APPENDIX D

Ex. D1

a. Purchases......................................................................... 7,000
Accounts PayableBertha Co................................. 7,000
b. Accounts PayableBertha Co....................................... 1,000
Purchases Returns and Allowances........................ 1,000
c. Accounts PayableBertha Co....................................... 6,000
Purchases Discounts................................................ 120
Cash............................................................................. 5,880
d. Purchases......................................................................... 4,000
Accounts PayablePrecision Golf, Inc................... 4,000
e. Accounts PayablePrecision Golf, Inc........................ 4,000
Purchases Discounts................................................ 40
Cash............................................................................. 3,960

Ex. D2

Mar. 8 Accounts Receivable........................................... 8,300

Sales.................................................................. 8,300
8 Accounts Receivable........................................... 250
Cash................................................................... 250
12 Sales Returns and Allowances........................... 1,600
Accounts Receivable....................................... 1,600
18 Cash....................................................................... 6,816
Sales Discounts.................................................... 134
Accounts Receivable....................................... 6,950

Ex. D3

Income Summary.................................................................... 273,000

Merchandise Inventory................................................... 273,000
Merchandise Inventory.......................................................... 309,600
Income Summary............................................................ 309,600

223
Ex. D4

a. Purchases returns and allowances, purchases discounts

b. Sales returns and allowances, sales discounts
c. Merchandise available for sale
d. Transportation in
e. Gross profit
f. Merchandise inventory (ending)
g. Income from operations
h. Selling expenses, administrative expenses
i. Other income, other expense

224
Ex. D5

TOWER STORES COMPANY

Income Statement
For the Year Ended December 31, 2003
Revenue from sales:
Sales............................................. $805,000
Less: Sales returns and
allowances..................... $ 8,700
Sales discounts............... 6,500 15,200
Net sales...................................... $789,800
Cost of merchandise sold:
Merchandise inventory,
January 1, 2003...................... $ 53,600
Purchases.................................... $657,000
Less: Purchases returns and
allowances..................... $15,500
Purchases discounts....... 8,000 23,500
Net purchases............................. $633,500
Add transportation in................. 22,500
Cost of merchandise
purchased........................... 656,000
Merchandise available for sale. $709,600
Less merchandise inventory,
December 31, 2003................ 63,900
Cost of merchandise sold.... 645,700
Gross profit....................................... $144,100

225
Ex. D6

a. Income Summary............................................................. 285,000

Merchandise Inventory.............................................. 285,000
Merchandise Inventory.................................................... 247,000
Income Summary....................................................... 247,000

b. Sales................................................................................. 1,315,000
Purchases Returns and Allowances.............................. 7,000
Purchases Discounts...................................................... 6,000
Income Summary....................................................... 1,328,000
Income Summary............................................................. 1,140,500
Sales Returns and Allowances................................. 44,300
Sales Discounts......................................................... 10,200
Purchases................................................................... 760,000
Transportation In........................................................ 21,300
Selling Expenses....................................................... 232,700
Administrative Expenses.......................................... 69,500
Interest Expense........................................................ 2,500
Income Summary............................................................. 149,500
Ted Kostner, Capital.................................................. 149,500
Ted Kostner, Capital........................................................ 36,000
Ted Kostner, Drawing................................................ 36,000

226
Prob. D1

Apr. 4 Purchases.............................................................. 10,800

Accounts PayableTurner Co........................ 10,800
5 Cash....................................................................... 4,100
Sales.................................................................. 4,100
7 Purchases.............................................................. 6,800
Transportation In.................................................. 200
Accounts PayableSummit Co...................... 7,000
7 Accounts PayableTurner Co............................ 2,200
Purchases Returns and Allowances.............. 2,200
11 Accounts ReceivableFawcett Co.................... 2,000
Sales.................................................................. 2,000
14 Accounts PayableTurner Co............................ 8,600
Cash................................................................... 8,428
Purchases Discounts....................................... 172
15 Accounts ReceivableAmerican Express........ 5,850
Sales.................................................................. 5,850
17 Accounts PayableSummit Co.......................... 7,000
Cash................................................................... 6,864
Purchases Discounts....................................... 136
21 Cash....................................................................... 1,980
Sales Discounts.................................................... 20
Accounts ReceivableFawcett Co................ 2,000
25 Accounts ReceivableClemons Co................... 3,000
Sales.................................................................. 3,000
28 Cash....................................................................... 5,570
Nonbank Credit Card Expense............................ 280
Accounts ReceivableAmerican Express.... 5,850
30 Sales Returns and Allowances........................... 1,700
Accounts ReceivableClemons Co.............. 1,700

