signer eat pos poi 9.180 cpetog apes, tno cmon scold? fos pt pec, 160 ity iio ROE, ROC. ist cpraing income 160 Ar impctensacon,p.149 spring wot, iGo sale rao, p 163 Reboetefre es p. 147 potax a, 147 fevered naan, Ereetom operons, roa p. 12 Te A Fuk, 158 singlet eae zoe, sigh 9.158 fate of etry, 162 Ps) pep inome ‘port frm p58 scared eens p M2 sateen, 9.19 ‘Phim nara rae ROA), wag copia p. 153 net eteagin ro, p. 12 pie ‘osking spin. 156 Assignment Material. =— . Questions: 42. Give te examples of explisitrampctions. 4-2'4 “Companies should always strive to 6-2 Give two examples of implicit transactions. eee working capita.” Do you agree? 6. Give tom aynoryms for unearned rane 4-42 Explain the difference between a single &-4 Disinguish between the averul Of WARES Sep anda mltple-sep income seme nd th payment of wages. ee 448 Woy does intrest expense appen blow 8 Giveasynonym fer income taxexpense- operating Insame on n muliplestep income 44 Faplain wy income tax expense ie usally sateen? the final deduction on both single-step and mu 4-44 The term “cows and expenses” 8 tome: ple-ep income statements times found intend of just “expenses” onthe 2.7 “The accrual of previously worecorded income statement. Would expenses be an ade- revenues isthe mitvr tage ofthe aceral oF gusts decripion? Why? previously unrecorded expences” Expltin bY 4.25 name four popular ratios for measuring (ing 60 Resrenion, profitability, and indicate how to compute each avn ope tng canes we ate Ta et ‘on Aer Bet 8 campeon we See es eae Serpemstmnatcmatann Uae exis So car a ee ek seme ong-term liabilities? menue Oe oe oem (40 mre che a en a at Critical Thinking Questions 447 Accounting Errors “Yu bave discovered an evr ia wich the tenant hs “ncrtecty” corded as rent expense a $3,000 payment made on Destmber | fret forthe oats of December and Janos. Asa young wir Sou ace oot ste wheter tis must be coreted, You tik tsa selRoorecting ex, Wh ae the [Ssues you should consider? 4-18 What Constitutes Revenue? You have jut sarod a progr of sling it saificts at your soe. fo the ist oath, yo sok $5,000 worth and customers redeemed $1,250 ofthese cerifiates for merchandise, Your average ose profit percentage is 40 percent What sould you repoct at gift eticate revenue, and ow tuck goss zp rele othe gift cetistes wil pea in Se acome semen” 429 Operating versus Nonoperating Expenses ‘You haverecerly Begun ene job aan oteral ator (sarge retail clothing cn. Te company prepares 2 multiple step income statement You discover that a materia amount of salaries expense {het eremeuunly clssifod nex nonopersting expene.Oac of your coworkers argu ta the earhap 4: cl Aeon 4 orl Seems eed not be cored because the net income number is ot fected by the miacasifcaton You i= ‘gree. Defend your pation, 4-20 Accounting for Supplies ‘Reompany began busines on fly | and purchased 1,000 in supplies including paper, pen, paper pe and soon. On December 31, a financial statements were being prepared the accounting ‘GK anked how to wea the $1,000 that appeared in he supplies inventory account, What should this lek do? Exercises 4-24. True or False ‘Use Toc Fo indicate whether each ofthe following statements isos oF ile: 1 Retained ssrnings shouldbe aecounted fr as. eure ibiiyHem, 2 Deferred even wl appear on the income sateen 3. Machinery me in th busines shouldbe recorded as a noucatent ase! tem, 4 A company hat eeploys esh-basaebouning exanat have a Prepid Expense account onthe Tatance sheet 5, om single balance shee, you can find stocker’ equity fora period of tie but nt fora specific ey 6, Tis not posible to determine changes th Finacial contton of a busines from ine Bol sce sect 4-22 Tenant and Landlord “The Tracano Comgany, arta haonre sore, pays quately et ont sore at the beponing ofeach see Th om por gure is 18,000, The over of he ling in which the soe i cates i he ‘esiog Corpration. ‘By using te balance sheet suo format, analyz the effects ofthe following onthe tenant and the Iandlords faecal poston: 2. Tracano pay $1000 rato July 2, Adjotment for lly 3. Adjuseat for August 4, Adjstnest or September Also prepa the journal ents for aucano an Ring for Septembe, 4-28 Customer and Alling ‘inabery Car (KC), maker of Scot paper products, decided obo managers’ meting await in ebevary To lake advantage of spa furs KC purchased ane kets n advan from Alas ‘ines at tal cot of $70,000, These were scquiced cn Decamber for cash fy using the helence chest equation format, malyze the impact of te December payment snd the Febery ave on te financial positon of bth KC and Alas. Alo prepare journal entries for ebm for bok compass. 