Chapter Four

Challenge Exercise 1 Expands on: E4-1 LO: 1 The trial balance columns of the worksheet for Lenny Company at une !"# $"14# are as follows% LE&&' CO()*&' +orksheet ,or the (onth Ended une !"# $"14 Trial -alance *ccount Titles .r% Cr% % Cash /$#$"" *ccounts 0ecei1able $#2"" 3upplies $#"4" *ccounts )ayable /1#!"" 5nearned 3er1ice 0e1enue !"" &otes )ayable $#""" Common 3tock !#$"" 3er1ice 0e1enue $#1"" 3alaries and +a6es Expense 1#$"" (iscellaneous Expense 44" % /7#2"" /7#2"" Other data: 1% * physical count re1eals /44" of supplies on hand% $% The unearned re1enue was collected on une 1 and will be earned o1er the 4 months startin6 une 1 !% The 8-month note payable was si6ned une 1 and bears an annual interest rate of 1$9% 4% Lenny has reco6ni:ed /8"" of re1enue on account ;which has not yet been recorded<% =nstructions: Enter the trial balance on a worksheet and complete the worksheet%

Challenge Exercise 2 Expands on: E4-> LO: $# !

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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)syche Company had the followin6 ad?usted trial balance% )3'C@E CO()*&' *d?usted Trial -alance ,or the (onth Ended une !"# $"14 *d?usted Trial -alance .ebits Credits /4#""" 4#$"" >"" /1#2"" $"" 4#4"" 7"" !4" 4#4"" 1#4"" !"" $#4"" >4" /1!#44" /1!#44"

*ccount Titles Cash *ccounts 0ecei1able 3upplies *ccounts )ayable 5nearned 3er1ice 0e1enue Common 3tock 0etained Earnin6s .i1idends 3er1ice 0e1enue 3alaries and +a6es Expense (iscellaneous Expense 3upplies Expense 3alaries and +a6es )ayable

=nstructions: ;a< )repare closin6 entries at une !"# $"14% ;b< )repare a post-closin6 trial balance% ;c< )repare the stockholdersA eBuity section of the une !"# $"14 balance sheet%

Challenge Exercise 3 Expands on: E4-2 3O: 4# 8 The ad?usted trial balance for &a1a?o Company is presented below% &*C* O CO()*&' *d?usted Trial -alance uly !1# $"14
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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&o% *ccount Titles 1"1 Cash 11$ *ccounts 0ecei1able 14> EBuipment 18> *ccumulated .epreciation $"1 *ccounts )ayable $"7 5nearned 0ent 0e1enue !11 Common 3tock !$" 0etained Earnin6s !!$ .i1idends 4"" 3er1ice 0e1enue 4$2 0ent 0e1enue >11 .epreciation Expense >$" 3alaries and +a6es Expense >!$ 5tilities Expense

.ebits / 18#""" 2#"""

Credits

$4#""" / 7#""" 4#4"" $#""" $$#""" $>#4"" 1>#""" 84#""" 11#""" 4#""" 4>#""" 1"#""" /1!2#"""

% /1!2#"""

&a1a?o made an error durin6 year when they debited 5tilities Expense for /$#""" instead of EBuipment for a cash purchase of eBuipment% =n addition# &a1a?o failed to accrue /4#""" of 3er1ice 0e1enue% =nstructions: ;a< )repare an income statement and a retained earnin6s statement for the year% ;b< )repare a classified balance sheet at uly !1%

Challenge Exercise 4 Expands on: E4-1$ LO: 4 *ndy 0ichter Company disco1ered the followin6 errors made in anuary $"14% 1% * payment of 3alaries and +a6es Expense of /1#""" was debited to EBuipment and credited to Cash# both for /1#"""% *ndy 0ichter recorded /$"" of depreciation on this DeBuipmentE% $% * collection of /$#""" from a client on account was debited to Cash /$"" and credited to 3er1ice 0e1enue /$""%

