ACC 300 FINANCIAL ACCOUNTING
Homework #1
Cunningham Hardware’s balance sheet at September 30, 2015 is shown below.
Cunningham Hardware
Balance Sheet
At September 30, 2015
In Dollars
1.
Assets
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Insurance
Total Current Assets
$ 88,400
54,500
136,300
800
$280,000
Land
Total Noncurrent Assets
252,000
$252,000
Total Assets
$532,000
Liabilities and Shareholders’ Equity
Accounts Payable
Note Payable
Salaries Payable
Total Current Liabilities
Total Liabilities
Common Stock
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’
Equity
$ 66,200
10,000
2,500
$ 78,700
$ 78,700
300,000
153,300
$453,300
$532,000
During October, the company had several transactions. Prepare journal entries for the
transactions below and post them to the t-accounts.
a.
b.
Sold merchandise with an original cost of $73,000 on account for a total selling price of
$170,000.
DR Accounts Receivable
CR Sales Revenue
170,000
DR COGS
CR Inventory
73,000
73,000
Purchased merchandise inventory on account from various suppliers for $92,600.
DR Inventory
CR Accounts Payable
c.
170,000
92,600
92,600
Paid rent of $23,500 for the month of October.
DR Rent Expense
CR Cash
23,500
23,500
ACC 300 FINANCIAL ACCOUNTING
d.
Paid salaries of $41,200 to employees during October, including $2,500 owed to
employees for work completed in September.
DR Salaries Payable
DR Salaries Expense
CR Cash
e.
68,300
77,900
77,900
Paid miscellaneous operating expenses of $6,400.
DR Miscellaneous expense
CR Cash
2.
68,300
Paid accounts payable of $77,900.
DR Accounts Payable
CR Cash
g.
41,200
Collected accounts receivable of $68,300.
DR Cash
CR Accounts Receivable
f.
2,500
38,700
6,400
6,400
At October 31, the company made several adjusting entries. Prepare entries for the adjustments
below and post them to the t-accounts, creating new accounts as necessary.
a.
The company paid the entire premium on a 1-year insurance policy on June 1, 2015, with
the insurance used up evenly throughout the life of the policy. This is the only insurance
policy in force on September 30, 2015.
DR Insurance Expense
CR Prepaid Insurance
b.
100
Employees earned salaries of $3,200 during the last two days of October but were not
paid. These are the only unpaid salaries at the end of October.
DR Salaries Expense
CR Salaries Payable
c.
100
3,200
3,200
The note payable is a 90-day, 6 percent note issued on September 30, 2015. The principal
plus all associated interest will be repaid at the due date.
DR INTEREST Expense
CR Interest payable
50
50
ACC 300 FINANCIAL ACCOUNTING
Prepaid Insurance
800
100 (2a)
(EB)
700
Note Payable
10,000
252,000
Land
Accounts Payable
77,900 (1f)
66,200
92,600 (1b)
252,000
80,900 (EB)
Salaries Payable
2,500 (1d)
2,500
3,200 (2b)
10,000
Inventory
136,300
73,000 (1a)
92,600 (1b)
155,900
3,200
(EB)
Cash
88,400
23,500 (1c)
68,300 (1e)
41,200 (1d)
77,900 (1f)
6,400 (1g)
7,700
Sales
170,000 (1a)
170,000
Common Stock
300,000
300,000
Accounts receivable
54,500
68,300 (1e)
170,000 (1a)
156,200
Expense
73,000 (1a)
23,500 (1c)
38,700 (1d)
6,400 (1g)
100 (2a)
3,200 (2b)
50 (2c)
144,950
(C1) 170,000
144,950(C2)
0
0
Interest Payable
50 (2c)
50
Retained Earnings
153,300
170,000 (C1)
(C2) 144,950
178,350
ACC 300 FINANCIAL ACCOUNTING
3.
Prepare the company’s income statement for the year ending October 31, 2015.
Cunningham Hardware
Income Statement
?
Revenues
COGS
Gross Margin
Operating Expenses:
Salaries Expense
Rent Expense
Insurance Expense
Miscellaneous Expenses
Total Operating Expenses
41,900
23,500
100
6,400
71,900
Operating Income
25,100
Interest Expense
Net Income
4.
$170,000
$73,000
$97,000
50
$ 25,050
Prepare the company’s statement of retained earnings for the year ending October 31, 2015.
Cunningham Hardware
?
For the Month Ended October 31, 2015
Balance as of September 30, 2015
$ 153,300
Net Income
25,050
Balance as of October 31, 2015
$ 178,350
ACC 300 FINANCIAL ACCOUNTING
5.
Prepare the company’s balance sheet at October 31, 2015.
Cunningham Hardware
Balance Sheet
?
Assets
Current Assets
Cash
Accounts Receivable
Prepaid Insurance
Inventory
Total Current Assets
$ 7,700
156,200
700
155,900
320,500
Long-Term Assets
Land
252,000
Total Assets
$572,500
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts Payable
Salaries Payable
Interest Payable
Note Payable
Total Current Liabilities
$ 80,900
3,200
50
10,000
94,150
Total Liabilities
Shareholders’ Equity
Common Stock
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
94,150
300,000
178,350
478,350
$572,500
ACC 300 FINANCIAL ACCOUNTING
6.
Based on Cunningham Hardware’s Net Income this month, do you think the company is
successful?
Yes. Because Cunningham Hardware’s net income is positive, the company made a profit this
month, which is a sign of success from a purely objective perspective.
7.
Review the Cash T-account you created. What was the overall change in cash for 2015? What
were the sources of the cash Cunningham Hardware used to pay its bills during October? Does
reviewing the company’s cash flows cause you to change your answer to (6), and if so, why?
Th overall change in cash for 2015 was debit $7,700, which means cash assets increased by $7,700.
The sources of the cash largely came from cash that carried over from the last accounting period
($88,400) and collections on accounts receivable ($68,300). Yes, my answer to (6) does change
because the net income was positive entirely from past accounting period entries, rather than largely
from this period’s operating activities. Also, this company had a substantial amount of operating
expenses, which is concerning, as it isn’t clear if the company can reliably generate enough revenue
to cover all expenses and have enough net income to make further investments into the company.