Coached+problem+2-2


 * ANSWERS TO MINI-EXERCISES**

M6 - 2
1.A 2.B 3.D 4.C 5.E


 * M6-3 **
 * 1) Establish responsibility
 * 2) Segregate duties
 * 3) Restrict access
 * 4) Document processes
 * 5) Document processes
 * 6) Independently verify


 * M6-4 **
 * **<span style="font-family: Arial,sans-serif;">Reconciling Item ** || **<span style="font-family: Arial,sans-serif;">Bank Statement ** || **<span style="font-family: Arial,sans-serif;">Company’s Books ** ||
 * //<span style="font-family: Arial,sans-serif;">a. //<span style="font-family: Arial,sans-serif;">Outstanding checks of $12,000 || -  ||   ||
 * //<span style="font-family: Arial,sans-serif;">b. //<span style="font-family: Arial,sans-serif;">Bank service charge of $15 ||  ||  -  ||
 * //<span style="font-family: Arial,sans-serif;">c. //<span style="font-family: Arial,sans-serif;">Deposit in transit of $2,300 || <span style="font-family: Arial,sans-serif;">+ ||   ||
 * //<span style="font-family: Arial,sans-serif;">d. //<span style="font-family: Arial,sans-serif;">Interest earned of $5 ||  || <span style="font-family: Arial,sans-serif;">+  ||

<span style="font-family: Arial,sans-serif;">(b)dr. Other expenses (+E, - <span style="font-family: Arial,sans-serif;">SE) ....................................... 15 <span style="font-family: Arial,sans-serif;">cr. Cash ( - <span style="font-family: Arial,sans-serif;">A)............................................................ 15 //<span style="font-family: Arial,sans-serif;">To record service charge deducted by bank. //
 * <span style="font-family: Arial,sans-serif;">M6-5 **

<span style="font-family: Arial,sans-serif;">(d)dr. Cash (+A).................................................................... 5 <span style="font-family: Arial,sans-serif;">cr. Interest revenue (+R,+SE)............................... 5 //<span style="font-family: Arial,sans-serif;">To record interest received from the bank. //

<span style="font-family: Arial,sans-serif; text-transform: none;">Perpetual inventory systems provide more timely information than periodic systems, allowing companies to keep just the right quantity of products on the shelves for the right amount of time.Another benefit of a perpetual inventory system is that it allows managers to estimate “shrinkage.” As a consequence, Nordstrom will be able to determine, on a timely basis, whether greater security is required and, if so, in which specific departments.
 * <span style="font-family: Arial,sans-serif;">M6-6 **


 * <span style="font-family: Arial,sans-serif; text-transform: none;">M6-7 **
 * <span style="font-family: Arial,sans-serif;">Beginning inventory || <span style="font-family: Arial,sans-serif;">$50,000 ||
 * <span style="font-family: Arial,sans-serif;">Purchases || <span style="font-family: Arial,sans-serif;">+8,000 ||
 * <span style="font-family: Arial,sans-serif;">Goods available for sale || <span style="font-family: Arial,sans-serif;">58,000 ||
 * <span style="font-family: Arial,sans-serif;">Cost of goods sold || <span style="font-family: Arial,sans-serif;">-30,000 ||
 * <span style="font-family: Arial,sans-serif;">Ending balance || <span style="font-family: Arial,sans-serif;">28,000 ||
 * <span style="font-family: Arial,sans-serif;">Inventory count || <span style="font-family: Arial,sans-serif;">-25,000 ||
 * <span style="font-family: Arial,sans-serif;">Shrinkage || <span style="font-family: Arial,sans-serif;">$3,000 ||


 * <span style="font-family: Arial,sans-serif; text-transform: none;">M6-8 **


 * <span style="font-family: Arial,sans-serif; text-transform: none;">Merchandise cost || <span style="font-family: Arial,sans-serif; text-transform: none;">$23,000 ||
 * <span style="font-family: Arial,sans-serif; text-transform: none;">Transportation cost || <span style="font-family: Arial,sans-serif; text-transform: none;">+650 ||
 * <span style="font-family: Arial,sans-serif; text-transform: none;">Returned goods || <span style="font-family: Arial,sans-serif; text-transform: none;">-1,200 ||
 * <span style="font-family: Arial,sans-serif; text-transform: none;">Purchase discount [($23,000 - $1,200) x 2%] || <span style="font-family: Arial,sans-serif; text-transform: none;">-436 ||
 * || <span style="font-family: Arial,sans-serif; text-transform: none;">$22,014 ||

