CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
PE 4–3A
4U Delivery Services
Statement of Owner’s Equity
For the Year Ended December 31, 2009
Meg Ostermiller, capital, January 1, 2009 ..........................
Net loss .................................................................................
Add withdrawals ...................................................................
Decrease in owner’s equity .................................................
Meg Ostermiller, capital, December 31, 2009 ....................
$900,500
$ 24,900
60,000
84,900
$815,600
PE 4–3B
Steuben Advertising Services
Statement of Owner’s Equity
For the Year Ended December 31, 2009
Rod Zoot, capital, January 1, 2009 .....................................
Additional investment during 2009 .....................................
Total .................................................................................
Net income ............................................................................
Less withdrawals .................................................................
Increase in owner’s equity ..................................................
Rod Zoot, capital, December 31, 2009 ................................
$475,000
75,000
$550,000
$110,000
30,000
PE 4–4A
1.
Current liability
5. Owner’s equity
2.
Current asset
6. Long-term liability
3.
Property, plant, and equipment
7. Current asset
4.
Current asset
8. Current liability
PE 4–4B
1.
Property, plant, and equipment
5. Current liability
2.
Owner’s equity
6. Current asset
3.
Long-term liability
7. Current liability
4.
Current asset
8. Current liability
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80,000
$630,000
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PE 4–5A
Nov. 30
30
30
30
Fees Earned ........................................................
Income Summary...........................................
779,000
Income Summary ................................................
Wages Expense .............................................
Rent Expense .................................................
Supplies Expense ..........................................
Miscellaneous Expense ................................
467,600
Income Summary ................................................
Brett Maxim, Capital ......................................
311,400
Brett Maxim, Capital ...........................................
Brett Maxim, Drawing ....................................
50,000
779,000
389,000
60,000
7,200
11,400
311,400
50,000
PE 4–5B
July 31
31
31
31
Fees Earned ........................................................
Income Summary...........................................
515,000
Income Summary ................................................
Wages Expense .............................................
Rent Expense .................................................
Supplies Expense ..........................................
Miscellaneous Expense ................................
571,100
Sherry Kerney, Capital .......................................
Income Summary...........................................
56,100
Sherry Kerney, Capital .......................................
Sherry Kerney, Drawing ................................
20,000
515,000
480,000
75,000
12,100
4,000
56,100
20,000
PE 4–6A
The following two steps are missing: (1) assembling and analyzing adjustment
data and (2) journalizing and posting the closing entries. The adjustment data
should be assembled and analyzed after step (c). The closing entries should be
journalized and posted to the ledger after step (g).
PE 4–6B
The following two steps are missing: (1) posting the transactions to the ledger
and (2) the preparation of the financial statements. Transactions should be posted to the ledger after step (a). The financial statements should be prepared after
step (f).
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EXERCISES
Ex. 4–8
JACKRABBIT SYSTEMS CO.
Statement of Owner’s Equity
For the Year Ended March 31, 2010
Terry Collins, capital, April 1, 2009 ...................................
Net income for year ............................................................
Less withdrawals ...............................................................
Increase in owner’s equity ................................................
Terry Collins, capital, March 31, 2010 ..............................
4
$611,900
$320,000
32,000
288,000
$899,900
Ex. 4–13
1. The date of the statement should be “August 31, 2010” and not “For the Year
Ended August 31, 2010.”
2. Accounts payable should be a current liability.
3. Land should be classified as property, plant, and equipment.
4. “Accumulated depreciation” should be deducted from the related fixed asset.
5. An adding error was made in determining the amount of the total property,
plant, and equipment.
6. Accounts receivable should be a current asset.
7. Net income should be reported on the income statement.
8. Wages payable should be a current liability.
A corrected balance sheet would be as follows:
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Ex. 4–13
Concluded
CABANA SERVICES CO.
Balance Sheet
August 31, 2010
Assets
Liabilities
Current assets:
Cash .............................................
$15,840
Accounts receivable ...................
41,250
Supplies .......................................
4,950
Prepaid insurance .......................
14,400
Total current assets .................
$ 76,440
Property, plant, and equipment:
Land..............................................
$180,000
Building ........................................ $470,100
Less accumulated depreciation . 260,100 210,000
Equipment.................................... $129,000
Less accumulated depreciation .
55,440
Total property, plant, and
equipment .............................
Total assets .....................................
Current liabilities:
Accounts payable .............. $20,370
Wages payable ...................
4,020
Total liabilities .......................
$ 24,390
Owner’s Equity
Hector Delgado, capital ........
515,610
Total liabilities and
owner’s equity ..................
$540,000
73,560
463,560
$540,000
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Ex. 4–27
a.
December 31,
Current assets ..........
Current liabilities .....
Working capital ........
2007
2006
$322,245
95,699
$226,546
$244,952
71,563
$173,389
Current ratio .... 3.37 ($322,245/$95,699)
3.42 ($244,952/$71,563)
b. Under Armour’s working capital increased by $53,157 ($226,546 – $173,389) during 2007. The current ratio decreased slightly, from 3.42 to 3.37, in 2007. However, a current ratio of 3.37 still indicates a strong solvency
position. Thus, short-term creditors should not be concerned about receiving payment from Under Armour.
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