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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!% The purchase of eBuipment on account for /2>" was debited to 3upplies />2" and credited to *ccounts )ayable />2"% 4% The purchase of =n1entory for /1#$"" cash was debited to )repaid =nsurance and credited to Cash% *t yearend# /4"" of the Dprepaid insuranceE was recorded as insurance expense% =nstructions: ;a< Correct the errors by re1ersin6 the incorrect entry and preparin6 the correct entry% ;b< Correct the errors without re1ersin6 the incorrect entry%

Challenge Exercise 5 Expands on: E4-14 LO: 8 The followin6 are the ma?or balance sheet classifications% Current assets ;C*< Current liabilities ;CL< Lon6-term in1estments ;LT=< Lon6-term liabilities ;LTL< )roperty# plant# and eBuipment ;))E< 3tockholdersA eBuity ;3E< =ntan6ible assets ;=*<
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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=nstructions: Classify each of the followin6 accounts taken from .on CompanyAs balance sheet% FFFFFF *ccounts payable FFFFFF *ccumulated depreciation FFFFFF *ccounts recei1able FFFFFF -uildin6s FFFFFF Cash FFFFFF Land FFFFFF Common stock FFFFFF Lon6-term debt FFFFFF )atents FFFFFF 3upplies FFFFFF 3alaries and wa6es payable FFFFFF EBuipment FFFFFF =n1entory FFFFFF )repaid insurance FFFFFF =n1estments ;to be sold in 8 months< FFFFFF &otes recei1able ;due in 2 months< FFFFFFLand impro1ements FFFFFF,urniture FFFFFFTaxes payable FFFFFFCopyri6hts FFFFFF=nterest payable FFFFFFTrademarks FFFFFF(ort6a6e payable FFFFFF0etained earnin6s

Challenge Exercise 6 Expands on: E4-18 LO: 8 The followin6 items were taken from the financial statements of 'usuf Company% ;*ll dollars are in thousands%< Lon6-term debt )repaid expenses EBuipment Lon6-term in1estments 1"#""" 3hort-term in1estments &otes payable ;due in $"14< / 24" 2"" 11#!"" *ccumulated depreciation *ccounts payable &otes payable ;due after $"14< 484 Common stock / 4#8"" 1#444 1#"$4

!#42" 0etained earnin6s 4>4 *ccounts recei1able

$#7"" 1#>!4 'age ()+

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

Cash $#847 =n1entory )atents 8"" $"14 net income was /1#""" and di1idends were />""% =nstructions: )repare a classified balance sheet in 6ood form as of .ecember !1# $"14%

1#448

Challenge Exercise 7 Expands on: E4-17 LO: > ConeGone Company pays salaries of /$"#""" e1ery (onday for the precedin6 4-day week ;(onday throu6h ,riday<% *ssume .ecember !1 falls on a +ednesday# so ConeGoneAs employes ha1e worked ! days without bein6 paid% =n addition# ConeGone has reco6ni:eded /!#4"" of re1enue on account which has not yet been recorded% =nstructions: ;a< *ssume the company does not use re1ersin6 entries% )repare the .ecember !1 ad?ustin6 entry for salaries and the entry on (onday# anuary 4# when ConeGone pays the payroll% ;b< *ssume the company does use re1ersin6 entries% )repare the .ecember !1 ad?ustin6 entry for salaries# the anuary 1
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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re1ersin6 entry# and the entry on (onday# anuary 4# when ConeGone pays the payroll% ;c< *ssume the company does not use re1ersin6 entries% )repare the .ecember !1 ad?ustin6 entry for ser1ice re1enue# and the entry on Tuesday# anuary 8# when ConeGone recei1es the cash% ;d< *ssume the company does use re1ersin6 entries% )repare the .ecember !1 ad?ustin6 entry for ser1ice re1enue# the anuary 1 re1ersin6 entry# and the entry on Tuesday# anuary 8# when ConeGone recei1es the cash%

Copyright 2012 John Wiley & Sons, Inc. #For Instr ctor $se %nly&

Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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