Financial Accounting Connect Access Card
Financial Accounting Connect Access Card
5th Edition
ISBN: 9781260159622
Author: J. David Spiceland
Publisher: Mcgraw-Hill
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Chapter 10, Problem 17E

1)

To determine

Record the given transactions.

1)

Expert Solution
Check Mark

Explanation of Solution

Record the given transactions:

DateAccount title and ExplanationPost Ref.

Debit

($)

Credit

($)

January 2, 2021Cash40,000
Common stock (2,000shares×$1)2,000
Additional paid-in-capital (balance)38,000
(To record the issue of common stock)
January 9, 2021Accounts receivable14,300
Service revenue14,300
(To record service revenue on account )
January 10, 2021Supplies4,900
Accounts payable4,900
(To record supplies on account)
January 12, 2021Treasury stock18,000
Cash18,000
(To record purchase of treasury stock )
January 15, 2021Accounts payable16,500
Cash16,500
(To record payment of cash on account )
January 21, 2021Cash49,100
Service revenue49,100
(To record service for cash)
January 22, 2021Cash16,600
Accounts receivable16,600
(To record receipt of cash on account)
January 29, 2021Dividends ([10,000+2,0001,000]×$0.30)3,300
Dividends payable3,300
(To record declaration of dividend)
January 30, 2021Cash12,000
Treasury stock10,800
Additional paid-in capital1,200
(To record resale of treasury stock)
January 31, 2021Salaries expense42,000
Cash42,000
(To record the payment of monthly salaries)

Table (1)

2)

To determine

Record the given adjustment entries.

2)

Expert Solution
Check Mark

Explanation of Solution

Record the given adjustment entries:

DateAccount title and ExplanationPost Ref.

Debit

($)

Credit

($)

January 31, 2021Utilities expenses6,200
Utilities payable6,200
(To record utilities adjustments)
January 31, 2021Supplies expenses7,300
Supplies ($7,500+$4,900$5,100)7,300
(To record supplies adjustments)
January 31, 2021Depreciation expense [$64,000$10,000]÷36 months1,500
Accumulated depreciation1,500
(To record depreciation for January)
January 31, 2021Income tax expense2,000
Income tax payable2,000
(To record the adjustment for income taxes)

Table (2)

3)

To determine

Prepare the adjusted trial balance as of January 31, 2021.

3)

Expert Solution
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Explanation of Solution

Adjusted trial balance: Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Prepare the adjusted trial balance as of January 31, 2021:

GF Fireworks
Adjusted Trial balance
January 31, 2021
Accounts

Debit

($)

Credit ($)
Cash$83,900
Accounts Receivable42,200
Supplies5,100
Equipment64,000
Accumulated Depreciation$10,500
Accounts Payable3,000
Utilities Payable6,200
Dividends Payable3,300
Income Tax Payable2,000
Common Stock12,000
Additional Paid-in Capital119,200
Retained Earnings45,100
Dividends3,300
Treasury Stock7,200
Service Revenue63,400
Salaries Expense42,000
Utilities Expense6,200
Supplies Expense7,300
Depreciation Expense1,500
Income Tax Expense2,000
Totals$264,700$264,700

Table (3)

Working note:

Prepare the T-accounts for ending balances:

Financial Accounting Connect Access Card, Chapter 10, Problem 17E , additional homework tip  1

Financial Accounting Connect Access Card, Chapter 10, Problem 17E , additional homework tip  2

Financial Accounting Connect Access Card, Chapter 10, Problem 17E , additional homework tip  3

Financial Accounting Connect Access Card, Chapter 10, Problem 17E , additional homework tip  4

Financial Accounting Connect Access Card, Chapter 10, Problem 17E , additional homework tip  5

4)

To determine

Prepare an income statement for the period ended January 31, 2021.

4)

Expert Solution
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Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare an income statement for the period ended January 31, 2021:

GF Fireworks
Income statement
For the month ended January 31, 2021
ParticularsAmount ($)Amount ($)
Service revenue$63,400
Salaries expense(42,000)
Utilities expense(6,200)
Supplies expense(7,300)
Depreciation expense(1,500)57,000
Income before taxes6,400
Income tax expense2,000
Net income$ 4,400 

Table (5)

Conclusion

Therefore, net income for the month of January is $4,400.

5)

To determine

Prepare a classified balance sheet as of January 31, 2021.

5)

Expert Solution
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Explanation of Solution

Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets. Liabilities are classified into two sections current and long-term. Stockholders’ equity comprises of common stock and retained earnings. Thus, the classified balance sheet includes all the elements under different sections.

Prepare a classified balance sheet as of January 31, 2021:

GF Fireworks
Classified balance sheet
As on January 31, 2021
AssetsLiabilities and stockholders’ equity
Particulars

Amount

 ($)

ParticularsAmount ($)
Current assets:Liabilities
Cash$ 83,900Accounts payable$3,000
Accounts receivable42,200Utilities payable6,200
Supplies5,100Dividends payable3,300
Total current assets131,200Income tax payable2,000
Total current liabilities14,500
Long term assets:Stockholders’ Equity
Equipment64,000Common stock12,000
Less: Accumulated Depreciation(10,500)Additional paid-in capital119,200
Equipment , net$54,500Retained earnings (1)46,200
Treasury stock(7,200)
Total stockholders’ equity170,200
Total assets$184,700Total liabilities and stockholders’ equity$184,700

Table (6)

Working note:

Compute the ending balance of retained earnings:

Retained earnings = Beginning retained earnings + Net incomeDividends= $45,000+$4,400$3,300=$46,200

6)

To determine

Prepare the closing entries.