<span style="font-family: Arial,sans-serif;">(a)dr. Inventory (+A) ............................................................ 23,000 <span style="font-family: Arial,sans-serif;">cr. Accounts payable (+L)...................................... 23,000 //<span style="font-family: Arial,sans-serif;">To record inventory purchased on account. //
 * <span style="font-family: Arial,sans-serif;">M6-9 **

<span style="font-family: Arial,sans-serif;">(b)dr. Inventory (+A)............................................................. 650 <span style="font-family: Arial,sans-serif;">cr. Accounts payable (+L)...................................... 650 //<span style="font-family: Arial,sans-serif;">To record transportation costs. //

<span style="font-family: Arial,sans-serif;">(c)dr. Accounts payable (-L) .............................................. 1,200 <span style="font-family: Arial,sans-serif;">cr. Inventory (-A)...................................................... 1,200 //<span style="font-family: Arial,sans-serif;">To record goods returned. //

<span style="font-family: Arial,sans-serif;">(d)dr. Accounts payable (-L)............................................... 21,800 <span style="font-family: Arial,sans-serif;">cr. Cash (-A) ($21,800 x 98%)............................... 21,364 <span style="font-family: Arial,sans-serif;">cr. Inventory (-A) ($21,800 x 2%).......................... 436 //<span style="font-family: Arial,sans-serif;">To record payment of accounts payable. //


 * <span style="font-family: Arial,sans-serif;">M6-10 **

<span style="font-family: Arial,sans-serif;">(a)
 * <span style="font-family: Arial,sans-serif;">Beginning inventory || <span style="font-family: Arial,sans-serif;">$ 13,400 ||
 * <span style="font-family: Arial,sans-serif;">Purchases || <span style="font-family: Arial,sans-serif;">+54,000 ||
 * <span style="font-family: Arial,sans-serif;">Cost of goods sold || <span style="font-family: Arial,sans-serif;">-60,000 ||
 * <span style="font-family: Arial,sans-serif;">Inventory, as per records || <span style="font-family: Arial,sans-serif;">7,400 ||
 * <span style="font-family: Arial,sans-serif;">Inventory, as per count || <span style="font-family: Arial,sans-serif;">7,400 ||
 * <span style="font-family: Arial,sans-serif;">Shrinkage || <span style="font-family: Arial,sans-serif;">$0 ||

è <span style="font-family: Arial,sans-serif;"> No shrinkage to be recorded.

<span style="font-family: Arial,sans-serif;">(b)Sales revenue$75,000 <span style="font-family: Arial,sans-serif;">Cost of goods sold__(60,000)__ <span style="font-family: 'Arial','sans-serif';">Gross profit__$15,000__

<span style="font-family: 'Arial','sans-serif';">(c) <span style="font-family: Arial,sans-serif;"> dr. <span style="font-family: 'Arial','sans-serif';">Inventory <span style="font-family: Arial,sans-serif;">(+A) ............................................................ 54,000 <span style="font-family: Arial,sans-serif;">cr. Accounts payable (+L)...................................... 54,000 //<span style="font-family: Arial,sans-serif;">To record inventory purchased on account. //

<span style="font-family: Arial,sans-serif;">dr. Accounts receivable (+A) ......................................... 75,000 <span style="font-family: Arial,sans-serif;">cr. Sales revenue (+R,+SE).................................. 75,000 //<span style="font-family: Arial,sans-serif;">To record sales on account. //

<span style="font-family: Arial,sans-serif;">dr. Cost of goods sold (+E,-SE)..................................... 60,000 <span style="font-family: Arial,sans-serif;">cr. Inventory (-A)...................................................... 60,000 //<span style="font-family: Arial,sans-serif;">To record cost of goods sold. //


