Solutions to Cash and Accrual Basis Problems
Zamboanga Company - 14-32
1) Sales
Retained Earnings
200,000
Accounts Receivable
Sales
250,000
200,000
250,000
2) Retained Earnings
Sales
40,000
3) Retained Earnings
Purchases
350,000
40,000
350,000
Purchases
Accounts Payable
280,000
280,000
4) Retained Earnings
Expenses
70,000
.
Expenses
Accrued Expenses
70,000
100,000
100,000
5) Mdse. Inventory, Jan. 1
Retained Earnings
150,000
150,000
Mdse. Inventory, Dec. 31
Income Summary
210,000
210,000
6) Asdvances to Suppliers
Purchases
100,000
100,000
7) Depreciation-Equipment
Retained Earnings
Accumulated Depreciation-Equipment
8) Depreciation-Bldg.
Retained Earnings
Accumulated Depreciation-Bldg.
20,000
10,000
30,000
300,000
300,000
600,000
9) Doubtful Account Expense
Allowance for Doubtful Accounts (250,000 x 10%)
25,000
10) Interest Expense (900,000 x 12% x 4/12)
Accrued Interest Payable
36,000
25,000
36,000
Zamboanga Company
Income Statement
Year Ended December 31, 2021
Sales
Cost of Sales:
Merchandise Inventory, January 1
Purchases
Goods Available for Sale
Less: Merchandise Inventiry, December 31
Gross Income
Expenses:
Expenses
4,090,000
150,000
1,830,000
1,980,000
210,000
1,530,000
1,770,000
2,320,000
Depreciation-Equipment
Depreciation-Building
Doubtful Accounts
Interest Expense
Net Income
20,000
300,000
25,000
36,000
1,911,000
409,000
Zamboanga Company
Statement of Financial Position
December 31, 2021
Assets
Current Assets:
Cash
Accounts Receivable (net)
Advances to Supplies
Merchandise Inventory
Total Current Assets
Noncurrent Assets:
Land
Building
Less Accumulated Depreciation
Equipment
Less Accumulated Depreciation
Total Noncurrent Assets
Total Assets
1,500,000
225,000
100,000
210,000
2,035,000
800,000
150,000
600,000
200,000
30,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable
Accrued Expenses
Accrued Interest Payable
Total Current Liasbilities
Noncurrent Liabilities:
Mortgage Payable
Equity:
Share Capital
Retained Earnings
Total Equity
Total Liabilities and Stockholders' Equity
900,000
170,000
1,870,000
3,905,000
280,000
100,000
36,000
416,000
900,000
2,000,000
589,000
2,589,000
3,905,000
Note 1 Retained Earnings:
Adjusted Retained Earnings, January 1
Net Income
Retained Earnings, December 31
180,000
409,000
589,000
Evelyn Company Problem 14-33
1) Inventory-December 31, 2021
Income Summary
230,000
230,000
2) Accounts Receivable
Sales
40,000
3) Doubtful Expense
Allowance for Doubtful Accounts
15,000
4) Depreciation Expense
Accumulated Depreciation-Bildg.
Accumulated Depreciation-Equipment
90,000
5) Purchases
30,000
40,000
15,000
50,000
40,000
Accounts Payable
30,000
6) Retained Earnings
Rent Expense
5,000
.
7) Rent Expenses
Accrued Rent Payable
5,000
10,000
10,000
8) Insurance Expense
Retained Earnings
7,000
9) Prepaid Insurance
Insurance Expense
12,000
7,000
12,000
6) Asdvances to Suppliers
Purchases
100,000
100,000
Evelyn Company
Income Statement
Year Ended December 31, 2021
Sales
Cost of Sales:
Merchandise Inventory, January 1
Purchases
Goods Available for Sale
Less: Merchandise Inventory, December 31
Gross Income
Expenses:
Office Expense
Rent Expense
Insurance Expense
Supplies Expense
Doubtful Accounts
Depreciation Expense
Net Income
2,040,000
150,000
1,230,000
1,380,000
230,000
255,000
245,000
45,000
140,000
15,000
90,000
1,150,000
890,000
790,000
100,000
Evelyn Company
Statement of Financial Position
December 31, 2021
Assets
Current Assets:
Cash
Accounts Receivable (net)
Merchandise Inventory
Prepaid Insurance
Total Current Assets
Noncurrent Assets:
Land
Building
Less Accumulated Depreciation
Equipment
Less Accumulated Depreciation
Total Noncurrent Assets
Total Assets
200,000
275,000
230,000
12,000
717,000
300,000
1,000,000
250,000
400,000
80,000
750,000
320,000
1,370,000
2,087,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable
Accrued Rent Payable
130,000
10,000
Total Current Liasbilities
Equity:
Share Capital
Retained Earnings
Total Equity
Total Liabilities and Stockholders' Equity
Note 1 Retained Earnings:
Retained Earnings per Book
Unrecorded Accrued Rent, December 31, 2020
Unrecorded Prepaid Insurance, December 31, 2020
Corrected Balance
Net Income 2021
Retained Earnings, December 31, 2021
140,000
1,500,000
447,000
1,947,000
2,087,000
345,000
(5,000)
7,000
347,000
100,000
447,000