Exercises- session 5 – measuring and reporting financial performance
Exercise 3.2 Atril & McLaney
Fill in the values (a) to (f) in the following table on the assumption that there were no
opening balances involved.
Related to the period Prepaid expense
Expense for At end of period
Paid
period
Rent payable $10,000 (a) $1,000
General expenses (c) 6,000 1,000
Interest payable
3,000 2,500 (d)
on borrowings
Accruals payable
Related to the period
At end of period
Expense for
Paid
period
Rates and
5,000 (b) 1,000
insurance
Salaries (e) 9,000 3,000
3-2A Weygandt
Lazy River Resort opened for business on June 1 with eight air-conditioned units.
Its trial balance before adjustment on August 31 is as follows.
Lazy River Resort, Inc.
Trial Balance
August 31, 2021
Cash $19,600
Supplies 3,300
Prepaid insurance 6,000
Land 25,000
Buildings 125,000
Equipment 26,000
Account payable $6,500
Unearned revenue (Payment in advanced of customers) 7,400
Share Capital—Ordinary 100,000
Dividends 5,000
Service Revenue 80,000
Maitenance and repairs expenses 3,600
Salaries and wages expenses 51,000
Utilities expenses 9,400
Total $273,900 $273,900
Other data:
1. Insurance expires at the rate of €400 per month.
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Exercises- session 5 – measuring and reporting financial performance
2. A count on August 31 shows €900 of supplies on hand.
3. Annual depreciation is €4,500 on buildings and €2,400 on equipment.
4. Unearned rent revenue of €4,100 was recognized for services performed prior to
August 31.
5. Salaries of €400 were unpaid at August 31.
6. Rentals of €3,700 were due from tenants at August 31. (Use Accounts Receivable.)
7. The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Instruction
Prepare an income statement for the 3 months ending August 31 and a statement of
financial position as of August 31.
E3-10 The income statement of Midland Co. for the month of July shows net income of
$1,500 based on Service Revenue $5,500, Salaries and Wages Expense $2,300, Supplies
Expense $1,200, and Utilities Expense $500. In reviewing the statement, you discover the
following.
1. Insurance expired during July of $400 was omitted.
2. Supplies expense includes $300 of supplies that are still on hand at July 31.
3. Depreciation on equipment of $150 was omitted.
4. Accrued but unpaid salaries and wages at July 31 of $280 were not included.
5. Services performed but unrecorded totaled $920.
Instructions
Prepare a correct income statement for July 2021.
P3-1A Joe Carter started his own consulting firm, Carter Company, on June 1, 2021.
The trial balance at June 30 is shown below.
Carter Company
Trial Balance
June 30, 2021
Cash $ 6,200
Accounts Receivable 10,000
Supplies 2,000
Prepaid Insurance 3,000
Equipment 14,400
Accounts Payable $ 4,700
Unearned Service Revenue 4,000
Share Capital—Ordinary 20,000
Service Revenue 7,900
Rent Expense 1000
$36,600 $36,600
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Exercises- session 5 – measuring and reporting financial performance
Other data:
1. Supplies on hand at June 30 are $1,100.
2. A utility bill for $150 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $2,500 of unearned service revenue is recognized for services performed at the end of
the month.
5. Salaries of $1,600 are accrued at June 30.
6. The equipment has a 4-year life with no residual value. It is being depreciated at $300
per month for 48 months.
7. Invoices representing $2,100 of services performed during the month have not been
recorded as of June 30.
Instruction
Make appropriate adjustments and prepare an income statement for June 2021 and a
statement of financial position as at June 30, 2021.
P3-6A Alpha Graphics Company, Inc. was organized on January 1, 2021. At the end of the
first 6 months of operations, the trial balance contained the accounts shown below.
Cash $ 8,400 Notes Payable $ 20,000
Accounts Receivable 14,000 Accounts Payable 9,000
Equipment 45,000 Share Capital— 22,000
Insurance Expense 2,880 Ordinary
Salaries and Wages Expense 30,000 Service Revenue 58,280
Supplies Expense 3,900
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
$109,28 $109,280
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Analysis reveals the following additional data.
1. The $3,900 balance in Supplies Expense represents supplies purchased in January. At
June 30, $680 of supplies are on hand.
2. The note payable was issued on February 1. It is a 9%, 6-month note.
3. The balance in Insurance Expense is the premium on a one-year policy, dated March
1, 2021.
4. Service revenues are credited to revenue when received. At June 30, service
revenue of $1,100 is still not performed for the customer.
5. Depreciation is $2,250 per year.
Instruction
Make appropriate adjustments and prepare an income statement for the 6 months
ended June 30, 2021 and a statement of financial position at June 30, 2021.
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Exercises- session 5 – measuring and reporting financial performance
P5-8A The trial balance of Mr. Rosiak Fashion Center contained the following accounts
at November 30, the end of the company’s fiscal year.
Mr. Rosiak Fashion Center
Trial Balance
November 30, 2021
Cash $ 8,700
Accounts Receivable 27,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation—Equipment $23,000
Notes Payable 51,000
Accounts Payable 48,500
Share Capital—Ordinary 50,000
Retained Earnings 38,000
Dividends 8,000
Sales Revenue 755,200
Sales Returns and Allowances 12,800
Cost of Goods Sold 497,400
Salaries and Wages Expense 136,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals $965,700 $965,700
Adjustment data:
1. Supplies on hand totaled $2,100.
2. Depreciation is $11,500 on the equipment.
3. Interest of $4,000 is accrued on notes payable at November 30.
4. Inventory actually on hand is $44,520.
Instructions
Make appropriate adjustments and prepare an income statement and a classified statement
of financial position as of November 30, 2021. Notes payable of $6,000 are due in January
2022.
