Professional Documents
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A
Event Assets = Liab. + Equity Rev. Exp. = Net Inc. Cash
Flow
1. +50,000 = NA + +50,000 NA NA NA FA
2. +380,000 = +380,000 + NA NA NA NA NA
3a. +550,800 = +40800 + NA +510,000 NA NA OA
3b. -330,000 = NA NA NA +330,000 NA NA
4. NA +10,200 NA NA +10,200 NA NA
5. -32000 = -32,000 NA NA NA NA OA
6. +50,000 = +50,000 NA NA NA NA FA
7. -6,200 = -6200 NA NA NA NA OA
8. -78000 NA NA NA +78000 NA OA
9. -250,000 = -250,000 NA NA NA NA OA
10. NA +667 NA NA +667 NA NA
b.
Ozark Sales
General Journal for 2016
Ozark Sales
T-Accounts for 2016
Assets = Liabilities + Stockholder’s Equity
Interest Expense
10. 667
Bal. 667
C.
Ozark Sales
Income Statement
For the Year Ended December 31, 2016
Ozark Sales
Balance Sheet
As of December 31, 2016
Assets
Cash 284,600
Merchandise Inventory 50,000
Total Assets 334,600
Liabilities
Accounts Payable 130,000
Sales Tax Payable 8,800
Warranties Payable 4,000
Interest Payable 667
Notes Payable 50,000
Total Liabilities 193467
Stockholders’ Equity
Common Stock 50,000
Retained Earnings 91,133
Total Stockholders’ Equity 141,133
Total Liabilities and Stockholders’ Equity $334,600
Ozark Sales
Statement of Cash Flows
For the Year Ended December 31, 2016
D.
Current Liabilities:
Accounts Payable $ 130,000
Sales Tax Payable 8,800
Warranty Payable 4,000
Interest Payable 667
Notes Payable 50,000
Total Current Liabilities $ 193,467
EXERCISE 9-10A
a. Calculate the net pay for both Clay and Philip for March.
Clay - March
Gross Earnings 3,600
Deductions:
Federal Income Tax ($3,600 x15 %) 540
FICA Tax - SS ($3,600 x 6%%) 216
FICA Tax - Medicare ($3,600 x 1.5%) 54
Total Deductions 810
Net Pay 2,790
Philip – March
Gross Earnings 10,800
Deductions:
Federal Income Tax($x 20%) 2,160
FICA Tax - SS ($10,800x 6%) 648
FICA Tax - Medicare ($10,800 x1.5 %) 162
Total Deductions 2,970
Net Pay 7,830
b. Calculate the net pay for both Clay and Philip for December.
Clay - December
Gross Earnings 3,600
Deductions:
Federal Income Tax 540
FICA Tax - SS 216
FICA Tax - Medicare 54
Total Deductions 810
Net Pay 2,790
Philip – December
Gross Earnings 10,800
Deductions:
Federal Income Tax 2,160
FICA Tax - Medicare 162
Total Deductions 2,322
Net Pay 8,478
c. Is the net pay the same in March and December for both parties? Why
or why not?
For Clay wages are same for March and December but for Philip due to no
deduction of FICA Tax – SS as it is up to 110,000 , wages has increased.
d. What amounts will Old Town report on the 2016 W-2s for each
employee?
Amount appearing on W-2 for 2016
Clay
Box 1 Wages, tips, and other compensation 43,200
Box 2 Federal income tax withheld 6,480
Box 3 Social Security wages
Box 4 Social Security tax withheld 2,592
Box 5 Medicare wages and tips
Box 6 Medicare tax withheld 648
EXERCISE 10-4A
a. Using a financial statements model like the one shown here, record the
appropriate amounts for the following two events:
(1) January 1, 2016, issue of the note payable.
(2) December 31, 2016, payment on the note payable.
Effect of Transactions on Financial Statements
Revenue 62,000
Expenses
Operating Expenses 45,000
Interest Expense 12,000 57,000
Total Expenses
Net Income $ 5,000
Provide all journal entries pertaining to Singer’s line of credit for the first
three months of 2016.
2016
Jan. 1 Cash 80,000
Line of Credit Payable 80,000
Jan. 31 Interest Expense 400
Cash 400
Feb. 1 Cash 60,000
Line of Credit Payable 60,000
Feb. 28 Interest Expense 758
Cash 758
March 1 Line of Credit Payable 20,000
Cash 20,000
March 31 Interest Expense 600
Cash 600
EXERCISE 10-6A
a. Prepare the journal entries for these events, and post them to T- accounts for
2016 and 2017.
Doyle Company
General Journal
Doyle Company
Interest Expense
2016
12/31 35,000 12/31 35,000
Bal. -0-
2017
12/31 35,000 12/31 35,000
Bal. -0-
b. Prepare the income statement, balance sheet, and statement of
cash flows for 2016 and 2017.
Doyle Company
Financial Statements 2016 2017
Income Statements for the Year Ended Decebmer 31
Lease Revenue 125,000 125,000
Interest Expense 35,000 35,000
Net Income $ 90,000 $ 90,000
Balance Sheets as of December 31
Assets
Cash 90,000 180,000
Land 500,000 500,000
Total Assets 590,000 590,000
Liabilities
Bonds Payable 500,000 500,000
Stockholders’ Equity
Common Stock 0 0
Retained Earnings 90,000 180,000
Total Stockholders’ Equity
Total Liab. and Stockholders’ Equity $590,000 $680,000
Statements of Cash Flows for the Year Ended December 31
Cash Flows From Operating Activities:
Receipts from Revenue 125,000 125,000
Paid for Interest 35,000 35,000
Net Cash Flow from Operating Act. 90,000 90,000
Cash Flows From Investing Activities:
Paid to PurchaseLand -500,000 0
Cash Flows From Financing Activities:
Proceeds from Bond Issue 500,000 0
Net Change in Cash 90,000 90,000
Plus: Beginning Cash Balance 0 90,000
Ending Cash Balance 90,000 180,000
EXERCISE 10-7A
Prepare all the general journal entries related to those bonds for 2016
and 2017.
Bell Corp.
General Journal
EXERCISE 10-19A
b. What item(s) in the table would appear on the 2019 balance sheet?
Bond liability $80,000
Less: Bond discount 734
Carrying value $79,266
(1)
(2)
(3)
(4)
(5)
b. Assume that after the funds are invested, EBIT amounts to $60,000.
Also assume the company pays $6,000in dividends or $6,000 in
interest depending on which source of financing is used. Based on a
40 percent tax rate, determine the amount of the increase in retained
earnings that would result under each financing option.
Bonds Stock
EBIT 60,000 60,000
Interest expense 6,000 0
Pretax earnings 54,000 60,000
Tax expense (40%) (21,600) (24,000)
Net earnings 32,400 36,000
Dividends 0 6,000
Additional retained earnings $ 32,400 $30,000