 * <span style="font-family: Arial,sans-serif;">M6-11 **


 * <span style="font-family: Arial,sans-serif;">Sales || <span style="font-family: Arial,sans-serif;">$2,000 ||
 * <span style="font-family: Arial,sans-serif;">Less 2% sales discount || <span style="font-family: Arial,sans-serif;">-40 ||
 * <span style="font-family: Arial,sans-serif;">Net sales || <span style="font-family: Arial,sans-serif;">$1,960 ||
 * <span style="font-family: Arial,sans-serif;">Cost of goods sold || <span style="font-family: Arial,sans-serif;">1,500 ||
 * <span style="font-family: Arial,sans-serif;">Gross profit || <span style="font-family: Arial,sans-serif;">$460 ||


 * <span style="font-family: Arial,sans-serif; text-transform: none;">M6-12 **

<span style="font-family: Arial,sans-serif;">(a)dr. Accounts receivable (+A) ......................................... 2,000 <span style="font-family: Arial,sans-serif;">cr. Sales revenue (+R,+SE).................................. 2,000 //<span style="font-family: Arial,sans-serif;">To record sales on account. //

<span style="font-family: Arial,sans-serif;">dr. Cost of goods sold (+E,-SE)..................................... 1,500 <span style="font-family: Arial,sans-serif;">cr. Inventory (-A)...................................................... 1,500 <span style="font-family: Arial,sans-serif;">//To record cost of goods sold.//

<span style="font-family: Arial,sans-serif;">(b)dr. Cash (+A) ($2,000 x 98%)......................................... 1,960 <span style="font-family: Arial,sans-serif;">dr. Sales discounts (+xR,-SE) ($2,000 x 2%) ............. 40 <span style="font-family: Arial,sans-serif;">cr. Accounts receivable (-A).................................. 2,000 <span style="font-family: Arial,sans-serif;">//To record receipt of payment for sales on account.//


 * <span style="font-family: Arial,sans-serif;">M6-13 **

<span style="font-family: Arial,sans-serif;">(a)dr. Accounts receivable (+A) ......................................... 700 <span style="font-family: Arial,sans-serif;">cr. Sales revenue (+R,+SE).................................. 700 //<span style="font-family: Arial,sans-serif;">To record sales on account. //

<span style="font-family: Arial,sans-serif;">dr. Cost of goods sold (+E,-SE)..................................... 500 <span style="font-family: Arial,sans-serif;">cr. Inventory (-A)...................................................... 500 <span style="font-family: Arial,sans-serif;">//To record cost of goods sold.//

<span style="font-family: Arial,sans-serif;">(b)dr. Cash (+A) ($700 x 98%)............................................ 686 <span style="font-family: Arial,sans-serif;">dr. Sales discounts (+xR,-SE) ($700 x 2%)................. 14 <span style="font-family: Arial,sans-serif;">cr. Accounts receivable (-A).................................. 700 <span style="font-family: Arial,sans-serif;">//To record receipt of payment for sales on account.//


 * <span style="font-family: Arial,sans-serif;">M6-14 **

<span style="font-family: Arial,sans-serif;">Income Statement <span style="font-family: Arial,sans-serif;">For the year ended December 31, 2008 ||   ||
 * <span style="font-family: Arial,sans-serif;">Sellall Department Stores
 * <span style="font-family: Arial,sans-serif;">Net sales || <span style="font-family: Arial,sans-serif;">$37,880 || <span style="font-family: Arial,sans-serif;">(= 42,000 – 2,200 – 1,920)  ||
 * <span style="font-family: Arial,sans-serif;">Cost of goods sold || <span style="font-family: Arial,sans-serif;">22,728 ||   ||
 * <span style="font-family: Arial,sans-serif;">Gross profit || <span style="font-family: Arial,sans-serif;">15,152 ||   ||
 * <span style="font-family: Arial,sans-serif;">Selling, general, and administrative expenses || <span style="font-family: Arial,sans-serif;">5,300 || <span style="font-family: Arial,sans-serif;">(= 2,400 + 300 + 2,600)  ||
 * <span style="font-family: Arial,sans-serif;">Income from operations || <span style="font-family: Arial,sans-serif;">9,852 ||   ||
 * <span style="font-family: Arial,sans-serif;">Interest expense || <span style="font-family: Arial,sans-serif;">(1,600) ||   ||
 * <span style="font-family: Arial,sans-serif;">Interest revenue || <span style="font-family: Arial,sans-serif;">200 ||   ||
 * <span style="font-family: Arial,sans-serif;">Income before income taxes || <span style="font-family: Arial,sans-serif;">8,452 ||   ||
 * <span style="font-family: Arial,sans-serif;">Income tax expense || <span style="font-family: Arial,sans-serif;">3,000 ||   ||
 * <span style="font-family: Arial,sans-serif;">Net income || <span style="font-family: Arial,sans-serif;">$5,452 ||   ||
 * <span style="font-family: Arial,sans-serif;">Net income || <span style="font-family: Arial,sans-serif;">$5,452 ||   ||


