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. |
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