California State University, Sacramento



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The Hay and Barnabas Company:

Adjustments and classification of financial statement items:

Part A.

|Assets |= |Liabilities |+ |Shareholders’ Equity |

|a. (70,000) accumulated | | | |(70,000) depreciation expense |

|depreciation | | | | |

|—equipment | | | | |

| | | | | |

|b. | |+20,000 interest | |(20,000) interest expense |

| | |payable | | |

| | | | | |

|c. (23,000) prepaid | | | |(23,000) insurance expense |

|insurance | | | | |

| | | | | |

|d. (35,000) prepaid rent | | | |(35,000) rent expense |

| | | | | |

|e. | |+28,000 salaries | |(28,000) salary expense |

| | |payable | | |

Part B.

|1. |Cash paid employees for salaries and wages |Statement of cash flows |

| | | |

|2. |Cash collected from sales customers |Statement of cash flows |

| | | |

|3. |Bonds Payable |Long-term assets |

| | | |

|4. |Cash |Current assets |

| | | |

|5. |Common Stock |Shareholders’ equity |

| | | |

|6. |Equipment |Long-term assets |

| | | |

|7. |Prepaid Insurance |Current assets |

| | | |

|8. |Inventory |Current assets |

| | | |

|9. |Prepaid Rent |Current assets |

| | | |

|10. |Retained Earnings |Shareholders’ equity |

| | | |

|11. |Salaries and Wages Expense |Income statement |

| | | |

|12. |Sales |Income statement |

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Adam’s Apple Company:

Amounts for financial statements

|Prepaid insurance |$600 |

|Cleaning supplies |500 |

|Unearned service fees |2,000 |

|Notes payable |5,000 |

|Service fees |97,000 |

|Wages expense |75,900 |

|Truck rent expense |3,600 |

|Truck fuel expense |1,100 |

|Insurance expense |1,200 |

|Supplies expense |2,300 |

|Interest expense |150 |

|Interest payable |150 |

|Wages payable |900 |

|Prepaid rent—truck |300 |

Net Income: Service fees (revenue) minus the six expenses (wages, rent, fuel, insurance, supplies used, and interest) = $12,750.

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Panda Company transactions and financial statement balances

| |Assets |= |Liabilities |+ |Contributed |Retained |

| | | | | |Capital |Earnings |

|Beginning |$40,000 cash | |$17,000 | |$45,000 |$14,500 retained |

|balances |+ 16,500 | |accounts | |contributed |earnings |

| |accounts | |payable | |capital | |

| |receivable | | | | | |

| |+20,000 land | | | | | |

| | | | | | | |

|Jan. |+20,000 cash | | | |+20,000 | |

| | | | | |contributed | |

| | | | | |capital | |

| | | | | | | |

|Jan. |+17,000 | | | | | |

| |computer | | | | | |

| |(17,000) cash | | | | | |

| | | | | | | |

|Mar. |+10,000 cash | |+10,000 notes | | | |

| | | |payable | | | |

| | | | | | | |

|May |+2,400 prepaid | | | | | |

| |rent | | | | | |

| |(2,400) cash | | | | | |

| | | | | | | |

|June |(5,000) cash | | | | |(5,000) dividends |

| | | | | | | |

|July |+10,000 land | | | | | |

| |(10,000) cash | | | | | |

| | | | | | | |

|Aug. |(6,000) cash | |(6,000) | | | |

| | | |accounts | | | |

| | | |payable | | | |

| |+9,600 cash | |+9,600 | | | |

| | | |unearned | | | |

| | | |revenue | | | |

| | | | | | | |

|Sept. |+13,000 cash | | | | |(3,000) loss on |

| |(16,000) land | | | | |sale of land |

Panda Company transactions and financial statement balances

| |Assets |= |Liabilities |+ |Contributed |Retained |

| | | | | |Capital |Earnings |

|Oct. |+1,300 supplies | |+1,300 accounts | | | |

| | | |payable | | | |

| | | | | | | |

|Nov. |+20,000 | | | | | |

| |investment in | | | | | |

| |certificate of | | | | | |

| |deposit | | | | | |

| |(20,000) cash | | | | | |

| | | | | | | |

|Dec. |+40,000 A/R | | | | |+40,000 revenue |

| |+44,000 cash | | | | | |

| |(44,000) accounts | | | | | |

| |receivable | | | | | |

| | | |+6,000 accounts | | |(6,000) operating |

| | | |payable | | |expenses |

| | | |+2,300 salaries | | |(2,300) salary |

| | | |payable | | |expense |

| |(1,100) supplies | | | | |(1,100) supplies |

| | | | | | |expense |

| | | | | | | |

|1- |(5,000) accumulated | | | | |(5,000) depreciation |

| |depreciation —computer | | | | |expense |

| | | | | | | |

|2- | | |+1,000 interest | | |(1,000) interest |

| | | |payable | | |expense |

| | | | | | | |

|3- |(1,600) prepaid | | | | |(1,600) rent |

| |rent | | | | |expense |

| | | | | | | |

|4- | | |(4,000) unearned | | |+4,000 revenue |

| | | |revenue | | | |

| | | | | | | |

|5- |+200 interest | | | | |+200 interest |

| |receivable | | | | |revenue |

|Totals |$135,900 | |$37,200 | |$65,000 |$33,700 |

A. Interest expense = $1,000

B. Rent expense = $1,600

C. Supplies expense = $1,100

D. Revenue = 40,000 + 4,000 + 200 = $44,200

E. Expenses (excluding loss) = + 6,000 + 2,300 + 1,100 + 5,000

+ 1,000 + 1,600 = $17,000

F. Loss = $3,000

G. Net income = $24,200

H. Total liabilities = $37,200

I. Unearned revenue = $5,600

J. Interest payable = $1,000

K. Retained earnings = 14,500 + 24,200 – 5,000 = 33,700

L. Financing cash = +20,000 + 10,000 – 5,000 = $25,000

M. Investing cash = –17,000 – 10,000 + 13,000 – 20,000 = $(34,000)

N. Operating cash = –2,400 – 6,000 + 9,600 + 44,000 = $45,200

(total change in cash = $36,200)

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Ortega Company:

Transactions and financial statement balances

Part A.

|Assets |= |Liabilities |+ |Owners’ Equity |

|a. (70,000) accumulated | | | |(70,000) depreciation expense |

|depreciation— | | | | |

|equipment | | | | |

| | | | | |

|b. | |+40,000 interest | |(40,000) interest expense |

| | |payable | | |

| | | | | |

|c. (100,000) prepaid | | | |(100,000) insurance expense |

|insurance | | | | |

| | | | | |

|d. (70,000) prepaid rent | | | |(70,000) rent expense |

| | | | | |

|e. | |+58,000 salaries | |(58,000) salary expense |

| | |payable | | |

Part B.

a. Income statement—$100,000

b. Balance sheet—$770,000

c. Income statement—$386,000

d. Income statement—$70,000

e. Balance sheet—$40,000

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