I am trying to find an explanation for 72, 77, 78, 80 ONLY. Thank You, Sara Rayn

Question

I am trying to find an explanation for 72, 77, 78, 80 ONLY.

Thank You,

Sara Raynes is a sole proprietor and interior designer. She has been in business for several years. Regular operating transactions are journalized daily and posted no less often than monthly. She prepares adjusting entries and financial statements on a monthly basis. However, she prepares closing entries only at the end of her fiscal year, which is December 31.

Table 2 on pages 12 and 13 shows her year-to-date, adjusted account balances as of November 30, 2014 in the form of T-accounts. (Accounts with a zero balance are not included because of space limitations on the page.)

The balance of Accounts Receivable on 11-30-14 consists of one customer account.

Sara Raynes made a capital contribution only once during the year (on March 7, 2014) in the amount of $15,000. The transaction was correctly recorded and posted in the month of March 2014.

Table 2 also shows her transactions for the month of December 2014. Additional information is provided that will be needed for adjusting entries at the end of December.

Company procedure is to record purchases of supplies and insurance in asset accounts and adjust for ending supplies on hand and unexpired insurance at the end of each month.

For questions 69 through 73 use the above data and Table 2. Consider in each case that all the transactions for December 2014 have been journalized and posted correctly, but no adjusting or closing entries have been made for December. Write the identifying letter of the best answer on your answer sheet.

*69. The balance in the Cash in Bank account is

            A. $13,974     B. $21,408     C. $22,068     D. $35,382     E. $40,142

*70. The balance of the Supplies account is

            A. $1,425     B. $2,670     C. $3,255     D. $4,500     E. $5,925

71. The balance of the Prepaid Insurance account is

            A. zero     B. $1,782     C. $1,944     D. $2,098     E. $3,792

*72. The balancing total of the trial balance is

            A. $179,606     B. $182,034     C. $186,696     D. $201,696

73. In the General Ledger on January 1, 2014, the balance of Sara Raynes, Capital was

            A. zero     B. $15,000     C. $69,226     D. $84,226     E. $99,226

Group 10_continued

Continue to use the information in Group 10. Consider now that the work sheet has been prepared for the twelve months ending December 31, 2014 and that any necessary adjusting entries have been prepared and posted to the general ledger. Closing entries have not been journalized at this time. For questions 74 through 78 write the identifying letter of the best answer on your answer sheet.

*74. The balance of the Supplies Expense account is

            A. $10,990     B. $15,490     C. $18,745     D. $19,990

75. The balance of the Insurance Expense account is

            A. zero     B. $162     C. $1,694     D. $1,782     E. $1,856     F. $1,944

76. The balance of Prepaid Insurance is

            A. zero     B. $162     C. $1,694     D. $1,782     E. $1,856     F. $1,944

*77. The net income for the twelve months ending December 31, 2014 is

            A. $21,269     B. $37,451     C. $59,136     D. $64,769     E. $69,431

*78. The subtotal of the work sheet’s Balance Sheet Debit column before net income

       is calculated is

            A. $32,789     B. $76,289     C. $149,245     D. $153,907     E. $186,696

*80. The balance of the account called Sara Raynes, Capital is

            A. $69,226                 D. $105,495

            B. $84,226                 E. $120,495

            C. $90,495                 F. $148,995

THE ANSWERS:

69. B

70. E

71 C

73 C

74 D

75 E

76 D

79. A

ransaction Cash in Bank Accounts Receivable Supplies Date 1 Issued a check for $425 for the December rent. 1 (11-30-14) 35,382 (11-30-14) 1,800 (11-30-14) 2,670 Issued check #3311 for $1,944 for a 12-month insurance policy. The coverage is effective on this date 2 Issued a check to purchase design supplies $650 4 Received invoice from Designer Ideas for fabric samples purchased on account, $250 5 Received S960 for design services performed. 8 Issued a check to Design Supply in payment on account, $2,740 9 Received S1,800 from Dale Jenkins on account. 9 Issued a check for $1,980 for design supplies 10 Used debit card to pay for truck rental used to transport equipment and supplies Prepaid Insurance Furniture & Equipment (11-30-14) 0 (11-30-14) 69,330 to a design job for a museum $285 12 Issued an invoice on account to Central Shopping Center $8,250 for the completion of designing and installing Christmas displays. 15 18 20 Received S500 for redecorating the university president's home. 22 Issued a check for $3,000 for owner's personal use 27 Receved S1,500 for redecorating a commercial property 30 Issued a check to Designer Ideas for $1,630 on account. 31 Issued check for $2,000 for owner's personal use 31 Used debit card to buy design supplies S375. Issued a check for $205 for utilities used at the office. Issued a check for $3,500 for a new leather couch for the office waiting room. Accts. aeDesigner Ideas (11-30-14).530 Accts. Pay.-Design Supply Sara Ravnes, Capital (11-30-14) 2,740 11-30-14) 84,226 * Physical inventory of supplies on December 31, 2014 was $1,425 Summary of insurance policies purchased Sara axnss Drawing Design Fees Rent& Utilities Expense December 1, 2013 $1,848 for a 12-month policy (coverage effective 12-1-13) December 1, 2014 (see above check #3311) (11-30-14) 38,500 0-14) 91,010 11-30-14) 7,480 72. The balancing total of the trial balance is 77. The net income for the twelve months ending December 31, 2014 is 78. The subtotal of the work sheet's Balance Sheet Debit column before net income A $179,606 B. $182,034 C. $186,696 D. S201,696 Insurance Expenses Delivery Expense Supplies Expense A. $21,269 B. S37,451 C, $59,136 D. $64,769 E. $69,431 (11-30-14) 1,694 (11-30-14) 7,210 (11-30-14) 15,490 is calculated is A. $32,789 B. S76,289 C. S149,245 D. $153,907E. S186,696 *80. The balance of the account called Sara Raynes, Capital is A. $69 226 B. $84,226 C. S90,495 D. $105,495 E. $120,495 F. $148,995

