Principles of Accounting

Class: BBC5.4
Name: PHAM KHANH HUY

Chapter 3

E3-3 Carillo Industry collected $108,000 from customers in 2017. Of the amount
collected $25,000 was for services performed in 2016. In addition, Carillo performed
services worth $36,000 in 2017, which will not be collected until 2018.
Carillo Industry also paid $72,000 for expenses in 2017. Of the amount paid, $30,000
was for expenses incurred on account in 2016. In addition, Carillo incurred $42,000 of
expenses in 2017, which will not be paid until 2018.

Answers:

A) Compute 2017 cash-basis net income7hy

Cash received from revenue $108.000

Cash paid for expenses $72.000
Cash-basic net income $36.000

B) Compute 2017 accrual-basis net income

Revenues $119.000= 83.000 + 36.000
Expenses $84.000= 42.000 + 42.000
Accrual-basis net income $35.000

E3-7 The ledger of Passehl Rental Agency on March 3 of the year includes the selected
accounts, shown below, before adjusting entries have been prepared:

No. Account tiles and explanation Debit Credit

Depreciation expense ($400*3) 1,200
1
Accumulated Depreciation-equipment 1,200
Unearned revenue (9,900*1/3) 3,300
2
Rent revenue 3,300
Interest expense 500
3
Interest payable 500
Supplies expense ($2,800-700) 2,100
4
Supplies 2,100
Insurance expense ($200*3) 600
5
Prepaid insurance 600
E3-10 The income statement of Montee Co. for the month of July shows net income of
$1,400 based on service revenue $5,500, salaries and wages expense $2,300, supplies
expense $1,200, and utilities expense $600. In reviewing the statement, you discover the
following:

Answers:

Montee Co.
Income statement
For the month of July 2017

Debit Credit
Revenue
Service revenue (5,500+650) $6,150
Expense
Salaries and wages (2,300+300) $2,600
Supplies expenses (1,200-250) 950
Utilities expenses 600
Prepaid insurance 400
Depreciation of equipment 150
Total expenses 4,700
Net income $1,450
 Chapter 4

E4-1 the trial balance columns of the worksheet for Dixon Company at June 30, 2017
are follows.

Answer:

DIXON COMPANY
Worksheet
For the Month Ended June 30, 2017

Trial Adj. Trial Income Balance

Account Titles Balance Adjustments Balance Statement Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 2,320 2,320 2,320
Accounts
Receivable 2,440 2,440 2,440
Supplies 1,880 1,580 300 300
Accounts
Payable 1,120 1,120 1,120
Unearned
Revenue 240 140 100 100
Common
Stock 3,600 3,600 3,600
Service
Revenue 2,400 140 2,540 2,540
Salaries
Expense 560 280 840 840
Miscellaneous
expense 160 160 160
Totals 7,360 7,360
Supplies
Expense 1,580 1,580 1,580
Salaries
Payable 280 280 280
Totals 2,000 2,000 7,640 7,640 2,580 2,540 5,060 5,100
Net Loss 40 40
Totals 2,580 2,580 5,100 5,100
 E4-2 the adjusted trial balance columns of the worksheet for Savaglia Company are as
follows:

Answers:

SAVAGLIA COMPANY
Worksheet
For the Month Ended April 30, 2017

Trial Adjustmen Adj. Trial Income

Account Titles Balance ts Balance Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 10,000 10,000
Accounts Receivable 7,840 7,840
Prepaid rent 2,280 2,280
Equipment 23,050 23,050
Accumulated
Depreciation-equip. 4,900 4,900
Note payable 5,700 5,700
Account payable 4,920 4,920

Owner’s capital 560 27,960 27,960

Owner’s drawings 3,650 3,650

Service revenue 15,590 15,590
Salaries and wages
expense 10,840 10,840
Rent expense 760 760
Depreciation expense 650 650
Interest expense 57 57
Interest payable 57 57
Totals 59,127 59,127 12,307 43,480
3,340
Net Income 3,262 15,590 46,820
Totals 15,590 15,590 46,820 46,820
 Chapter 5

E5-1 Mr. McKenzie has prepared the following list of statements about service
companies and merchandisers:

Answer:

1. Measuring net income for a merchandiser is conceptually the same as for a service
company. True
2. For a merchandiser, sales less operating expenses is called gross profit. False
Correct: sales minus cost of goods sold equals Gross profit
3. For a merchandiser, the primary source of revenues is the sale of inventory. True
4. Sales salaries and wages is an example of an operating expense. True
5. The operating cycle of a merchandiser is the same as that of a service company.
False
Correct: the added asset account for a merchandising company is the inventory
account.
6. In a perpetual inventory system, no detailed inventory records of goods on hand are
maintained. False
Correct: perpetual inventory system keep detailed inventory records throughout the
accounting period.
7. In a periodic inventory system, the cost of goods sold is determined only at the end
of the accounting period. True
8. A periodic inventory system provides better control over inventories than a perpetual
system. False
Correct: a perpetual system provides better control over inventories than a periodic
inventory system.

E5-9 Presented below is information for Kaila Company for the month of March 2017.

(a) Multiple-step income statement:

Kaila Company
Income Statement
For the month of March 2017
 Sales
Sales revenue $380,000
Less: Sales returns and
13,000
allowances
Sales discounts 8,000 $21,000
Net sales $359,000
Cost of goods sold 215,000
Gross profit $144,000
Operating expenses
Rent expense 30,000
Salaries and wages
58,000
expense
Freight-out 7,000
Insurance expense 6,000
Total operating
$101,000
expenses
Income from operations $43,000
Net income $43,000

(b) Compute the gross profit rate:

Answer:
Gross Profit Rate= Gross Profit / Net Sales= 144,000 / 359,000= 40.1%

E5-10 In its income statement for the year ended December 31, 2017, Anhad Company
reported the following condensed data.
Answer:
(a) Multiple-step income statement:
 Anhad Company
Income Statement
For the ended December 31, 2017

Net sales $2,200,000

Cost of goods sold 1,289,000
Gross profit 911,000
Operating expenses 725,000
Income from
186,000
operation
Other revenues and
gains
Interest revenue $28,000
Other expenses and
losses
Interest expense $70,000
Loss on disposal of
17,000 87,000 (59,000)
plant assets
Net income $127,000

(b) Single-step income statement:

Anhad Company
Income Statement
For the ended December 31, 2017

Revenues
Net sales $2,200,000
Interest revenue 28,000
Total revenues $2,228,000

Expenses
Cost of goods sold 1,289,000
Operating expenses 725,000
Interest expense 70,000
Loss on disposal of
17,000
plant assets
Total expenses $2,101,000
Net income $127,000