6)

Expert Solution
Check Mark

Explanation of Solution

Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Prepare the closing entries:

DateAccount title and ExplanationPost Ref.

Debit

($)

Credit

($)

January 31, 2021Service revenue63,400
Retained earnings63,400
(To record closing entries)
January 31, 2021Retained earnings59,000
Salaries expense42,000
Utilities expense6,200
Supplies expense7,300
Depreciation expense1,500
Income tax expense2,000
(To record the closing entries)
January 31, 2021Retained earnings3,300
Dividends3,300
(To record the closing entries)

Table (7)

7a)

To determine

Calculate the return on equity for the month of January. Compare it with the industry average of 2.5% and state whether the company more or less profitable than other companies in the same industry.

7a)

Expert Solution
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Explanation of Solution

Return on equity ratio: Rate of return on equity ratio is used to determine the relationship between the net income available for the common stockholders’ and the average common equity that is invested in the company.

Return on Equity=NetIncomeAverageTotalStockholder'Equity

Calculate the return on equity in 2021:

Given, the net income is $4,400 and beginning and ending stockholder’ equity are 135,100 and 170,200 respectively.

Return on Equity=NetIncomeAverageTotalStockholder'Equity=$4,400($135,100 + $170,200)÷2=$4,400$152,650=2.9%

Therefore, return on equity in January 2021 is 2.9%.

The industry average is 2.5%.

Conclusion

Therefore the company’s return on equity (2.9%) is more profitable than other companies in the same industry.

7b)

To determine

Identify the common stock outstanding as on January 31, 2021.

7b)

Expert Solution
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Explanation of Solution

Outstanding stock: The total number of shares that are authorized and issued by a public company, and are held by the stockholders or investors are referred to as outstanding stock.

Identify the common stock outstanding as on January 31, 2021:

ParticularsShares
Common shares outstanding at beginning of January10,000
Add: Shares issued during January2,000
Less: Treasury stock(1,000)
Add: Resell of treasury stock­600
Common stock outstanding as on January 31, 202111,600

Table (8)

Conclusion

The common stock outstanding as on January 31, 2021 is 11,600.

7c)

To determine

Calculate earnings per share for the month of January.

7c)

Expert Solution
Check Mark

Explanation of Solution

Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Earnings Per Share=Net IncomeAverage Number of common Shares Outstanding

Calculate the projected earnings per share for 2021 before purchase of stock.

Given, net income is $4,400 and shares outstanding at the beginning and ending 10,000 and 11,600 respectively.

Earnings Per Share=Net IncomeAverage Number of common Shares Outstanding=$4,400(10,000+11,600)÷2=$4,40010,800=$0.41

Therefore, earnings’ per share January in 2021 is $0.41.

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Chapter 10 Solutions

Financial Accounting Connect Access Card

Ch. 10 - Prob. 11SSQCh. 10 - Prob. 12SSQCh. 10 - Prob. 13SSQCh. 10 - Prob. 14SSQCh. 10 - Prob. 15SSQCh. 10 - Prob. 1AECh. 10 - Prob. 2AECh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - LO10–2 9. What is par value? How is it related to...Ch. 10 - Prob. 10RQCh. 10 - Prob. 11RQCh. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Prob. 17RQCh. 10 - Prob. 18RQCh. 10 - Prob. 19RQCh. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Prob. 22RQCh. 10 - Prob. 23RQCh. 10 - Prob. 1BECh. 10 - Prob. 2BECh. 10 - Prob. 3BECh. 10 - Prob. 4BECh. 10 - Prob. 5BECh. 10 - Prob. 6BECh. 10 - Determine the amount of preferred stock dividends...Ch. 10 - Prob. 8BECh. 10 - Record sale of treasury stock (LO10–4) BE10–9...Ch. 10 - Record cash dividends (LO10–5) BE10–10 Divine...Ch. 10 - Prob. 11BECh. 10 - Prob. 12BECh. 10 - Prob. 13BECh. 10 - Prob. 14BECh. 10 - Calculate the return on equity (LO10–8) BE10–15...Ch. 10 - Match terms with their definitions (LO10–1) E10–1...Ch. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Determine the amount of preferred stock dividends...Ch. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Match terms with their definitions (LO10–1) P10–1A...Ch. 10 - Prob. 2PACh. 10 - Indicate effect of stock dividends and stock...Ch. 10 - Prob. 4PACh. 10 - Prob. 5PACh. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 1PBCh. 10 - Prob. 2PBCh. 10 - Prob. 3PBCh. 10 - Prob. 4PBCh. 10 - Prob. 5PBCh. 10 - Prob. 6PBCh. 10 - Prob. 7PBCh. 10 - Prob. 1APCh. 10 - Prob. 2APCh. 10 - Prob. 3APCh. 10 - Prob. 4APCh. 10 - Prob. 5APCh. 10 - Prob. 7APCh. 10 - Prob. 8AP
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