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Chapter 4 B Solutions

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Chapter 4 B SolutionsChap

    PROBLEM SET B

Problem 4-1B (15 minutes)

1. A 6. E 11. Z 16. F

    2. E 7. Z 12. A 17. D

    3. E 8. A 13. B 18. E

    4. G 9. C 14. A 19. C

    5. A 10. Z 15. C 20. C

Problem 4-2B (90 minutes)

    INSTRUCTOR NOTE: Ledger accounts (as prepared per Part 1) are shown after Part 7 as

    they would appear after all entries are posted.

    Part 2

    Transactions for July

    July 1 Cash ............................................................... 101 34,000

     Buildings ....................................................... 173 175,000

     C. Park, Capital...................................... 301 209,000

     Owner invested in the business.

     2 Rent Expense ................................................ 640 1,500

     Cash ....................................................... 101 1,500

     Paid one month’s rent.

     5 Office Supplies ............................................. 124 1,300

     Cash ....................................................... 101 1,300

     Acquired office supplies.

     10 Prepaid Insurance ........................................ 128 3,600

     Cash ....................................................... 101 3,600

     Paid 12 months’ premium in advance.

     14 Salaries Expense .......................................... 622 1,280

    ?McGraw-Hill Companies, 2009

    1 Solutions Manual, Chapter 4

     Cash ....................................................... 101 1,280

     Paid two weeks’ salary.

     24 Cash ............................................................... 101 11,500

     Storage Fees Earned ............................ 401 11,500

     Collected fees from customers.

     28 Salaries Expense .......................................... 622 1,320

     Cash ....................................................... 101 1,320

     Paid two weeks’ salary.

     29 Repairs Expense .......................................... 684 250

     Cash ....................................................... 101 250

     Repaired the roof.

     30 Telephone Expense ...................................... 688 850

     Cash ....................................................... 101 850

     Paid the telephone bill.

     31 C. Park, Withdrawals .................................... 302 2,400

     Cash ....................................................... 101 2,400

     Owner withdrew cash for personal use.

Part 3

    SAFE STORAGE CO.

    Unadjusted Trial Balance

    July 31, 2009

    No. Account Title Debit Credit 101 Cash ..................................................................... $ 33,000 106 Accounts receivable .......................................... 0 124 Office supplies .................................................... 1,300 128 Prepaid insurance .............................................. 3,600 173 Buildings ............................................................. 175,000 174 Accum. depreciationBuildings........................ $ 0

    209 Salaries payable ................................................. 0 301 C. Park, Capital ................................................... 209,000 302 C. Park, Withdrawals .......................................... 2,400 401 Storage fees earned ........................................... 11,500 606 Depreciation expenseBuildings ...................... 0

    622 Salaries expense ................................................ 2,600

    ?McGraw-Hill Companies, 2009

    2 Solutions Manual, Chapter 4

    637 Insurance expense ............................................. 0 640 Rent expense ...................................................... 1,500 650 Office supplies expense .................................... 0 684 Repairs expense ................................................. 250 688 Telephone expense ............................................ 850

     Totals ................................................................... $220,500 $220,500

    Part 4

    Adjusting entries

    July 31 Insurance Expense ...........................................637 200

     Prepaid Insurance ....................................128 200

     To record expired insurance (2/3 x

    $3,600/12 per month).

     31 Office Supplies Expense ..................................650 500

     Office Supplies .........................................124 500

     To record the cost of consumed

     supplies ($1,300 - $800).

     31 Depreciation ExpenseBuildings ...................606 1,750

     Accum. DepreciationBuildings ...........174 1,750

     To record depreciation.

     31 Salaries Expense ...............................................622 570

     Salaries Payable ......................................209 570

     To record accrued salaries.

     31 Accounts Receivable ........................................106 2,350

     Storage Fees Earned ...............................401 2,350

     To record accrued storage fees.

