CHAPTER 3

E3-1
DATE ACCOUNT DR CR
2-Apr Cash 30,000
Share capital 30,000
Equipment 14,000
Cash 14,000
3-Apr Supplies 700
Account payable 700
7-Apr Rent expense 600
Cash 600
11-Apr account receivable 1,100
service revenue 1,100
12-Apr Cash 3,200
Unearned revenue 3,200
17-Apr cash 2,300
service revenue 2,300
21-Apr insurance expense 110
Cash 110
30-Apr Salary expenses 1,160
Cash 1,160
30-Apr Supplies 120
supplies expense 120
30-Apr Equipment 5,100
Cash 5,100
P 3.4
P3-6
 E3-11
NO ACCOUNT DR CR
1 Insurance expense 1125
Prepaid insurance 1125

2 Supplies expense 1950

Supplies 1950

3 Depreciation expense (Building) 4800

Accumulation. Building 4800

DE equipment 1600
AC equipment 1600

4 Unearned rent revenue 3,800

Rent revenue 3,800

5 Salaries expense 375

Salaries payable 375

6 Cash 800
Rent revenue 800

7 Mortgage interest expense 2666.66666666667

Mortgage payable 2666.666666667

UHURA RESORT
TRIAL BALANCE
31-Aug-15

Debit Credit
Cash 20400
Prepaid Insurance 3375
Supplies 650
Land 20000
Building 120000
D.E building 4800
A.C building 4800
Equipment 16000
D.E equipment 1600
A.C equipment 1600
Accounts Payable 4500
Unearned Rent Revenue 800
Mortgage Payable 52666.66666667
Share Capital—Ordinary 100000
Dividends 5000
Rent Revenue 90800
Salaries and Wages Expense 45175
Utilities Expense 9200
Maintenance and Repairs Expense 3600
Supplies expense 1950
Salaries payable 375
Insurance expense 1125
Mortgage interest expense 2666.66666666667
255541.666666667 255541.6666667
 Rent revenue
Cash 86200 Unearned rent revenue
19600 3800 4600
800 800 3800
20400 90800 800

Prepaid insurance Insurance expense Salaries expense

4500 1125 44800
1125 1125 375
3375 45175

Supplies Supplies expense Salaries payable

2600 1950 375
1950 1950 375
650

D.E building D.E equipment

4800 1600
4800 1600

AC building A.C equipment

4800 1600
4800 1600
E4-6
PARNEVIK CORP
Income Statement
For the Year Ended December 31, 2010

Sales Revenue
Less: Sales returns and allowances
Sales discounts
Net sale revenue
COGS
Gross profit
Selling expenses
Administrative and general expenses

Other Income and Expense

Loss from impairment of plant assets
Interest revenue
Income from operations
Interest expense
Income before income tax
Income tax ($79,000 X 0.34)
Net Income

Earnings per share ($52,140 ÷ 100,000)

 E4-17

a.
1,280,000
150,000
45,000
1,085,000
621,000
464,000
194,000
97,000
173,000

120,000
86,000
139,000
60,000
79,000
26,860
52,140

52

b.
Sales revenue
COGS
Gross profit
Selling expenses
Administrative expenses

Other income and expense

Gain on sale of plant assets
Rent revenue
Loss from impairment of plant assets
Income before income tax
Income tax
Income from continuing operations
Discontinued operations
Loss on discontinued operations
Less: Applicable income tax reduction
Net Income

Other comprehensive income

Unrealized holding gain

Comprehensive income

Earnings per share

Income from continuing operations
($266,000 ÷ 100,000)

Loss on discontinued operations, net of tax

Net income ($216,500 ÷ 100,000)

Retained earnings, January 1

Add: Net income
 Less: Dividends

Retained earnings, December 31

 VEGA INC.
Income Statement
For the Year Ended December 31, 2010

1,700,000
850,000
850,000
300,000
240,000
310,000

95,000
40,000
60,000 75,000
385,000
119,000
266,000

75,000
25,500 49,500
216,500

15,000

231,500

2.66

0.49
2.17

VEGA INC
Retained Earnings Statement
For the Year Ended December 31, 2010
600,000
216,000
150,000

666,500
P4-2
DICKINSON COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales revenue
COGS
Gross profit
Selling and administrative expenses

Other income and expense

Gain on the sale of investments
Loss due to flood damage
Write-off of goodwill
Income from operations
Interest expense
Income before income tax
Income tax
Income from continuing operations
Discontinued operations
Loss on operations, net of tax
Loss on disposal, net of tax
Net income