 * <span style="font-family: Arial,sans-serif; text-transform: none;">M6-15 **
 * <span style="font-family: Arial,sans-serif;">Gross profit percentage || <span style="font-family: Arial,sans-serif;">= || Gross profit || <span style="font-family: Arial,sans-serif;">x 100 || <span style="font-family: Arial,sans-serif;">= || $15,152 || <span style="font-family: Arial,sans-serif;">x100% || <span style="font-family: Arial,sans-serif;">= || <span style="font-family: Arial,sans-serif;">40.0% ||
 * ^  ||   || <span style="font-family: Arial,sans-serif;">Net sales  ||   ||   || <span style="font-family: Arial,sans-serif;">$37,880  ||   ||   ||   ||

<span style="font-family: Arial,sans-serif; text-transform: none;">Sellall Department stores possesses a higher gross profit percentage than the average department store shown in Exhibit 6.11.This indicates that Sellall is able to generate a higher-than-average profit on each item that it sells.

**<span style="font-family: Arial,sans-serif;">Nutboy Theater Company **
 * <span style="font-family: Arial,sans-serif;">M5-4 **
 * <span style="font-family: Arial,sans-serif;">Income Statement **
 * <span style="font-family: Arial,sans-serif;">For the year ended December 31, 2008 **


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Revenues: ||  ||   ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Ticket sales ||  || <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">$50,000 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Concession sales ||  || <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">2,500 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Total sales revenues ||  || <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">52,500 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Operating expenses: ||  ||   ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Salaries and wage expense ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">30,000 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Advertising expense ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">8,000 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Utilities expense ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">7,000 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Total operating expenses ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">45,000 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Income from operations ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">7,500 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Other income (expense): ||  ||   ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Interest revenue ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">200 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Other revenue ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">50 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Income before income tax expense ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">7,750 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Income tax expense ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">2,500 ||


 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Net income ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">$5,250 ||

<span style="font-family: Arial,sans-serif;"> Net profit margin = Net income / Total sales revenues <span style="font-family: Arial,sans-serif;"> = $5,250 / $52,500 <span style="font-family: Arial,sans-serif;"> = 10%

<span style="font-family: Arial,sans-serif;"> Nutboy produced more net income per dollar of sales (ten cents) than in the previous year (8 cents).


 * <span style="font-family: Arial,sans-serif;">PA3-3 **

<span style="font-family: Arial,sans-serif;"> Req. 1 and 2

(//d//)13,200 (//e//)1,500 (//i//)1,000 || <span style="font-family: Arial,sans-serif;">71,000 (//b//) <span style="font-family: Arial,sans-serif;"> 840 (//g//) <span style="font-family: Arial,sans-serif;"> 1,700 (//h//) <span style="font-family: Arial,sans-serif;"> 4,000 (//j//) <span style="font-family: Arial,sans-serif;"> 3,600 (//k//) ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//c//)15,260 || <span style="font-family: Arial,sans-serif;">1,000 (//i//) ||   || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//f//)3,210 ||   ||
 * **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Cash (A) cr- //** ||  |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Accounts Receivable (A) cr- //** ||   |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Supplies (A) cr- //** ||
 * <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//a//)200,000
 * __<span style="font-family: Arial,sans-serif;">134,560 __ ||  ||   || __<span style="font-family: Arial,sans-serif;">14,260 __ ||   ||   || __<span style="font-family: Arial,sans-serif;">3,210 __ ||   ||

<span style="font-family: Arial,sans-serif;"> 1,200 (//l//) ||
 * **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Prepaid Insurance (A) cr- //** ||  |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Barns (A) cr- //** ||   |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr- Accounts Payable (L) cr+ //** ||
 * <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//k//)3,600 ||  ||   || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//b//)142,000 ||   ||   || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//h//)1,700 || <span style="font-family: Arial,sans-serif;">3,210 (//f//)
 * __<span style="font-family: Arial,sans-serif;">3,600 __ ||  ||   || __<span style="font-family: Arial,sans-serif;">142,000 __ ||   ||   ||   || <span style="font-family: Arial,sans-serif;">__2,710__ ||