    ?McGraw-Hill Companies, 2009

    3 Solutions Manual, Chapter 4

    Part 5

    SAFE STORAGE CO.

    Income Statement

    For Month Ended July 31, 2009

    Storage fees earned ................................... $13,850 Expenses

     Depreciation expenseBuildings ............ $1,750

     Salaries expense ...................................... 3,170

     Insurance expense ................................... 200

     Rent expense ............................................ 1,500

     Office supplies expense .......................... 500

     Repairs expense ....................................... 250

     Telephone expense .................................. 850

     Total expenses ......................................... 8,220

    Net income .................................................. $ 5,630

    ?McGraw-Hill Companies, 2009

    4 Solutions Manual, Chapter 4

    Problem 4-2B (Continued)

    SAFE STORAGE CO.

    Statement of Owner’s Equity

    For Month Ended July 31, 2009

    C. Park, Capital, July 1, 2009 ..................... $ 0 Add: Owner’s investment ........................$209,000

     Net income ....................................... 5,630

     214,630

    Less: Withdrawals ..................................... (2,400)

    C. Park, Capital, July 31, 2009 ................... $212,230

    SAFE STORAGE CO.

    Balance Sheet

    July 31, 2009

     Assets

    Cash ............................................................. $ 33,000 Accounts receivable .................................. 2,350 Office supplies ............................................ 800 Prepaid insurance ...................................... 3,400 Buildings ..................................................... $175,000 Accumulated depreciation--Buildings...... (1,750) 173,250

    Total assets ................................................. $212,800

     Liabilities

    Salaries payable ......................................... $ 570

     Equity

    C. Park, Capital ........................................... 212,230

    Total liabilities and equity ......................... $212,800

    ?McGraw-Hill Companies, 2009

    5 Solutions Manual, Chapter 4

Problem 4-2B (Continued)

    Part 6

    Closing entries

    July 31 Storage Fees Earned ................................. 401 13,850

     Income Summary .................................. 901 13,850

     To close the revenue account.

     31 Income Summary ....................................... 901 8,220

     Depreciation ExpBuildings .............. 606 1,750

     Salaries Expense .................................. 622 3,170

     Insurance Expense... ............................ 637 200

     Rent Expense ........................................ 640 1,500

     Office Supplies Expense ...................... 650 500

     Repairs Expense ................................... 684 250

     Telephone Expense .............................. 688 850

     To close the expense accounts.

     31 Income Summary ....................................... 901 5,630

     C. Park, Capital...................................... 301 5,630

     To close the Income Summary.

     31 C. Park, Capital .......................................... 301 2,400

     C. Park, Withdrawals ............................ 302 2,400

     To close the withdrawals account.

    Part 7

    SAFE STORAGE CO.

    Post-Closing Trial Balance

    July 31, 2009

     Debit Credit

    Cash ............................................................. $ 33,000

    Accounts receivable .................................. 2,350

    Office supplies ............................................ 800

    Prepaid insurance ...................................... 3,400

    Buildings ..................................................... 175,000

    Accumulated depreciationBuildings ...... $ 1,750

    Salaries payable ......................................... 570

    L. Plume, Capital ........................................ 212,230

    Totals ........................................................... $214,550 $214,550

    ?McGraw-Hill Companies, 2009

    6 Solutions Manual, Chapter 4

Problem 4-2B (Continued)

