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Accounting 211

Monday, February 1st, 1999
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Lecture notes:

Chapter 4 Homework:

Questions:

Closing entries clear revenue, expense, and dividend accounts of their balances which sets the stage for the next period and they summarize a period's revenues and expenses.
Adjusting entries give the correct balance, while closing entries give a zero balance.
The Income Summary Account provides a place to summarize all revenues and expenses and move them to Retained Earnings.

Short Exercises:

Patient Services		3,400
Lab Fees		1,800
	Income Summary		5,200

To close Revenue accounts

Income Summary		3,000
	Rent Expense		1,400
	Wage Expense		1,100
	Other Expenses		500

To close Expense accounts

Income Summary		2,200
	Retained Earnings		2,200

To close Income Summary account

Retained Earnings		800
	Dividends		800

To close Dividends account

Exercises:

Entry #1:

Sales Commission Earned		31,700
	Income Summary		31,700

Entry #2:

Income Summary		23,275
	Office Salaries Expense		13,500
	Advertising Expense		2,525
	Rent Expense		2,650
	Telephone Expense		1,600
	Income Tax Expense		3,000

Entry #3:

Income Summary		8,425
	Retained Earnings		8,425

Entry #4:

Retained Earnings		7,000
	Dividends		7,000

Wendell's Barber Shop, Inc. Statement of Retained Earnings For the Period Ended December 31, 19XX
Retained Earnings	18,000
Net Income	9,500
Subtotal	22,500
Less Dividends	4,500
Retained Earnings, 12/31/XX	18,000

Problem Sets:

A2. Answer is in the packet.

Chapter 5 Homework:

Questions:

Merchandising deals with the transfer of material products whereas services operate by providing services, not material products. On the income statement, a merchandising operation has to reflect the cost of the goods they buy and sell and the service does not.

Gross margin is the difference between net sales and the cost of goods sold on the income statement. Gross margin is important because it must be greater than operating expenses for the company to earn profit.
Net Sales = $106,666

They must take a physical count.

So you can keep an eye on how much is coming back in order to determine customer satisfaction and quality control.

Short Exercises:

Net Sales			50,000
Cost of Goods Sold			- 30,000
Gross Margin			20,000
Operating Expenses
	General and Administrative Expenses	8,000
	Selling Expense	7,000
			- 15,000
Income Before Taxes			5,000
	Income Taxes		- 1,000
Net Income			4,000

Beginning Balance	33,000
+ Net Purchases	+ 229,000
+ Freight In	+ 12,000
= Cost of Goods Available for Sale	274,000
- Ending Balance	- 44,000
= Cost of Goods Sold	230,000

Purchases = $238,000

Exercises:

Answer is in the packet.

Net Sales	281,800
- Cost of Goods Sold	- 120,400
= Gross Margin	161,400
- Operating Expenses	- 85,700
- Income Tax Expense	- 15,000
= Net Income	60,700

10.

3/2/98	Accounts Receivable			500
			Sales		500

3/3/98	Sales Returns + Allowances			200
			Accounts Receivable		200

3/10/98	Cash			294
	Sales Discounts			6
			Accounts Receivable		300

3/11/98	Accounts Receivable			800
		Sales			800

3/31/98	Cash			800
		Accounts Receivable			800

11.

7/2	Purchases		800
		Accounts Payable		800

7/6	Accounts Payable		100
		Purchase Returns + Allowances		100

7/11	Accounts Payable		700
		Cash		686
		Purchase Discounts		14

7/14	Purchases		900
		Accounts Payable		900

7/31	Accounts Payable		900
		Cash		900

Information contained on this page does not represent the lecture verbatim. These notes are not a substitute for class attendance.

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