Samantha Company has the following adjusted account balances at December 31, 201

Question

Samantha Company has the following adjusted account balances at December 31, 2012:

Equipment $250,000
Salaries Expense 140,000
Unearned Revenue 10,000
Accounts Receivable 95,000
Cash 90,000
Rent Expense 115,000
Depreciation Expense 5,000
Accounts Payable 42,000
Office Supplies 1,000
Dividends 11,000
Land 220,000
Revenues 375,000
Office Supplies Expense 8,000
Common Stock ($1 par) 480,000
Prepaid Rent 60,000
Salaries Payable 11,000
Accumulated Depreciation- Equipment 40,000
Retained Earnings (1/1/2012) 37,000


6. A Trial Balance prepared on December 31, 2012 using the account balances above would balance at:
$____________.


7. The income statement prepared at December 31, 2012, would report net income of:
$____________.


8. The balance sheet prepared at December 31, 2012, would report total owners

Explanation / Answer

(1) The equipment has an estimated life of 16 years and a salvage value of $40,000 at the end of that time. (Use straight-line method.) (192,000 - 40,000) / 16 = 9,500 per year Dr Depreciation Expense--Equipment 9,500 Cr Accumulated Depreciation--Equipment 9,500 (2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 10%. (Use 360 days for denominator.) 90,000 x 10% x 72/360 = 1,800 Dr Interest Expense 1,800 Cr Interest Payable 1,800 (3) In December 2,000 coupon admission books were sold at $25 each. They could be used for admission any time after January 1. It doesn't say it, but since at the end of the problem you're supposed to give the balance for Admissions Revenue, this amount must have been charged to Admissions Revenue. Dr Admissions Revenue 50,000 Cr Unearned Revenue 50,000 (4) Advertising expense paid in advance and included in Advertising Expense $1,100. Dr Prepaid Advertising 1,100 Cr Advertising Expense 1,100 (5) Salaries accrued but unpaid $4,700. Dr Salaries Expense 4,700 Cr Salaries Payable 4,700 (b) What amounts should be shown for each of the following on the income statement for the year? (1) Interest expense. 1,400 + 1,800 = $3,200 (2) Admissions revenue. 380,000 - 50,000 = $330,000 (3) Advertising expense 13,680 - 1,100 = $12,580 (4) Salaries expense 57,600 + 4,700 = 62,300 March 15 - Purchased 9,000 shares of treasury stock at $7 per share. Dr Treasury Stock 63,000 Cr Cash 63,000 April 30 - Distributed a 10% stock dividend on the outstanding shares of common stock. The market value of common stock was $10 per share. (50,000 - 9,000) x 0.10 x $10 = $41,000 stock dividend Dr Retained Earnings 41,000 Cr Common Stock 41,000 Dec 31 - Earned net income of $105,000 during the year. Closed net income to Retained Earnings. Dr Income Summary 105,000 Cr Retained Earnings 105,000 2. Prepare the stockholders' equity section of Mundo Health Food's balance sheet at December 31, 2012. Stockholders' Equity Common Stock . . . . . . . . . . . . . . . .$211,000 Retained Earnings . . . . . . . . . . . . . . .204,000 . . . . . .$415,000 Less: Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 63,000 Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . .$352,000

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