    Ledger as of July 31

     Cash Acct. No. 101

     Date Explanation PR Debit Credit Balance July 1 34,000 34,000

     2 1,500 32,500

     5 1,300 31,200

     10 3,600 27,600

     14 1,280 26,320

     24 11,500 37,820

     28 1,320 36,500

     29 250 36,250

     30 850 35,400

     31 2,400 33,000

     Accounts Receivable Acct. No. 106

     Date Explanation PR Debit Credit Balance July 31 Adjusting 2,350 2,350

     Office Supplies Acct. No. 124

     Date Explanation PR Debit Credit Balance July 5 1,300 1,300

     31 Adjusting 500 800

     Prepaid Insurance Acct. No. 128

     Date Explanation PR Debit Credit Balance July 10 3,600 3,600

     31 Adjusting 200 3,400

     Buildings Acct. No. 173

     Date Explanation PR Debit Credit Balance July 1 175,000 175,000

     Accumulated DepreciationBuildings Acct. No. 174

     Date Explanation PR Debit Credit Balance July 31 Adjusting 1,750 1,750

     Salaries Payable Acct. No. 209

     Date Explanation PR Debit Credit Balance July 31 Adjusting 570 570

    ?McGraw-Hill Companies, 2009

    7 Solutions Manual, Chapter 4

Problem 4-2B (Continued)

     C. Park, Capital Acct. No. 301

     Date Explanation PR Debit Credit Balance July 1 209,000 209,000

    July 31 Closing 5,630 214,630

     31 Closing 2,400 212,230

     C. Park, Withdrawals Acct. No. 302

     Date Explanation PR Debit Credit Balance July 31 2,400 2,400

     31 Closing 2,400 0

     Storage Fees Earned Acct.No. 401

     Date Explanation PR Debit Credit Balance July 24 11,500 11,500

     31 Adjusting 2,350 13,850

     31 Closing 13,850 0

     Depreciation ExpenseBuildings Acct. No. 606

     Date Explanation PR Debit Credit Balance July 31 Adjusting 1,750 1,750

     31 Closing 1,750 0

     Salaries Expense Acct. No. 622

     Date Explanation PR Debit Credit Balance July 14 1,280 1,280

     28 1,320 2,600

     31 Adjusting 570 3,170

     31 Closing 3,170 0

     Insurance Expense Acct. No. 637

     Date Explanation PR Debit Credit Balance July 31 Adjusting 200 200

     31 Closing 200 0

     Rent Expense Acct. No. 640

     Date Explanation PR Debit Credit Balance July 2 1,500 1,500

     31 Closing 1,500 0

    ?McGraw-Hill Companies, 2009 8 Solutions Manual, Chapter 4

Problem 4-2B (Concluded)

     Office Supplies Expense Acct. No. 650

     Date Explanation PR Debit Credit Balance July 31 Adjusting 500 500

     31 Closing 500 0

     Repairs Expense Acct. No. 684

     Date Explanation PR Debit Credit Balance July 29 250 250

     31 Closing 250 0

     Telephone Expense Acct. No. 688

     Date Explanation PR Debit Credit Balance July 30 850 850

     31 Closing 850 0

     Income Summary Acct. No. 901

     Date Explanation PR Debit Credit Balance July 31 Closing 13,850 13,850

     31 Closing 8,220 5,630

     31 Closing 5,630 0

    ?McGraw-Hill Companies, 2009

    9 Solutions Manual, Chapter 4

    Problem 4-3B (90 minutes)

    Part 1

    GOLDSMITH COMPANY

    Income Statement

    For Year Ended December 31, 2009

    Repair fees earned ..................................... $91,500 Expenses

     Depreciation expenseEquipment ........ $ 8,500

     Wages expense ........................................ 41,500

     Insurance expense ................................... 1,000

     Rent expense ............................................ 11,400

     Store supplies expense ........................... 4,400

     Utilities expense ....................................... 3,000

     Total expenses ......................................... 69,800

    Net income .................................................. $21,700

    GOLDSMITH COMPANY

    Statement of Owner’s Equity

    For Year Ended December 31, 2009

    N. Goldsmith, Capital, December 31, 2008 ... $33,400 Add: Net income ............................................ 21,700

     55,100

    Less: Withdrawals .......................................... (16,500)

    N. Goldsmith, Capital, December 31, 2009 ... $38,600

    ?McGraw-Hill Companies, 2009

    10 Solutions Manual, Chapter 4

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