**//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr- Unearned Revenue (L) cr+ //** ||  |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">Long-term //**
 * <span style="display: block; font-family: Arial,sans-serif; font-size: 9.5pt; text-align: center;">
 * //<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr- Notes Payable (L)cr+ //** ||  |||| **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr- Contributed Capital (SE) cr+ //** ||
 * || <span style="font-family: Arial,sans-serif;">1,500 (//e//) ||  ||   || <span style="font-family: Arial,sans-serif;">71,000 (//b//) ||   ||   || <span style="font-family: Arial,sans-serif;">200,000(//a//) ||
 * || <span style="font-family: Arial,sans-serif;">__1,500__ ||  ||   || __<span style="font-family: Arial,sans-serif;">71,000 __ ||   ||   || __<span style="font-family: Arial,sans-serif;">200,000 __ ||

**//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr- Rental Revenue (R) cr+ //** ||  |||| <span style="display: block; font-family: Arial,sans-serif; font-size: 9.5pt; text-align: center;"> **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Utilities Expense (E) cr- //** || (//l//)1,200 ||  ||
 * **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">Animal Care dr- Service Revenue (R) cr+ //** ||  |||| <span style="display: block; font-family: Arial,sans-serif; font-size: 9.5pt; text-align: center;">
 * || <span style="font-family: 'Arial','sans-serif';">15,260 (//c//) ||  ||   || <span style="font-family: Arial,sans-serif;">13,200 //(d//) ||   || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//g//)840
 * || __<span style="font-family: Arial,sans-serif;">15,260 __ ||  ||   || __<span style="font-family: Arial,sans-serif;">13,200 __ ||   || __<span style="font-family: Arial,sans-serif;">2,040 __ ||   ||


 * **//<span style="font-family: Arial,sans-serif; font-size: 9.5pt;">dr+ Wages Expense (E)cr - //** ||
 * <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(//j//)4,000 ||  ||
 * __<span style="font-family: Arial,sans-serif;">4,000 __ ||  ||


 * <span style="font-family: Arial,sans-serif;">PA3 ****<span style="font-family: Arial,sans-serif;">- ****<span style="font-family: Arial,sans-serif;">3 (continued) **

<span style="font-family: Arial,sans-serif;"> Req. 3

Unadjusted Trial Balance As of April 30, 2008 ||
 * <span style="display: block; font-family: Arial,sans-serif; text-align: center;">Spicewood Stables, Inc.
 * || <span style="display: block; font-family: Arial,sans-serif; text-align: center;">Debit || <span style="display: block; font-family: Arial,sans-serif; text-align: center;">Credit ||
 * <span style="font-family: Arial,sans-serif;">Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$134,560 ||  ||
 * <span style="font-family: Arial,sans-serif;">Accounts receivable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">14,260 ||  ||
 * <span style="font-family: Arial,sans-serif;">Supplies || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">3,210 ||  ||
 * <span style="font-family: Arial,sans-serif;">Prepaid insurance || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">3,600 ||  ||
 * <span style="font-family: Arial,sans-serif;">Barns || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">142,000 ||  ||
 * <span style="font-family: Arial,sans-serif;">Accounts payable ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$2,710 ||
 * <span style="font-family: Arial,sans-serif;">Unearned revenue ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">1,500 ||
 * <span style="font-family: Arial,sans-serif;">Long-term notes payable ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">71,000 ||
 * <span style="font-family: Arial,sans-serif;">Contributed capital ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">200,000 ||
 * <span style="font-family: Arial,sans-serif;">Animal care service revenue ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">15,260 ||
 * <span style="font-family: Arial,sans-serif;">Rental revenue ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">13,200 ||
 * <span style="font-family: Arial,sans-serif;">Utilities expense || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">2,040 ||  ||
 * <span style="font-family: Arial,sans-serif;">Wages expense || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">4,000 ||  ||
 * <span style="font-family: Arial,sans-serif;">Totals || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$303,670 || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$303,670 ||
 * <span style="font-family: Arial,sans-serif;">Totals || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$303,670 || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$303,670 ||

<span style="font-family: Arial,sans-serif;"> Req. 4

<span style="font-family: Arial,sans-serif;"> Date:(today’s date) <span style="font-family: Arial,sans-serif;"> To:Stockholders of Spicewood Stables, Inc. <span style="font-family: Arial,sans-serif;"> From:(your name)

<span style="font-family: Arial,sans-serif;"> After analyzing the effects of transactions for Spicewood Stables, Inc. for April, the company has realized a profit of $22,420.Notice, however, this is based on unadjusted amounts.There are several additional expenses that will decrease the net income amount.These include depreciation of the barns, supplies, insurance, interest, and income taxes.