Earnings per share:

Income from continuing operations

(($1,886,000 - 80,000)/ 500,000 shares))
Discontinued operations
Loss on operations, net of tax 0.18
Loss on disposal, net of tax
0.88

Net income
($1,356,000 - 80,000)/ 500,000 shares)

DICKINSON COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2010
Retained earnings, January 1
Add: Net income
 Less: Dividends

Preference shares
Ordinary shares
Retained earnings, December 31
 P4-5

25,000,000
16,000,000
9,000,000
4,700,000
4,300,000

110,000
-390,000
-820,000 1,100,000
3,200,000
70,000
3,130,000
1,244,000
1,886,000

90,000
440,000 530,000
1,356,000

3.61

1.06

2.55

980,000
1,356,000
 80,000
250,000
2,006,000
 TWAIN CORPORATION
Income Statement
For the Year Ended June 30, 2010
Sales Revenue
Less: Sales discounts
Sales returns
Net sales revenue
COGS
Gross profit
Selling expenses
Sales commissions
Sales salaries
Travel expense
Freight-out
Entertainment expense
Telephone and internet expense
Building expense
Depr. of sales equipment
Bad debt expense
Miscellaneous selling expenses

Administrative Expenses
Building expense
Real estate and other local taxes

Depreciation of office furniture

and equipment

Office supplies used

Telephone and internet expense

Miscellaneous office expenses

Other income and expense

Dividend revenue
Income from operations

Bond interest expense

Income before income tax

Income tax
Net income
Earnings per share
[($221,525 – $9,000) ÷ 80,000]

TWAIN CORPORATION
Retained Earnings Statement
For the Year Ended June 30, 2010

Retained earnings, July 1, 2009, as reported

Correction of depreciation understatement, net of tax
Retained earnings, July 1, 2009, as adjusted
Add: Net income
Less: Dividends declared on preference shares
Dividends declared on ordinary shares
Retained earnings, June 30, 2010
 1,578,500
31,150
62,300
1,485,050
896,770
588,280

$97,600
56,260
28,930
21,400
14,820
9,030
6,200
4,980
4,850
4,715 $248,785

9,130
7,320

7,250
3,450
2,820

6,000 35,970

$303,525

38,000
$341,525

18,000
$323,525
102,000
 $221,525

2.66

337,000
17,700
319,300
221,525
9,000
37,000
494,825
 CA4-1

1. The heading is inappropriate. The heading should include the name of the company and the period of time for which the inc
2. Dividends and gain on recovery of insurance proceeds should be classified as other income and expense items
3. Cost of goods sold is usually listed as the first expense, followed by selling, administrative, and other expenses
4. Loss on obsolescence of inventories should be classified as an other income and expense item
5. Loss on discontinued operations requires a separate classification after income from continuing operations and before pres
6. Intraperiod income tax allocation is required to relate income tax expense to income from continuing operations, and loss o
7. Interest expense should be shown as a deduction from income from operations in determining income before income tax.
8. Per share data is a required presentation for income from continuing operations, discontinued operations, and net income.
E5-7

E5-12

Assets Non-current assets

Long-term investments
Investments in bonds
Investments in capital shares.
Total long-term investments

Property, plant, and equipment

Land
Buildings
Less: A. depreciation
Equipment
Less: A. Depreciation
Total property, plant, and equipment

Intangible assets
Franchise
Patent
Total intangible assets.

Total non-current assets

Current assets
Inventories

Accounts receivable

Less: Allowance for doubtful accounts

Trading securities
Cash

Total current assets

Total assets
Equity and Liabilities Equity
Share capital—ordinary ($5 par)
Retained earnings
Accumulated other comprehensive income
Less: Treasury shares
Total equity

Non-current liabilities
Bonds payable
Long-term notes payable
Provision for pensions
Total non-current liabilities
Current liabilities
Short-term notes payable
Accounts payable
Dividends payable
Accrued liabilities
Total current liabilities

Total equity and liabilities

Sales
Investment revenue
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Net income

Beginning retained earnings

Net income
Ending retained earnings
 VIVALDI CORPORATION
Statement of Financial Position December 31,
2010

