II. Moulton (Year 12)
Debits
Credits
Increase
Decrease
Equity
Decrease
Increase
Revenue
Decrease
Increase
Expense
Increase
Decrease
Asset
Liabilities
Journal
Assets
=
Liabilities
+
1. Cash (Up)
Common Stock /
Ordinary Shares (Up)
$ 800,000
$ 800,000
Cash
Equity
800,000
Ordinary Shares
2. Land (Up)
$ 50,000
Building (Up)
$ 450,000
Cash (Down)
$ 500,000
800,000
Revenues
Expenses
Land
Building
50,000
450,000
Cash
3. Inventories (Up)
$ 280,000
500,000
Accounts Payable (Up)
$ 280,000
Inventories
280,000
Accounts Payable
4. Cash (Down)
$ 245,000
Inventories (Down)
$ 5,000
Accounts Payable
Cash
Inventories
280,000
Accounts Payable (Down)
$ 250,000
250,000
245,000
5,000
5. Prepaid Insurance (Up)
$ 12,000
Cash (Down)
$ 12,000
Prepaid Insurance
Cash
12,000
12,000
6. Cash (Up)
$ 300,000
Loans Payable (Up)
$ 300,000
(Noncurrent Liabilities)
Cash
300,000
Loans Payable
7. Equipment (Up)
$ 80,000
300,00
Notes Payable (Up)
$ 80,000
(Current Liaibilites)
Equipment
Notes Payable
80,000
80,000
III. Moulton (Year 13)
Assets
1. Inventories (Up)
$ 1,100,000
=
Liabilities
+
Equity
Accounts Payable (Up)
$ 1,100,000
Inventories
Accounts Payable
1,100,000
1,100,000
Revenues
Expenses
2. Accounts Receivable (Up)
$ 2,000,000
Accounts Receivable
Positive
Effect of Sales
Sales (Up)
$ 2,000,000
2,000,000 (Selling Price)
Sales
2,000,000
Sale transaction
Assets
=
Liabilities
3. Inventories (Down)
$ 1,200,000
+
Equity
Negative Effect of
COGS
Cost of Goods Sold
Inventories
Revenues
Expenses
COGS (Up)
$ 1,200,000
Expense
1,200,000 (cost)
1,2000,000
Gross Profit = (Sales – cost of goods sold) = (2,000,000 – 1,200,000) = 800,000
4. A/R (Down)
1,400,000
Cash (Up)
1,400,000
Cash
1,400,000
A/R
5. Cash (down)
950,000
A/P
Cash
1,400,000
A/P (down)
950,000
950,000 (payment of an accounts payable) Total Assets = down
950,000
Total Liabilities = down
6. Cash (down)
625,000
Negative Effect
of Equity
SAE
Selling & Admin Expenses (Up)
625,000
625,000
Cash
7. Cash (down)
80,000
625,000
N/P (down)
80,000
N/P
80,000
Cash
80,000
Total Assets = down
Total Liabilities = down
Interest = (Principal X Rate X Time) = (80,000 X 6% X 6/12) =2,400
Cash (down)
2,400
Interest Expense
Cash
Negative Effect
of interest expense
2,400
2,400
8. Int = 300,000 X 8% X 12/12
Asset
Liability
Interest Payable (Up)
24,000
Interest Expense
Interest Payable
Interest Expense (Up)
2,400
Equity
Negative Effect of Interest
Expense
24,000
24,000
Revenue
Expense
Interest Expense (Up)
24,000
9.
Insurance Expense (Up)
Prepaid Insurance (Down)
12,000
12,000
Insurance Expense
Prepaid Insurance
12,000
12,000
10. Depreciate = cost – esv / eul
= 450,000 – 0 / 25 = 18,000
Accumulated Depreciation (Up)
Depreciation Expense (Up)
18,000
18,000
Depreciation Expense (Building)
18,000
Accumulated Depreciation
Building
450,000
Accumulated Depreciation.
(18,000)
Book Value
18,000
432,000
Depreciate equipment = 80,000-0/5 = 16,000
Depreciation Expense (Equipment)
Accumulated Depreciation
Equipment
Accumulated Depreciation
80,000
(16,000)
16,000
16,000
Book Value
11. Sales
COGS
SAE
Interest Expense
Depreciation
Insurance expense
Taxable Income
40%.
64,000
2,000,000
102,600
41,040
Income Tax expense
Income Tax Payable
41,040
41,040