Question

The accounts receivable balance on the balance sheet should be ‘net of allowance for doubtful accounts’. Resulting in a net balance of $100,000. Total assists and total liabilities plus equity balances should equal $810,000.

Problem 1 (Textbook Reference: Pl-4A)-Financial Accounting Review Problem The Homer Company uses the perpetual inventory procedure. The 2013 balance sheet of the Homer Company is as follows Homer Company Balance Sheet December 31, 2013 Assets Current Assets: Cash Accounts receivable, net Inventory Prepaid Expenses S 60,000 $130,000 $210,000 S 20,000 $420,000 Total current assets Long-Term Assets: Land S 50,000 S 500,000 Buildings and equipment Less: Accumulated depreciation s(150,000) 350.000 $820,000 Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Income taxes payable Accrued expeneses payable s 70,000 S 50,000 S 30,000 $150,000 Total current liabilites $200,000 $350,000 Bonds payable, 9% due 2040 Total liabilities Stockholders' Equity $300,000 Capital Stock S30 par value, 10,000 shares outstanding Retained earnings S170,000 $470,000 Total stockholders' equity $820,000 Total liabilities and stockholders' equity

Answer 1

Journal:

Ref	Account		Debit	Credit
a	Inventory		480000
	Accounts payable			480000
b	Accounts receivable		980000
	Sales revenue			980000
c	Cost of goods sold		500000
	Inventory			500000
d	Cash		1000000
	Accounts receivable			1000000
e	Accounts payable		500000
	Cash			500000
f	Prepaid expenses		16000
	Cash			16000
g	Miscellaneous expenses		22000
	Prepaid expenses			22000
h	Interest expense		18000
	Cash			18000
i	Salaries and wages expense		300000
	Accrued expenses			300000
j	Accrued expenses		310000
	Cash			310000
k	Income taxes payable		50000
	Cash			50000
l	Depreciation expense		50000
	Accummulated depreciation			50000
m	bad debt expense		10000
	allowance for bad debts			10000
n	equipment		70000
	cash			70000
o	retained earnings		10000
	cash			10000
p	income tax expense		32000
	Income taxes payable			32000

T accounts:

Cash
ref	debit	ref	credit
d	10,00,000
		e	5,00,000
		f	16,000
		h	18,000
		j	3,10,000
		k	50,000
		n	70,000
Accounts payable
ref	debit	ref	credit
		a	4,80,000
e	5,00,000
Accounts receivable b
ref	debit	ref	credit
b	9,80,000
		d	10,00,000
Accrued expenses
ref	debit	ref	credit
		i	3,00,000
j	3,10,000
Accummulated depreciation
ref	debit	ref	credit
		l	50,000
allowance for bad debts
ref	debit	ref	credit
		m	10,000
bad debt expense
ref	debit	ref	credit
m	10,000
Cost of goods sold
ref	debit	ref	credit
c	5,00,000
Depreciation expense l
ref	debit	ref	credit
l	50,000
equipment
ref	debit	ref	credit
n	70,000
income tax expense
ref	debit	ref	credit
p	32,000
Income taxes payable
ref	debit	ref	credit
k	50,000
		p	32,000
Interest expense
ref	debit	ref	credit
h	18,000
Inventory
ref	debit	ref	credit
a	4,80,000
		c	5,00,000
Miscellaneous expenses
ref	debit	ref	credit
g	22,000
Prepaid expenses
ref	debit	ref	credit
f	16,000
		g	22,000
Sales revenue
ref	debit	ref	credit
		b	9,80,000
Salaries and wages expense
ref	debit	ref	credit
i	3,00,000
retained earnings
ref	debit	ref	credit
o	10,000

Statement of changes in equity
Particulars		Retained earnings
Opening balance		1,70,000.00
Add net income		48,000.00
Less dividends paid		-10,000.00
Closing balance		2,08,000.00

Income statement
Sales revenue		980000
Cost of goods sold		500000
Gross margin		480000
Miscellaneous expenses		22000
Interest expense		18000
Salaries and wages expense		300000
Depreciation expense		50000
bad debt expense		10000
Income before taxes		80000
Less income taxes at 40%		32000
net income		48000

Balance sheet
Liabilities and stockholders equity	Amount	Assets		Amount
Liabilities
Current liabilities
Accounts payable	50,000.00	Current assets
Income taxes payable	32,000.00	Cash		86,000.00
Accrued expenses	20,000.00	Accounts receivable		1,00,000.00
Total current liabilities	1,02,000.00	Inventory		1,90,000.00
		Prepaid expenses		14,000.00
Bonds payable	2,00,000.00
Total liabilities	3,02,000.00
Stockholders equity		Total current assets		3,90,000.00
Common stock	3,00,000.00
retained earnings	2,08,000.00	Property plant and equipment
Total stockholders equity	5,08,000.00
		Land	50,000.00
		equipment	5,70,000.00
		Accummulated depreciation	-2,00,000
		Total		4,20,000.00
Total liabilities and stockholders equity	8,10,000.00
		Total assets		8,10,000.00