227
Prob. D2

Mar. 2 Purchases.............................................................. 22,400

Transportation In.................................................. 720
Accounts PayableDiane Co......................... 23,120
4 Purchases.............................................................. 8,000
Accounts PayableLambert Co..................... 8,000
6 Accounts ReceivableC. F. Howell Co.............. 4,500
Sales.................................................................. 4,500
9 Accounts PayableLambert Co......................... 1,300
Purchases Returns and Allowances.............. 1,300
12 Accounts PayableDiane Co............................. 23,120
Cash................................................................... 22,672
Purchases Discounts....................................... 448
14 Accounts PayableLambert Co......................... 6,700
Cash................................................................... 6,633
Purchases Discounts....................................... 67
16 Cash....................................................................... 4,410
Sales Discounts.................................................... 90
Accounts ReceivableC. F. Howell Co......... 4,500
19 Accounts ReceivableAmerican Express........ 4,450
Sales.................................................................. 4,450
22 Accounts ReceivableWu Co............................ 4,420
Sales.................................................................. 4,420
24 Cash....................................................................... 4,350
Sales.................................................................. 4,350
25 Sales Returns and Allowances........................... 1,610
Accounts ReceivableWu Co........................ 1,610
31 Cash....................................................................... 4,160
Nonbank Credit Card Expense............................ 290
Accounts ReceivableAmerican Express.... 4,450

228
Prob. D3

1. July 3 Accounts ReceivableSimpson Co.............. 12,400

Sales............................................................. 12,400
3 Transportation Out........................................... 450
Cash.............................................................. 450
10 Accounts ReceivableSimpson Co.............. 9,600
Sales............................................................. 9,600
11 Sales Returns and Allowances....................... 2,000
Accounts ReceivableSimpson Co......... 2,000
17 Accounts ReceivableSimpson Co.............. 30,000
Sales............................................................. 30,000
17 Accounts ReceivableSimpson Co.............. 1,750
Cash.............................................................. 1,750
18 Cash................................................................... 10,192
Sales Discounts................................................ 208
Accounts ReceivableSimpson Co......... 10,400
27 Cash................................................................... 31,450
Sales Discounts................................................ 300
Accounts ReceivableSimpson Co......... 31,750
31 Cash................................................................... 9,600
Accounts ReceivableSimpson Co......... 9,600

229
Prob. D3 Concluded

2. July 3 Purchases.......................................................... 12,400

Accounts PayableTramley Co................ 12,400
10 Purchases.......................................................... 9,600
Accounts PayableTramley Co................ 9,600
11 Accounts PayableTramley Co..................... 2,000
Purchases Returns and Allowances......... 2,000
14 Transportation In.............................................. 200
Cash.............................................................. 200
17 Purchases.......................................................... 30,000
Transportation In.............................................. 1,750
Accounts PayableTramley Co................ 31,750
18 Accounts PayableTramley Co..................... 10,400
Purchases Discounts................................. 208
Cash.............................................................. 10,192
27 Accounts PayableTramley Co..................... 31,750
Purchases Discounts................................. 300
Cash.............................................................. 31,450
31 Accounts PayableTramley Co..................... 9,600
Cash.............................................................. 9,600