299,000
277,000
576,000

260,000
1,040,000
352,000 688,000
600,000
60,000 540,000
1,488,000

160,000
195,000
355,000

2,419,000

597,000

435,000

25,000 410,000
153,000
197,000

1,357,000
3,776,000
 1,000,000
130,000
80,000
191,000
1,019,000

1,000,000
900,000
80,000
1,980,000

90,000
455,000
136,000
96,000
777,000

3,776,000

7,900,000
63,000
4,800,000
2,000,000
900,000
211,000
52,000

78,000
52,000
130,000
P5-2

Assets Non-current assets

Property, plant, and equipment
Land
Building
Less: Ac depreciation building
Equipment
Less: Ac depreciation equipment

Intangible assets
Goodwil

Current assets
Inventories
Notes receivable
Income taxes receivable
Prepaid expenses
Trading securities
Cash
Total current assets
Total assets

Equity and Liabilities Equity

Share capital

Share capital—
Preference €10 par; 20,000 shares
authorized, 15,000 shares issued

Share capital—
ordinary, €1 par; 400,000 shares
authorized, 200,000 issued
Retained earnings (1,063,897 – 350,000)
Total shareholders’ equity

Non-current liabilities
Unsecured notes payable (long-term)
 Bonds payable

Long-term rental obligations

Total non-current liabilities

Current liabilities
Notes payable to banks
Accounts payable
Payroll taxes payable
Taxes payable
Rent payable
Total current liabilities

Total equity and liabilities

 MONTOYA, INC.
Statement of Financial Position
December 31, 2010

480,000
1,640,000
270,200 1,369,800
1,470,000
292,000 1,178,000 3,027,800

125,000

239,800
445,700
97,630
87,920
121,000
360,000
1,352,050
4,504,850

150,000

200,000 350,000
713,897
1,063,897

1,600,000
285,000

480,000
2,365,000

265,000
490,000
177,591
98,362
45,000
1,075,953
3,440,953
4,504,850
P5-5

Assets Non-current assets

Long-term investments
Investments in share capital (at fair value)
Bond sinking fund
Land held for speculation
Land held for future use

Property, plant, and equipment

Land
Building
Less: Ac depreciation building
Equipment
Less: Ac depreciation equipment
Total property, plant, and equipment

Intangible assets
Franchise
Goodwill

Current assets
Inventories, at lower of cost
(determined using FIFO) or NRV
Accounts receivable
Less: Allowance for doubtful accounts

Trading securities (at fair value)

Cash
Total current asset
Total assets

Equity and Liabilities Equity

Share capital
 Preference shares, $5 par value;
200,000 shares authorized, 90,000 issued and
outstanding

Ordinary shares, $1 par value;

400,000 shares authorized, 100,000 issued and
outstanding
Share premium—ordinary (100,000 X [$10 – $1)
Retained earnings
Total shareholders’ equity

Non-current liabilities
Notes payable
7% bonds payable, due 2018
Total non-current liabilities

Current liabilities
Notes payable
Accounts payable
Taxes payable
Unearned revenue
Total current liabilities
Total equity and liabilities
 SARGENT CORPORATION
Statement of Financial Position
December 31, 2010

270,000
250,000
40,000
270,000 830,000

500,000
1,040,000
360,000
450,000
180,000
1,450,000

165,000
100,000

180,000
170,000
10,000

80,000

150,000
570,000
3,115,000
 450,000

100,000
900,000
320,000
1,770,000

120,000
960,000
1,080,000

80,000
140,000
40,000
5,000
265,000
3,115,000
CA5-3

1. Minority interests should be shown under equity as an addition to total shareholders’ equity
2. Trading securities should be reported at fair value, not cost.

3. Bad Debt Reserve is generally viewed an improper terminology; Allowance for Doubtful Accounts is considered more appro
The amount of estimated uncollectibles should be disclosed.
4. Currents assets should be listed last and long-term investments should be reported first followed by “Tangible assets.”
5. Heading “Tangible assets” should be changed to “Property, Plant and Equipment” also label for corresponding €630,000 sho
6. Land should not be depreciated.
7. Buildings and equipment and their related accumulated depreciation balances should be separately disclosed
8. The valuation basis for shares should be disclosed (fair value or equity) and the description should be Available for Sale Secu
9. Treasury shares are not an asset and should be shown in the equity section as a deduction.
10. This land held for future factory site should be reported in the long-term investments section (not with other assets.)
11. Sinking fund should be reported in the long-term investments section.
d be changed to “net property, plant, and equipment.”

ties or Investment in X Company