> > a. Office Supplies had a balance of $168 on January 1. Purchases debited to Office Supplies during the year amount to $830. A year-end inventory reveals supplies of $570 on hand.
 * 1) <span style="font-family: Arial,sans-serif; font-size: 10pt;">Prepare the year-end adjusting entries for each of the following:

<span style="font-family: Arial,sans-serif; font-size: 10pt;"> b. Depreciation of office equipment is estimated to be $4,260 for the year.

<span style="font-family: Arial,sans-serif; font-size: 10pt;"> c. Property taxes for six months, estimated at $1,750, have accrued but have not been recorded.

<span style="font-family: Arial,sans-serif; font-size: 10pt;"> d. Unrecorded interest receivable on U.S. government bonds is $1,700.

<span style="font-family: Arial,sans-serif; font-size: 10pt;"> e. Unearned Revenue has a balance of $1,800. Services for $600 received in advance have now been performed.

<span style="font-family: Arial,sans-serif; font-size: 10pt;"> f. Services totaling $400 have been performed; the customer has not yet been billed.

<span style="font-family: 'Arial','sans-serif';">**M3-16**

<span style="display: block; font-family: Arial,sans-serif; text-align: center;">**Income Statement** **Year Ended December 31, 2008** ||
 * <span style="display: block; font-family: Arial,sans-serif; font-size: 14pt; text-align: center;">**Buck Up!, Inc.**


 * Revenues: ||  ||   ||


 * Horse-breaking revenue ||  || $25,200 ||


 * Rodeo lesson revenue ||  || 10,500 ||


 * Total revenues ||  || 35,700 ||


 * Expenses: ||  ||   ||


 * <span style="font-family: Arial,sans-serif;">Wages expense ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">3,900 ||


 * <span style="font-family: Arial,sans-serif;">Maintenance expense ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">410 ||


 * <span style="font-family: Arial,sans-serif;">Other expenses ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">270 ||


 * <span style="font-family: Arial,sans-serif;">Total expenses ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">4,580 ||


 * <span style="font-family: Arial,sans-serif;">Net income ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$ 31,120 ||

<span style="display: block; font-family: Arial,sans-serif; text-align: center;">**Statement of Retained Earnings** **Year Ended December 31, 2008** <span style="display: block; font-family: Arial,sans-serif; text-align: center;"> ||
 * <span style="display: block; font-family: Arial,sans-serif; font-size: 14pt; text-align: center;">**Buck Up!, Inc.**


 * <span style="font-family: 'Arial','sans-serif';">Retained earnings, Jan. 1, 2008 ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: center;">$14,500 ||


 * <span style="font-family: 'Arial','sans-serif';">Add: Net income ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: center;">31,120 ||


 * <span style="font-family: 'Arial','sans-serif';">Subtract: Dividends ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">(3,500) ||


 * <span style="font-family: 'Arial','sans-serif';">Retained earnings, Dec. 31, 2008 ||  || <span style="display: block; font-family: Arial,sans-serif; text-align: center;">$ 42,120 ||

<span style="display: block; font-family: Arial,sans-serif; text-align: center;">

<span style="display: block; font-family: Arial,sans-serif; text-align: center;">

