/31/13 101,408 4,310 5,000 690 100,718
01/01/14-12/31/14 100,718 4,282 5,000 718 100,000

2., 3., 4. Complete the required journal entries to record the bond issue, interest payments on December
& 31, 2012 and 2013, interest and face value payment on December 31, 2014, and bond retirement.
5. Assume the bonds are retired on January 1, 2014, at a price of 101. (If no entry is required for
a transaction/event, select "No Journal Entry Required" in the first account field. Round
your answers to the nearest whole dollar.)

Date General Journal Debit Credit


January 01, 2012 Cash 102,070
Bonds Payable, Net 102,070

December 31, 2012 Interest Expense 4,338


Bonds Payable, Net 662
Cash 5,000

December 31, 2013 Interest Expense 4,310


Bonds Payable, Net 690
Cash 5,000

December 31, 2014 Interest Expense 4,282


Bonds Payable, Net 718
Cash 5,000
Bonds Payable, Net 100,000
Cash 100,000

January 01, 2014 Bonds Payable, Net 10,100


Cash 10,100

* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points deduc ted.
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* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no points deduc ted.

rev: 02_07_2013_QC_26422
ebook & resources

Learning Objective: 10-S3 Use simplified effective-


Problem B Difficulty: Hard
interest bond amortization.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 4.59 out of 10 points (45.90%)

aw ard:

1. 4.59 out of
10.00 points
Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2013:

Common Stock (par $1; outstanding, 460,000 shares) $ 460,000


Preferred Stock, 9% (par $10; outstanding, 18,700 shares) 187,000
Retained Earnings 963,000

On December 31, 2013, the board of directors is considering the distribution of a cash dividend to the
common and preferred stockholders. No dividends were declared during 2011 or 2012. Three independent
cases are assumed:

Case A: The preferred stock is noncumulative; the total amount of 2013 dividends would be $21,000.
Case B: The preferred stock is cumulative; the total amount of 2013 dividends would be $21,000.
Dividends were not in arrears prior to 2011.
Case C: Same as Case B, except the amount is $64,000.

Required:
1-a. Compute the amount of 2013 dividends in total payable to each class of stockholders for each case.

Case A Case B Case C


Preferred $ 16,830 $ 50,490 $ 50,490
Common 4,170 12,510 12,510
Total $ 21,000 $ 63,000 $ 63,000
* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed
c alc ulation is inc orrec t; no points deduc ted.

1-b. Compute the amount of 2013 dividends per share payable to each class of stockholders for each
case. (Round your answers to 2 decimal places.)

2. Complete the following schedule, which compares case C to a 100 percent stock dividend on the
outstanding common shares when the stock price was $45. (Select "NE" if there is no effect.)

Schedule of Comparative Differences


Amount of Dollar Increase (Decrease)
Item Case C (Cash Dividend) Stock Dividend
Assets
Liabilities
Stockholders’ Equity

ebook & resources

Learning Objective: 11-04 Describe the


Learning Objective: 11-02 Explain and analyze
Problem B characteristics of preferred stock and analyze
common stock transactions.
transactions affecting preferred stock.

Learning Objective: 11-03 Explain and analyze cash


Difficulty: Hard dividends, stock dividends, and stock split
transactions.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 4.65 out of 10 points (46.50%)

aw ard:

1. 4.65 out of
10.00 points
Audio City, Inc., is developing its annual financial statements at December 31, 2013. The statements are
complete except for the statement of cash flows. The completed comparative balance sheets and income
statement are summarized below:

2013 2012
Balance Sheet at December 31
Cash $ 75,000 $ 78,200
Accounts Receivable 17,400 23,000
Merchandise Inventory 25,600 23,000
Property and Equipment 235,000 156,000
Less: Accumulated Depreciation (69,000) (51,000)

$284,000 $229,200

Accounts Payable $ 8,600 $ 20,200


Wages Payable 2,000 1,000
Note Payable, Long-Term 63,000 81,000
Contributed Capital 112,000 76,000
Retained Earnings 98,400 51,000

$284,000 $229,200

Income Statement for 2013


Sales $218,000
Cost of Goods Sold 96,000
Other Expenses 69,000

Net Income $ 53,000

Additional Data:
a. Bought equipment for cash, $79,000.
b. Paid $18,000 on the long-term note payable.
c. Issued new shares of stock for $36,000 cash.
d. Dividends of $5,600 were paid in cash.
e. Other expenses included depreciation, $18,000; wages, $23,000; taxes, $28,000.
f. Accounts Payable includes only inventory purchases made on credit. Because a liability relating to
taxes does not exist, assume that they were fully paid in cash.