230
Prob. D4

1. BAIT AND TACKLE CO.

Work Sheet
For the Year Ended December 31, 2003
Adjusted Income Balance
Trial Balance Adjustments Trial Balance Statement Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash............................. 38,000 ............... ................. ................. 38,000 ............... ............... ............... 38,000 ...............
Accounts Receivable. 112,500 ............... ................. ................. 112,500 ............... ............... ............... 112,500 ...............
Merchandise Inventory 180,000 ............... (b) 196,000 (a) 180,000 196,000 ............... ............... ............... 196,000 ...............
Prepaid Insurance...... 9,700 ............... ................. (c) 5,400 4,300 ............... ............... ............... 4,300 ...............
Store Supplies............ 4,250 ............... ................. (d) 2,950 1,300 ............... ............... ............... 1,300 ...............
Office Supplies........... 2,100 ............... ................. (e) 1,350 750 ............... ............... ............... 750 ...............
Store Equipment........ 132,000 ............... ................. ................. 132,000 ............... ............... ............... 132,000 ...............
Accum. Depr.Store
Equipment............ ............... 40,300 ................. (f) 7,500 ............... 47,800 ............... ............... ............... 47,800
Office Equipment....... 50,000 ............... ................. ................. 50,000 ............... ............... ............... 50,000 ...............
Accum. Depr.Office
Equipment............ ............... 17,200 ................. (g) 3,800 ............... 21,000 ............... ............... ............... 21,000
Accounts Payable...... ............... 66,700 ................. ................. ............... 66,700 ............... ............... ............... 66,700
Salaries Payable......... ............... ............... ................. (h) 5,000 ............... 5,000 ............... ............... ............... 5,000
Unearned Rent............ ............... 1,200 (i) 800 ................. ............... 400 ............... ............... ............... 400
Note Payable (final
payment, 2010)..... ............... 105,000 ................. ................. ............... 105,000 ............... ............... ............... 105,000
J. Milner, Capital......... ............... 154,600 ................. ................. ............... 154,600 ............... ............... ............... 154,600
J. Milner, Drawing....... 40,000 ............... ................. ................. 40,000 ............... ............... ............... 40,000 ...............
Income Summary....... ............... ............... (a) 180,000 (b)196,000 180,000 196,000 180,000 196,000 ............... ...............
Sales............................ ............... 915,000 ................. ................. ............... 915,000 ............... 915,000 ............... ...............
Sales Returns & Allow. 11,900 ............... ................. ................. 11,900 ............... 11,900 ............... ............... ...............
Sales Discounts.......... 7,100 ............... ................. ................. 7,100 ............... 7,100 ............... ............... ...............
Purchases................... 540,000 ............... ................. ................. 540,000 ............... 540,000 ............... ............... ...............

231
Prob. D4 Continued

Adjusted Income Balance

Trial Balance Adjustments Trial Balance Statement Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Purchases Returns and
Allowances........... ............... 10,100 ................. ................. ............... 10,100 ............... 10,100 ............... ...............
Purchases Discounts. ............... 4,900 ................. ................. ............... 4,900 ............... 4,900 ............... ...............
Transportation In........ 6,200 ............... ................. ................. 6,200 ............... 6,200 ............... ............... ...............
Sales Salaries Expense 71,400 ...........(h) 3,850 ................. 75,250 ............... 75,250 ............... ...............
Advertising Expense.. 25,000 ............... ................. ................. 25,000 ............... 25,000 ............... ............... ...............
Depr. Expense
Store Equipment. . ............... ............... (f) 7,500 ................. 7,500 ............... 7,500 ............... ............... ...............
Store Supplies Expense.............. ............... (d) 2,950 ................. 2,950 ............... 2,950 ............... ............... ...............
Misc. Selling Expense 1,600 ............... ................. ................. 1,600 ............... 1,600 ............... ...............
Office Salaries Expense 44,000 ............... (h) 1,150 ................. 45,150 ............... 45,150 ............... ............... ...............
Rent Expense.............. 26,000 ............... ................. ................. 26,000 ............... 26,000 ............... ............... ...............
Insurance Expense..... ............... ............... (c) 5,400 ................. 5,400 ............... 5,400 ............... ............... ...............
Depr. ExpenseOffice
Equipment............ ............... ............... (g) 3,800 ................. 3,800 ............... 3,800 ............... ............... ...............
Office Supplies
Expense................ ............... ............... (e) 1,350 ................. 1,350 ............... 1,350 ............... ............... ...............
Misc. Adm. Expense... 1,650 ............... ................. ................. 1,650 ............... 1,650 ............... ............... ...............
Rent Revenue............. ............... ............... ................. (i) 800 ............... 800 800 ............... ...............
Interest Expense......... 11,600 ............... ................. ................. 11,600 ............... 11,600 ............... ............... ...............
1,315,000 1,315,000 402,800 402,800 1,527,300 1,527,300 952,450 1,126,800 574,850 400,500
Net Income.................. 174,350 174,350
1,126,800 1,126,800 574,850 574,850