4-24 Accrual of Wages ‘Conse he ellowing calendar “The Golden Role Department Store commorced busines on September 1 [i open every dy xcept Sunday tal parol fr all employees is $8,000 per dy. Payments are ace cach Tuesday fbrthe pressing week’ work though Sauda.esgrmene Metai 199 By wing the balance shee qustion ema analyze the aacalipacon the Golden Re ofthe | follow: { 1. Disbursement for wages en Septem 8, 15,72, nd 29 ie 2. Adjustment or wages on Sepember 30, Also prepare te journal ear. = 4-28 Avetued Vacation Pay Delta Artie ad the following aa crcent isblityon ts balance sheer, December 31,2002: ‘ean salon ora lees benatta 33,385000.600 “he ead ets ind tty or vacation py Under te era ss of son ing rin pw rly seed ogi yt oa ey ed Fa ea, = | Sfp Dla tages hater ers $0 per er 50 wes and ao ge pal 2,0 at | Dieehwacatin cnc eae Acro! scouting rege thal the obligation forthe $2,000 be ecg tinned intend o hen he met bane Tina, neah of he 9 wes, Baka | Seat tecopan wag spent payee oF $2Q0050 = 0, | "T's ery eed ey he xp | Epa teeny bet $00 pment of eats pr 4-26 Placomont of intorost in Income Statement ‘Two companies have he folowing balance shects a of December 31, 20X8: Jupiter Company ‘ es ‘550000 Note payaner 100,000 tree ascets 450.000 Stoesholders' equty 100,000, Tea ¥zp0.000 Tota $200,009 Saturn Company | cam 350000 Stosiholine eauly $200,000 | Other aesets 250.000 In 20X8, each compeny had sales of $600,000 and expenses (exclnding interest) of $52,000. lgnore income kes. Ite had not epaid tha $100,000 Now Payable as of December 31, 20X9, ‘Nether company inured any new interest-bearing deb in 20X9, Did the to companies car the same et income and the same operating income? Explain, showing ‘compatations of operating income and net income 427 Effects of Interest on Lenders end Borrowers Prudential fot Rode Paint Company $1,300,000 on April 1, 20XS, The foan pus interest of, 10 parent is payable on Apel, 20X6. 1. By sing dhe balance chee: equation format, prepare an analysis of he impact ofthe transaction ‘on oth Prantl v and Rod financial poiion on Apa, 20XS. Show the summary adjust ‘ments op Desember 3, 20XS, forthe period Api Ito Deere 31 Prepare an says of the ‘ransaction tht espace on Apri, 20X6, when Rodda repay its objgaion 2, Pepe adjusting jocnl entries fr Prudential and Rods ot December 31, 20% 53, Paepae the enn hat Prudential apd Rodda would make on Apel, 20XS when the lan and sntrest isp. These ens should ine inlet hat astm ervoen Janay 1, 20% ad Apri 1 20X6, Valenzvela Corporation’ financial postin is represented by the ane balances shown onthe fist line ofthe following schedle (Sin thoosands).Assome tht single ranaction ok pace for each ofthe following lines, and doseribe what you think happened, using ove short seoenee ot | | 428 Identification of Transactions i i cach ine |rape &: hol Acuna Statens Teersed Unearned ‘accounts taven: -Equlyr Accounts "Wages Rent © Paidin——Retalnod coon eeSbte “Tory” ‘mont Payable.__Payatle__Revenw _Captal_ Earnings ery 32 eo a 0 0 55 a 2 2 sO 2 ° ° 6 2 = 32 5420 2 ° ° 5 2 2 22 6% 20 a1 ° ° 8 a 2 ar 6 20 a ° 0 8 38 23 a7 520 a ° o ra 28 4 a eB 20 a ° o 35 2s a 2 ss 20 a ° ° 8s 28 re a se 20 a © 5 8 2B 19 2 S820 a 2 5 85 28 w 2 sia Ey 2 5 85 2 9 2 ss 19 2 2 a 55, 2 4.29 Effects on Balance Sheet Equation Following tot of effets of accounting transictions onthe balance sheet equation: Asset Liabilities + Stckboldes' equity 4. crease in ase, decease in bi 1 lnctesee nase, increas nibs, Decent asset, dorease in sockholir' egy A Decrease in ast, dorease in bit. neat eases, acease vast 1 Increase i abies, decease in stokholders equity Decrease in asset, acease in abies, Decrease it abies, oreaseinetockoldes' equity 1 fcrease in ase, erase in stockade en, 4 Nowe of these. Required ‘Vic ofthe relationships previously identifi by eter defines te ascouning effet of ech ft Felwing easacion? 1. The adjusing entry to recognize peso depreciation 2 The adjstng ety to revo acred sais 5. The adjusting ent to rene acre interest rcsvabe 44. The colletion of incest previously accrued 5 The sctlnent of seeoun payable by te isuaes of note payable The eecogiton of an expense that had been pad for previously. A “prepaid” account wat roretad on pameat 2 The caning ofcevense previously collect. Cneared reve was increased when cllestion wus made nade. 4.80 Effects of Enors in Acjustments ‘What il ete elect—undestated (0), vested (0), oF no eet (a) —on the income ofthe ee SEEN Rr pide the fllowing ere were rade In all exes, assume ha amounts cari ‘Re uo 2047 sould affect 20X7 operations Wate routine ceouning eis of 20X7, rene 0x6 ‘2x7 {Revenue has boon coasted a savanoe, but eamed - fanounts have not been reeogized a the end of oN sted, af revenoe was recognized 38 earned in 20%7 2. Rover for serous rnserea has been eames, Dia the ubled amounts have not been recogn zed st te end of 20K,