Exercise 4-6 (Part Level Submission)

Carla Vista Co., a ski tuning and repair shop, opened on November 1, 2016. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2017.

	CashReceipts	CashPayments
Issuance of common shares	$19,900
Payment to purchase repair shop equipment		$9,100
Payments to landlord		1,225
Newspaper advertising payment		330
Utility bill payments		810
Part-time helper’s wage payments		2,700
Income tax payment		10,300
Cash receipts from ski and snowboard repair services	30,700
Subtotals	50,600	24,465
Cash balance		26,135
Totals	$50,600	$50,600

The repair shop equipment was purchased on November 1 and has an estimated useful life of 5 years. Lease payments to the landlord are made at the beginning of each month. The payments to the landlord included a security deposit of $175. The part-time helper is owed $400 at April 30, 2017, for unpaid wages. At April 30, 2017, customers owe Carla Vista Co. $445 for services they have received but have not yet paid for.

Prepare an accrual-basis income statement for the 6 months ended April 30, 2017.


			$

	$






			$

Solution

[Revenues – Expenses = Net income or (loss)]

Service revenue	($30,700 + $445)	=	$31,145
Salaries and wages expense	($2,700 + $400)	=	$3,100
Rent expense	($1,225 – $175 )	=	$1,050
Depreciation expense	[($9,100 ÷ 5) × 6/12]	=	$910

Exercise 4-22 (Part Level Submission)

The adjusted trial balance for Ivanhoe Company is given below:

	BeforeAdjustment		AfterAdjustment
	Dr.	Cr.	Dr.	Cr.
Cash	$11,070		$11,070
Accounts Receivable	8,990		9,540
Supplies	2,640		1,210
Prepaid Insurance	4,490		3,020
Equipment	15,410		15,410
Accumulated Depreciation—Equipment		$3,467		$4,667
Accounts Payable		5,270		5,270
Salaries and Wages Payable		0		1,050
Unearned Rent Revenue		1,810		920
Common Stock		15,950		15,950
Retained Earnings		5,680		5,680
Dividends	2,920		2,920
Service Revenue		34,300		34,850
Rent Revenue		13,520		14,410
Salaries and Wages Expense	16,120		17,170
Supplies Expense	0		1,430
Rent Expense	18,357		18,357
Insurance Expense	0		1,470
Depreciation Expense	0		1,200
	$79,997	$79,997	$82,797	$82,797

Exercise 4-9

	Your answer is partially correct.

The ledger of Sunland Company on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared.

	Debit	Credit
Supplies	$3,450
Prepaid Insurance	4,140
Equipment	25,200
Accumulated Depreciation—Equipment		$7,560
Notes Payable		19,600
Unearned Rent Revenue		10,650
Rent Revenue		55,500
Interest Expense	0
Salaries and Wages Expense	14,100

An analysis of the accounts shows the following.

1.		The equipment depreciates $330 per month.
2.		Half of the unearned rent revenue was earned during the quarter.
3.		Interest of $470 is accrued on the notes payable.
4.		Supplies on hand total $800.
5.		Insurance expires at the rate of $460 per month.