Required:
1. Prepare the statement of cash flows for the year ended December 31, 2013, using the indirect method.
(List cash outflows as negative amounts.)

AUDIO CITY INC.


Statement of Cash Flows
For the Year Ended December 31, 2013
Cash Flows from Operating Activities:
Net Income $ 47,400
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation Expense $ 18,000
Decrease in Accounts Receivable 5,600
Increase in Merchandise Inventory 79,000
Decrease in Accounts Payable 11,600
Cash Payments on Long-Term Note 18,000
Increase in Wages Payable 23,000 155,200
202,600
Cash Flows from Investing Activities:
Cash Payments to Purchase Equipment 79,000

79,000
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79,000
Cash Flows from Financing Activities:
Cash Receipts from Issuing Stock 36,000
Cash Payments on Long-Term Note 18,000
Cash Dividends Paid 5,600

59,600

* Red text indic ates no res pons e was expec ted in a c ell or a formula- bas ed c alc ulation is inc orrec t; no
points deduc ted.

ebook & resources

Learning Objective: 12-02 Report cash flows from Learning Objective: 12-04 Report cash flows from
Problem B
operating activities, using the indirect method. financing activities.

Learning Objective: 12-03 Report cash flows from Learning Objective: 12-05 Interpret cash flows from
Difficulty: Hard
investing activities. operating, investing, and financing activities.

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4/29/13 McGraw-Hill Connect | Student Performance

Score: 5.96 out of 10 points (59.60%)

aw ard:

1. 5.96 out of
10.00 points
The comparative financial statements prepared at December 31, 2013, for Tiger Audio showed the following
summarized data:

Required:
1. Complete the two final columns shown beside each item in Tiger Audio’s comparative financial
statements. (Decreases should be indicated by a minus sign. Round percentage values to 1
decimal place.)

TIGER AUDIO
Horizontal Analysis
Increase (Decrease)
in 2013 (versus 2012)
2013 2012 Amount Percentage
Income Statement
Sales Revenue $ 262,000 $ 170,000 $ 92,000 35.1 %
Cost of Goods Sold 112,150 101,200 10,950 9.8 %
Gross Profit 149,850 68,800 81,050 54.1 %
Operating Expenses 37,600 32,730 4,870 13.0 %
Interest Expense 6,000 5,070 930 15.5 %
Income before Income Tax Expense 106,250 31,000 75,250 70.8 %
Income Tax Expense (30%) 31,875 9,300 22,575 70.8 %
Net Income $ 74,375 $ 21,700 $ 52,675 70.8 %
Balance Sheet
Cash $ 57,075 $ 13,900 $ 43,175 75.6 %
Accounts Receivable, Net 14,200 14,000 200 1.4 %
Inventory 26,200 22,800 3,400 13.0 %
Property and Equipment, Net 167,000 149,000 18,000 10.8 %
Total Assets $ 264,475 $ 199,700 $ 64,775 24.5 %
Accounts Payable $ 25,000 $ 23,500 $ 1,500 6.0 %
Income Tax Payable 5,000 4,400 600 12.0 %
Note Payable, Long-term 87,100 98,800 (11,700) (11.8) %
Total Liabilities 117,100 126,700 (9,600) (7.6) %
Capital Stock (par $1) 25,000 25,000 0 0.0 %
Retained Earnings 122,375 48,000 74,375 60.8 %
Total Liabilities and Stockholders’ Equity $ 264,475 $ 199,700 $ 64,775 24.5 %

2-a. Which account increased by the largest dollar amount?

Account Sales Revenue

2-b. Which account increased by the largest percentage?

Account Cash

ebook & resources

Learning Objective: 13-02 Use horizontal (trend)


Learning Objective: 13-05 Interpret the results of
Problem B analyses to recognize financial changes that unfold
financial analyses.
over time.

Learning Objective: 13-04 Calculate financial ratios


Difficulty: Medium
to assess profitability, liquidity, and solvency.

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