232
Prob. D4 Continued
2. BAIT AND TACKLE CO.
Income Statement
For the Year Ended December 31, 2003
Revenue from sales:
Sales............................................. $915,000
Less: Sales returns & allow...... $ 11,900
Sales discounts............... 7,100 19,000
Net sales...................................... $896,000
Cost of merchandise sold:
Merch. inv., Jan. 1, 2003......... $180,000
Purchases.................................... $540,000
Less: Pur. returns & allow......... $10,100
Purchases discounts....... 4,900 15,000
Net purchases.................................. $525,000
Add transportation in...................... 6,200
Cost of merch. purchased......... 531,200
Merchandise available for sale....... $711,200
Less merch. inv., Dec. 31, 2003...... 196,000
Cost of merchandise sold......... 515,200
Gross profit....................................... $380,800
Operating expenses:
Selling expenses:
Sales salaries expense......... $ 75,250
Advertising expense............. 25,000
Depr. exp.store equip........ 7,500
Store supplies expense ....... 2,950
Misc. selling expense........... 1,600
Total selling expenses.... $112,300
Administrative expenses:
Office salaries expense ....... $ 45,150
Rent expense......................... 26,000
Insurance expense................ 5,400
Depr. exp.office equip....... 3,800
Office supplies expense....... 1,350
Misc. administrative exp...... 1,650
Total admin. expenses.... 83,350
Total operating expenses.......... 195,650
Income from operations.................. $185,150
Other expense:
Interest expense......................... $ 11,600
Other income:
Rent revenue............................... 800 10,800
Net income........................................ $174,350

233
Prob. D4 Continued

3.
BAIT AND TACKLE CO.
Statement of Owners Equity
For the Year Ended December 31, 2003
J. Milner, capital, January 1, 2003......................................... $154,600
Net income for the year......................................................... $174,350
Less withdrawals................................................................... 40,000
Increase in owners equity.................................................... 134,350
J. Milner, capital, December 31, 2003................................... $288,950

234
Prob. D4 Continued

4.
BAIT AND TACKLE CO.
Balance Sheet
December 31, 2003
Assets
Current assets:
Cash.............................................................. $ 38,000
Accounts receivable................................... 112,500
Merchandise inventory............................... 196,000
Prepaid insurance....................................... 4,300
Store supplies............................................. 1,300
Office supplies............................................ 750
Total current assets.............................. $352,850
Fixed assets:
Store equipment.......................................... $132,000
Less accumulated depreciation........... 47,800 $ 84,200
Office equipment......................................... $ 50,000
Less accumulated depreciation........... 21,000 29,000
Total fixed assets............................. 113,200
Total assets....................................................... $466,050

Liabilities
Current liabilities:
Accounts payable....................................... $ 66,700
Note payable (current portion).................. 15,000
Salaries payable.......................................... 5,000
Unearned rent.............................................. 400
Total current liabilities.......................... $ 87,100
Long-term liabilities:
Note payable (final payment, 2010)........... 90,000
Total liabilities................................................... $177,100

Owners Equity
J. Milner, capital................................................ 288,950
Total liabilities and owners equity................. $466,050

235
Prob. D4 Continued

5. Income Summary............................................................. 180,000

Merchandise Inventory.............................................. 180,000
Merchandise Inventory.................................................... 196,000
Income Summary....................................................... 196,000
Insurance Expense.......................................................... 5,400
Prepaid Insurance...................................................... 5,400
Store Supplies Expense................................................. 2,950
Store Supplies............................................................ 2,950
Office Supplies Expense................................................ 1,350
Office Supplies........................................................... 1,350
Depreciation ExpenseStore Equipment.................... 7,500
Accumulated DepreciationStore Equipment....... 7,500
Depreciation ExpenseOffice Equipment................... 3,800
Accumulated DepreciationOffice Equipment...... 3,800
Sales Salaries Expense.................................................. 3,850
Office Salaries Expense.................................................. 1,150
Salaries Payable......................................................... 5,000
Unearned Rent................................................................. 800
Rent Revenue............................................................. 800

236
Prob. D4 Concluded

6. Sales................................................................................. 915,000
Purchases Returns and Allowances.............................. 10,100
Purchases Discounts...................................................... 4,900
Rent Revenue................................................................... 800
Income Summary....................................................... 930,800
Income Summary............................................................. 772,450
Sales Returns and Allowances................................. 11,900
Sales Discounts......................................................... 7,100
Purchases................................................................... 540,000
Transportation In........................................................ 6,200
Sales Salaries Expense............................................. 75,250
Advertising Expense................................................. 25,000
Depreciation ExpenseStore Equipment............... 7,500
Store Supplies Expense............................................ 2,950
Miscellaneous Selling Expense................................ 1,600
Office Salaries Expense............................................ 45,150
Rent Expense............................................................. 26,000
Insurance Expense.................................................... 5,400
Depreciation ExpenseOffice Equipment............. 3,800
Office Supplies Expense........................................... 1,350
Miscellaneous Administrative Expense................... 1,650
Interest Expense........................................................ 11,600
Income Summary............................................................. 174,350
J. Milner, Capital......................................................... 174,350
J. Milner, Capital.............................................................. 40,000
J. Milner, Drawing....................................................... 40,000

237