Maintenance and repairs expense 24000 depreciation

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Maintenance and Repairs Expense 24,000 Depreciation Expense 19,000 Insurance Expense 3,500 -31- Income Summary 31,640 Retained Earnings 31,640 3-68
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PROBLEM 3-10 (a), (b), (c) Cash Accounts Receivable Allow. for Doubtful Accts. Bal. 18,500 Bal. 32,000 Bal. 700 Adj. 1,400 2,100 Inventory Equipment Accum. Depr.—Equipment Bal. 80,000 Bal. 84,000 Bal. 35,000 Adj. 12,000 47,000 Prepaid Insurance Notes Payable Interest Expense Bal. 5,100 Adj. 2,550 Bal. 28,000 Adj. 3,360 Cls. 3,360 2,550 Common Stock Sales Revenue Insurance Expense Bal. 80,600 Cls. 600,000 Bal. 600,000 Adj. 2,550 Cls. 2,550 Salaries and Wages Expense (Sales) Advertising Expense Salaries and Wages Expense (Administrative) Bal. 50,000 Cls. 52,400 Bal. 6,700 Adj. 700 Adj. 65,000 Cls. 65,000 Adj. 2,400 Cls. 6,000 52,400 52,400 6,700 6,700 Bad Debt Expense Supplies Expense Prepaid Advertising Adj. 1,400 Cls. 1,400 Bal. 5,000 Adj. 1,500 Adj. 700 Cls. 3,500 5,000 5,000 Interest Payable Depr. Exp. Income Summary Adj. 3,360 Adj. 12,000 Cls. 12,000 Exp. 554,210 Sales 600,000 Inc. 45,790 600,000 600,000 Supplies Salaries and Wages Payable Adj. 1,500 Adj. 2,400 Retained Earnings Cost of Goods Sold Bal. 10,000 Bal. 408,000 Cls. 408,000 Inc. 45,790 Bal. 55,790 3-69
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PROBLEM 3-10 (Continued) (b) -1- Bad Debt Expense 1,400 Allowance for Doubtful Accounts 1,400 -2- Depreciation Expense ($84,000 ÷ 7) 12,000 Accumulated Depreciation—Equipment 12,000 -3- Insurance Expense 2,550 Prepaid Insurance 2,550 -4- Interest Expense 3,360 Interest Payable 3,360 -5- Salaries and Wages Expense (Sales) 2,400 Salaries and Wages Payable 2,400 -6- Prepaid Advertising 700 Advertising Expense 700 -7- Supplies 1,500 Supplies Expense 1,500 3-70
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PROBLEM 3-10 (Continued) (c) Dec. 31 Sales Revenue ...................................................... 600,000 Income Summary ......................................... 600,000 Dec. 31 Income Summary ................................................. 554,210 Cost of Goods Sold ...................................... 408,000 Advertising Expense .................................... 6,000 Salaries and Wages Expense (Admin.) ...... 65,000 Salaries and Wages Expense (Sales) ......... 52,400 Supplies Expense ......................................... 3,500 Insurance Expense ....................................... 2,550 Bad Debt Expense ........................................ 1,400 Depreciation Expense .................................. 12,000 Interest Expense ........................................... 3,360 Dec. 31 Income Summary ................................................. 45,790 Retained Earnings ........................................ 45,790 3-71
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*PROBLEM 3-11 (a) ARKANSAS SALES AND SERVICE Income Statement For the Month Ended January 31, 2014 (1) Cash Basis (2) Accrual Basis Revenues $ 75,000 $98,400* Expenses Cost of computers & printers: Purchased and paid 82,500** Cost of goods sold 59,500*** Salaries and wages 9,600 12,600 Rent 6,000 2,000 Other operating expenses 8,400 10,400 Total expenses 106,500 84,500 Net income (loss) $(31,500 ) $13,900 *($2,550 X 30) + ($3,600 X 4) + ($500 X 15) **($1,500 X 40) + ($2,500 X 6) + ($300 X 25) ***($1,500 X 30) + ($2,500 X 4) + ($300 X 15) 3-72
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*PROBLEM 3-11 (Continued) (b) ARKANSAS SALES AND SERVICE Balance Sheet As of January 31, 2014 (1) Cash Basis (2) Accrual Basis Assets Cash .................................................. $58,500 a $ 58,500 a Accounts receivable ....................... 23,400 Inventory .......................................... 23,000 b Prepaid rent ..................................... 4,000 Total assets ................................ $58,500 $108,900 Liabilities and owners’ Equity Salaries and wages payable ........... $ 3,000 Accounts payable ............................ 2,000 Owner’s capital ................................ $58,500 c 103,900 d Total liabilities and owner’s equity ....................................... $58,500 $108,900 a Original investment $ 90,000 Cash sales 75,000 Cash purchases (82,500) Rent paid (6,000) Salaries paid (9,600) Other operating expenses (8,400 ) Cash balance Jan. 31 $ 58,500 b (10 @ $1,500) + (2 @ $2,500) + (10 @ $300). c Initial investment minus net loss: $90,000 – $31,500. d Initial investment plus net income: $90,000 + $13,900. 3-73
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*PROBLEM 3-11 (Continued) (c) 1. The $23,400 in receivables from customers is an asset and a future cash flow resulting from sales that is ignored. The cash basis understates the amount of revenues and inflow of assets in January from the sale of computers and printers by $23,400.
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Christopher Reinemann
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