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EXERCISE 9-8A

Event

Assets

Liab.

Equity

Rev.

Exp.

Net Inc.

Cash Flow

3a.

3b.

10.

EXERCISE 9-8A (cont.)

Ozark Sales General Journal for 2016

Event	Account Title	Debit	Credit

1.	Cash
	Common Stock

2.	Merchandise Inventory
	Accounts Payable

3a.	Cash
	Sales Revenue
	Sales Tax Payable

3b.	Cost of Goods Sold
	Merchandise Inventory

4.	Warranty Expense
	Warranties Payable

5.	Sales Tax Payable
	Cash

6.	Cash
	Notes Payable

7.	Warranty Payable
	Cash

8.	Operating Expense
	Cash

9.	Accounts Payable
	Cash

10.	Interest Expense1
	Interest Payable

EXERCISE 9-8A b. (cont.)

Ozark Sales T-Accounts for 2016

Assets	=	Liabilities	+	Stockholder’s Equity

Cash		Accounts Payable		Common Stock
1.	5.		9.	2.			1.
3a.	7.			Bal.			Bal.
6.	8.
	9.		Sales Tax Payable		Sales Revenue
Bal. 284,600			5.	3a.			3a. 510,000
				Bal.			Bal. 510,000
Merchandise Inventory
2.	3b.		Warranties Payable		Cost of Goods Sold
Bal.			7.	4.		3b.
				Bal. 4,000		Bal. 330,000

			Interest Payable		Operating Expenses
				10.		8.
				Bal. 667		Bal. 78,000

			Notes Payable		Warranty Expense
				6.		4.
				Bal. 50,000		Bal. 10,200

						Interest Expense
						10.
						Bal. 667

EXERCISE 9-8A (cont.)

Ozark Sales Income Statement For the Year Ended December 31, 2016

	Sales Revenue

	Cost of Goods Sold

	Gross Margin

	Expenses
	Operating Expenses	$78,000
	Warranty Expense	10,200
	Total Operating Expenses

	Operating Income
	Interest Expense

	Net Income

EXERCISE 9-8A c. (cont.)

Ozark Sales Balance Sheet As of December 31, 2016

	Assets
	Cash
	Merchandise Inventory
	Total Assets

	Liabilities
	Accounts Payable
	Sales Tax Payable
	Warranties Payable
	Interest Payable
	Notes Payable
	Total Liabilities

	Stockholders’ Equity
	Common Stock
	Retained Earnings
	Total Stockholders’ Equity	141,133

	Total Liabilities and Stockholders’ Equity	$334,600

EXERCISE 9-8A c. (cont.)

Ozark Sales Statement of Cash Flows For the Year Ended December 31, 2016

	Cash Flows From Operating Activities:
	Inflow from Customers
	Inflow from Sales Tax
	Outflow to Purchase Inventory
	Outflow for Expenses1
	Outflow for Sales Tax
	Net Cash Flow from Operating Activities

	Cash Flows From Investing Activities	-0-

	Cash Flows From Financing Activities:
	Inflow from Stock Issue
	Inflow from Loan
	Net Cash Flow from Financing Activities

	Net Change in Cash
	Plus: Beginning Cash Balance
	Ending Cash Balance

d. Current Liabilities:

Accounts Payable $

Sales Tax Payable

Warranty Payable

Interest Payable

Notes Payable

Total Current Liabilities $

EXERCISE 9-10A

Clay - March
Gross Earnings
Deductions:
Federal Income Tax ($3,600 x %)
FICA Tax - SS ($3,600 x %)
FICA Tax - Medicare ($3,600 x %)
Total Deductions
Net Pay

Philip – March
Gross Earnings
Deductions:
Federal Income Tax ($x %)
FICA Tax - SS ($x %)
FICA Tax - Medicare ($ x %)
Total Deductions
Net Pay

EXERCISE 9-10A

Clay - December
Gross Earnings
Deductions:
Federal Income Tax
FICA Tax - SS
FICA Tax - Medicare
Total Deductions
Net Pay

Philip – December
Gross Earnings
Deductions:
Federal Income Tax
FICA Tax - Medicare
Total Deductions
Net Pay

Amount appearing on W-2 for 2016
Clay
Box 1 Wages, tips, and other compensation
Box 2 Federal income tax withheld
Box 3 Social Security wages
Box 4 Social Security tax withheld
Box 5 Medicare wages and tips
Box 6 Medicare tax withheld

EXERCISE 9-10A d. (cont.)

