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225ch3solutions - E 328(LO2 1 Relationships of the Expanded...

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E 3–28 (LO2) Relationships of the Expanded Accounting Equation 1. December 31, 2008: Total assets .......................................................................................... $ 125,000 Less total liabilities .............................................................................. 30,000 Total owners’ equity ............................................................................ $ 95,000 Less retained earnings ........................................................................ 75,000 Capital stock ......................................................................................... $ 20,000 2. December 31, 2009: Total assets .......................................................................................... $ .................................................................................................. 150,000 Less total liabilities .............................................................................. .................................................................................................... 35,000 Total owners’ equity ............................................................................ $ .................................................................................................. 115,000 Less capital stock ................................................................................ .................................................................................................... 25,000 Retained earnings ................................................................................ $ .................................................................................................... 90,000 3. Retained earnings, December 31, 2008 ............................................. $ .................................................................................................... 75,000 Plus net income for 2009 .................................................................... X Less dividends for 2009 ...................................................................... .................................................................................................... (2,500 ) Retained earnings, December 31, 2009 ............................................. $ .................................................................................................... 90,000 Net income ............................................................................................ $ ................................................................................................... 17,500 * *($75,000 + X – $2,500 = $90,000; X = $17,500) Revenues for 2009 ............................................................................... $ X Less expenses for 2009 ...................................................................... ................................................................................................ (102,500 ) Net income for 2009 ............................................................................. $ .................................................................................................... 17,500 Revenues .............................................................................................. $ ............................................................................................... 120,000 ** **(X – $102,500 = $17,500; X = $120,000) Alternative solution:
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Increase in Retained Earnings during year = $15,000 ($90,000 – $75,000) $15,000 = Revenues (X) – Expenses ($102,500) – Dividends ($2,500) = Revenues ($120,000) E 3–29 (LO3) Journalizing Transactions 1. Cash ................................................................................. 90,000 Capital Stock .......................................................... 90,000 2. Cash ................................................................................. 45,000 Notes Payable ........................................................ 45,000 3. Salaries Expense ............................................................ 53,000 Rent Expense ................................................................. 4,100 Cash ........................................................................ 57,100
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E 3–29 (LO3) (Concluded) 4. Inventory ......................................................................... 6,300 Accounts Payable .................................................. 6,300 5. Accounts Payable .......................................................... 6,300 Cash ........................................................................ 6,300 6. Accounts Receivable ..................................................... 2,400 Sales Revenue ........................................................ 2,400 Cost of Goods Sold ........................................................ 1,350 Inventory ................................................................. 1,350 7. Cash ................................................................................. 2,400 Accounts Receivable ............................................. 2,400
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E 3–31 (LO3) Journal Entries General Journal Entries: July 2 Cash ........................................................................ 320,000 Capital Stock ..................................................... 320,000 Issued 80,000 shares of capital stock. 4 Equipment ............................................................... 90,000 Cash ................................................................... 67,500 Notes Payable ................................................... 22,500 Purchased equipment with 75% cash and 25% on a note payable. 5 Utilities Expense .................................................... 2,300 Cash ................................................................... 2,300 Paid utilities. 9 Cash ........................................................................ 15,000 Equipment ......................................................... 15,000 Sold equipment at no gain or loss. 13 Inventory ................................................................. 250,000
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Cash ................................................................... 100,000 Accounts Payable ............................................. 150,000 Purchased inventory, 40% cash and 60% on account. 14 Insurance Expense ................................................ 6,000 Cash ................................................................... 6,000 Paid insurance premium.
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E 3–31 (LO3) (Concluded) July 18 Accounts Receivable ............................................. 81,000 Sales Revenue .................................................. 81,000 Sold merchandise on account. Cost of Goods Sold ............................................... 62,000 Inventory ........................................................... 62,000 Cost of merchandise sold. 20 Cash ........................................................................ 7,500 Accounts Receivable ....................................... 7,500 Collected accounts receivable. 24 Cash ........................................................................ 43,000 Sales Revenue .................................................. 43,000 Sold merchandise for cash.
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