Explanation / Answer

Date Account Title Debit Credit Dec-14 1 Rent & utilities expense 425 Cash 425 Prepaid Insurance expense 1944 Cash 1944 2 Supplies 650 Cash 650 4 Inventory 250 Accts .Payables-Designer Ideas 250 5 Cash 960 Design Fees 960 8 Accts .Payables-Design supply 2740 Cash 2740 9 Cash 1800 Accounts Receivables 1800 9 Supplies 1980 Cash 1980 10 Delivery expense 285 Cash 285 12 Accounts receivables 8250 Design Fees 8250 15 Rent & utilities expense 205 Cash 205 18 Furniture & Equipment 3500 Cash 3500 20 Cash 500 Design Fees 500 22 Sara Raynes, Drawing 3000 Cash 3000 27 Cash 1500 Design Fees 1500 30 Accts .Payables-Designer Ideas 1630 Cash 1630 31 Sara Raynes, Drawing 2000 Cash 2000 Supplies 375 Cash 375 Adjusting Entries Supplies expense 4250 Supplies 4250 Insurance expense 162 Prepaid Insurance 162 1944/12 36406 36406 LEDGER ACCOUNTS Debit Credit Debit Credit Beginning Balance 1800 9 Accounts Receivables 1800 12 Accounts Receivables 8250 8250 Beginning Balance 2740 8 Accts .Payables-Design supply 2740 Beginning Balance 1630 4 Accts .Payables-Designer Ideas 250 30 Accts .Payables-Designer Ideas 1630 250 Beginning Balance 35382 1 Cash 425 1 Cash 1944 2 Cash 650 5 Cash 960 8 Cash 2740 9 Cash 1800 9 Cash 1980 10 Cash 285 15 Cash 205 18 Cash 3500 20 Cash 500 22 Cash 3000 27 Cash 1500 30 Cash 1630 31 Cash 2000 31 Cash 375 21408 Beginning balance 7210 10 Delivery expense 285 7495 Beginning balance 91010 5 Design Fees 960 12 Design Fees 8250 20 Design Fees 500 27 Design Fees 1500 102220 Beginning Balance 69380 18 Furniture & Equipment 3500 72880 Beginning balance 1694 1 Insurance expense 162 1856 4 Fabric Samples 250 250 1 Prepaid Insurance 1944 31 Prepaid Insurance expense 162 1782 Beginning balance 7480 1 Rent & utilities expense 425 15 Rent & utilities expense 205 8110 Sara Raynes Capital 84226 84226 Beginning balance 38500 22 Sara Raynes, Drawing 3000 31 Sara Raynes, Drawing 2000 43500 Beginning balance 2670 2 Supplies 650 9 Supplies 1980 31 Supplies 375 31 Supplies 4250 1425 Beginning balance 15490 31 Supplies expense 4250 19740 216012 216012 186696 186696 Trial Balance as at Dec 31 Debit Credit Cash 21408 Accounts Receivables 8250 Prepaid Insurance expense 1782 Supplies 1425 Furniture & Equipment 72880 Accts .Payables-Designer Ideas 250 Sara Raynes Capital 84226 Sara Raynes, Drawing 43500 Design Fees 102220 Fabric Samples 250 Insurance expense 1856 Delivery expense 7495 Rent & utilities expense 8110 Supplies expense 19740 Total 186696 186696 Income Statement for the Yr.ended Dec.31 Design Fees 102220 Fabric Samples 250 Insurance expense 1856 Delivery expense 7495 Rent & utilities expense 8110 Supplies expense 19740 Total operating Expenses 37451 Net Income 64769 Balance sheet as at Dec.31 Assets Cash 21408 Accounts Receivables 8250 Prepaid Insurance expense 1782 Supplies 1425 Total current assets 32865 Furniture & Equipment 72880 Total 105745 Liabilities & Equity Accts .Payables-Designer Ideas 250 Sara Raynes Capital 84226 Less: Drawings 43500 40726 Retained earnings 64769 Total equity 105495 Total Liabilities& equity 105745 ANSWERS: 72.C . 186696 Balancing Total of Trial Balance 77. D. 64769 (Net Income) 78. C. 149245 (B/S Dr. col.total) (105745+43500)= 149245 (Asset side B/S+Drawings) 80.B. 84226 (Sara Raynes'capital)

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