<span style="display: block; font-family: Arial,sans-serif; font-size: 14pt; text-align: center;"> <span style="display: block; font-family: Arial,sans-serif; text-align: center;">**Balance Sheet** **As of December 31, 2008**
 * M3-16 (continued)**
 * Buck Up!, Inc.**
 * **Assets** ||  ||
 * //<span style="font-family: Arial,sans-serif;">Current assets // ||  ||
 * <span style="font-family: Arial,sans-serif;">Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$59,750 ||
 * <span style="font-family: Arial,sans-serif;">Accounts receivable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">3,300 ||
 * <span style="font-family: Arial,sans-serif;">Prepaid insurance || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">1,200 ||
 * //<span style="font-family: Arial,sans-serif;">Total current assets // || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">64,250 ||
 * <span style="font-family: Arial,sans-serif;">Equipment || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">64,600 ||
 * <span style="font-family: Arial,sans-serif;">Land || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">23,000 ||
 * ===//Total Assets//=== || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$151,850 ||
 * **Liabilities** ||  ||
 * //Current liabilities// ||  ||
 * <span style="font-family: Arial,sans-serif;">Accounts payable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$29,230 ||
 * <span style="font-family: Arial,sans-serif;">Unearned revenues || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">1,500 ||
 * //<span style="font-family: Arial,sans-serif;">Total current liabilities // || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">30,730 ||
 * Long-term notes payable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">74,000 ||
 * ===//Total Liabilities//=== || 104,730 ||
 * **Stockholders’ Equity** ||  ||
 * <span style="font-family: Arial,sans-serif;">Contributed capital || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">5,000 ||
 * <span style="font-family: Arial,sans-serif;">Retained earnings || 42,120 ||
 * **Total Stockholders’ Equity** || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">47,120 ||
 * **Total Liabilities and Stockholders’ Equity** || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">$151,850 ||


 * CP2-2**

Req. 1

<span style="font-family: 'Arial','sans-serif';"> Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+141,000
 * |||| <span style="font-family: 'Arial','sans-serif';">Assets || <span style="font-family: 'Arial','sans-serif';">= |||| <span style="font-family: 'Arial','sans-serif';">Liabilities || <span style="font-family: 'Arial','sans-serif';">+ |||| <span style="font-family: 'Arial','sans-serif';">Stockholders’ Equity ||
 * //<span style="font-family: 'Arial','sans-serif';">a. // || <span style="font-family: 'Arial','sans-serif';">Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+200,000 ||  ||   ||   ||   || <span style="font-family: 'Arial','sans-serif';">Contributed capital || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+200,000 ||
 * //<span style="font-family: 'Arial','sans-serif';">b. // || <span style="font-family: 'Arial','sans-serif';">Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+30,000 ||  || <span style="font-family: 'Arial','sans-serif';">Notes payable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+30,000 ||   ||   ||   ||
 * //<span style="font-family: 'Arial','sans-serif';">c. // || <span style="font-family: 'Arial','sans-serif';">Factory building

-41,000 ||  || <span style="font-family: 'Arial','sans-serif';">Notes payable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+100,000 ||   ||   ||   || <span style="font-family: 'Arial','sans-serif';"> Cash || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+100,000 -100,000 ||  ||   ||   ||   ||   ||   ||
 * //<span style="font-family: 'Arial','sans-serif';">d. // || <span style="font-family: 'Arial','sans-serif';">Equipment
 * //<span style="font-family: 'Arial','sans-serif';">e. // || <span style="font-family: 'Arial','sans-serif';">Supplies || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+10,000 ||  || <span style="font-family: 'Arial','sans-serif';">Accounts payable || <span style="display: block; font-family: Arial,sans-serif; text-align: right;">+10,000 ||   ||   ||   ||


 * CP2-2 (continued)**

Req. 2


 * a. || //dr// Cash (+A)................................................................................ || 200,000 ||  ||
 * || //cr// Contributed capital (+SE)................................................ ||  || 200,000 ||


 * b. || //dr// Cash (+A)................................................................................ || 30,000 ||  ||
 * || //cr// Notes payable (+L)........................................................... ||  || 30,000 ||


 * c. || //dr// Factory building (+A)............................................................. || 141,000 ||  ||
 * || //cr// Cash (-A)............................................................................ ||  || 41,000 ||
 * || //cr// Notes payable (+L)........................................................... ||  || 100,000 ||


 * d. || //dr// Equipment (+A)...................................................................... || 100,000 ||  ||
 * || //cr// Cash (-A)............................................................................ ||  || 100,000 ||


 * e. || //dr// Supplies (+A).......................................................................... || 10,000 ||  ||
 * || //cr// Accounts Payable (+L).................................................... ||  || 10,000 ||

Req. 3


 * **<span style="font-family: Arial,sans-serif; font-size: 12pt;">Cash ** ||  |||||||| **<span style="font-family: Arial,sans-serif; font-size: 12pt;">Supplies ** ||   |||||| **<span style="font-family: Arial,sans-serif; font-size: 12pt;">Equipment ** ||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">16,000 ||  ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">5,000 ||   ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">18,000 ||||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">(a) || 200,000 || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">41,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(c) ||  || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(e) || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">10,000 ||   ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(d) || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 ||||   ||
 * (b) || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">30,000 || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(d) ||  ||   ||   ||   ||   ||   ||   ||   ||||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">105,000 ||  ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">15,000 ||   ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">118,000 ||||   ||


 * **<span style="font-family: 'Arial','sans-serif'; font-size: 12pt;">Factory ****<span style="font-family: 'Arial','sans-serif'; font-size: 12pt;"> Building ** ||  |||||||| **<span style="font-family: Arial,sans-serif; font-size: 12pt;">Land ** ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">200,000 ||  ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 ||   ||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">(c) || 141,000 ||  ||   ||   ||   ||   ||   ||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">341,000 ||  ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 ||   ||   ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">341,000 ||  ||   ||   || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 ||   ||   ||


 * **<span style="font-family: Arial,sans-serif; font-size: 12pt;">Accounts Payable ** ||  |||||||||| **Notes Payable** ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">20,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. ||   ||||||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">1,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. ||   ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">10,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(e) ||   ||||||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">30,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(b) ||   ||
 * ||  ||   ||   ||   ||||||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(c) ||   ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">30,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. ||   ||||||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">131,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. ||   ||


 * **Contributed Capital** ||  |||||||| **Retained Earnings** ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">80,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. ||   ||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">238,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Beg. ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">200,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">(a) ||   ||   ||   ||   ||   ||
 * ||  || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">280,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. ||   ||   ||   || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">238,000 || <span style="font-family: Arial,sans-serif; font-size: 12pt;">End. ||


 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">CP2-2 (continued) **

<span style="font-family: Arial,sans-serif; font-size: 12pt;"> Req. 4 <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: center;">**At July 31, 2008**
 * Athletic Performance Company**
 * Balance Sheet**

$679,000 ||  || **//<span style="font-family: Arial,sans-serif; font-size: 12pt;">Total Liabilities & Stockholders’ Equity //** || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;"> $679,000 ||
 * **//<span style="font-family: Arial,sans-serif; font-size: 12pt;">Assets //** ||  ||   || **//Liabilities//** ||   ||
 * //Current Assets// ||  ||   || //Current Liabilities// ||   ||
 * Cash || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">$ 105,000 ||  || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Accounts payable || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">$30,000 ||
 * Supplies || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">15,000 ||  || //<span style="font-family: Arial,sans-serif; font-size: 12pt;">Total Current Liabilities // || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">30,000 ||
 * //<span style="font-family: Arial,sans-serif; font-size: 12pt;">Total Current Assets // || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">120,000 ||  ||   ||   ||
 * ||  ||   || Notes payable || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">131,000 ||
 * ||  ||   || == //Total Liabilities// == || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">161,000 ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">Equipment || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">118,000 ||  || ==//Stockholders’ Equity//== ||   ||
 * Factory building || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">341,000 ||  || <span style="font-family: Arial,sans-serif; font-size: 12pt;">Contributed capital || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">280,000 ||
 * <span style="font-family: Arial,sans-serif; font-size: 12pt;">Land || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">100,000 ||  || == Retained earnings == || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">238,000 ||
 * ||  ||   || == //Total Stockholders’ Equity// == || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">518,000 ||
 * **//<span style="font-family: Arial,sans-serif; font-size: 12pt;">Total Assets //** || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">
 * **//<span style="font-family: Arial,sans-serif; font-size: 12pt;">Total Assets //** || <span style="display: block; font-family: Arial,sans-serif; font-size: 12pt; text-align: right;">

<span style="font-family: Arial,sans-serif; font-size: 12pt;"> Req. 5

<span style="font-family: Arial,sans-serif; font-size: 12pt;"> As of July 31, 2008, most of APC’s financing has come from stockholders’ equity.Stockholders’ equity has financed $518,000 of APC’s assets and liabilities financed $161,000.