Amount appearing on W-2 for 2017
Philip
Box 1 Wages, tips, and other compensation
Box 2 Federal income tax withheld
Box 3 Social Security wages
Box 4 Social Security tax withheld
Box 5 Medicare wages and tips
Box 6 Medicare tax withheld

EXERCISE 10-4A

Effect of Transactions on Financial Statements

Balance Sheet

Income Statement

Statement of

No.

Assets

Liab.

S. Equity

Rev.

Exp.

Net Inc.

Cash Flow

b. (1)


	Revenue

	Expenses
	Operating Expenses
	Interest Expense
	Total Expenses

	Net Income		$ 5,000

(2)


Cash Flows From Operating Activities:
Inflow from Customers
Outflow for Expenses
Net Cash Flow from Operating Activities

(3)


Cash Flows From Financing Activities:
Inflow from Issue of Note
Outflow to Repay Note
Net Cash Flow from Financing Activities

c. EXERCISE 10-5A

Month	Amount Borrowed (Repaid)	Balance End of Month	Interest Rate	Interest Expense

January			.06/12
February			.065/12
March			.06/12

Date	Account Titles	Debit	Credit

2016
Jan. 1	Cash
	Line of Credit Payable

Jan. 31	Interest Expense
	Cash

Feb. 1	Cash
	Line of Credit Payable

Feb. 28	Interest Expense
	Cash

March 1	Line of Credit Payable
	Cash

March 31	Interest Expense
	Cash

EXERCISE 10-6A

Doyle Company General Journal

Date	Account Titles	Debit	Credit

2016
Jan. 1	Cash
	Bonds Payable

Jan. 1	Land
	Cash

Dec. 31	Cash
	Lease Revenue

Dec. 31	Interest Expense ($500,000 x 7%)
	Cash

Dec. 31	Lease Revenue
	Interest Expense
	Retained Earnings

2017
Dec. 31	Cash
	Lease Revenue

Dec. 31	Interest Expense
	Cash

Dec. 31	Lease Revenue
	Interest Expense
	Retained Earnings

EXERCISE 10-6A a. (cont.)

Doyle Company

Assets	=	Liabilities	+	Stockholders’ Equity

Cash		Bonds Payable		Retained Earnings
2016			2016			2016
1/1	1/1			1/1			cl
12/31	12/31			Bal.			Bal.
Bal.						2017
2017							cl
12/31	12/31						Bal.
Bal. 180,000
						Lease Revenue
						2016
Land					cl	12/31
2016							Bal. -0-
1/1						2017
Bal.						cl	12/31
							Bal. -0-

						Interest Expense
						2016
						12/31	cl
						Bal. -0-
						2017
						12/31	cl
						Bal. -0-

10-23

EXERCISE 10-6A b. (cont.)

Doyle Company
Financial Statements		2016		2017
Income Statements for the Year Ended Decebmer 31

	Lease Revenue

	Interest Expense

	Net Income		$ 90,000		$ 90,000

Balance Sheets as of December 31
	Assets
	Cash
	Land
	Total Assets

	Liabilities
	Bonds Payable

	Stockholders’ Equity
	Common Stock
	Retained Earnings
	Total Stockholders’ Equity

	Total Liab. and Stockholders’ Equity		$590,000		$680,000

Statements of Cash Flows for the Year Ended December 31

	Cash Flows From Operating Activities:
	Receipts from Revenue
	Paid for Interest
	Net Cash Flow from Operating Act.

	Cash Flows From Investing Activities:
	Paid to Purchase Land

	Cash Flows From Financing Activities:
	Proceeds from Bond Issue

	Net Change in Cash
	Plus: Beginning Cash Balance
	Ending Cash Balance

EXERCISE 10-7A

Bell Corp. General Journal

Date	Account Titles	Debit	Credit

2016
Jan.1	Cash
	Bonds Payable

Dec. 31	Interest Expense*
	Cash

2017
Dec. 31	Interest Expense
	Cash

EXERCISE 10-8A

Nivan Co.

Date	Account Titles	Debit	Credit

2016
Jan. 1	Cash
	Bonds Payable

2020
Dec. 31	Loss on Bond Redemption
	Bonds Payable
	Cash

EXERCISE 10-19A

Face Value	−	Bond Price	=	Discount

Carrying Value	x	Effective Rate	=	Interest Expense

c. Compute the Ending Balance in the Discount Account

Face Value	x	Stated Rate	=	Cash Payment

Interest Expense	−	Cash Payment	=	Amortization

Beginning Discount	−	Amortization	=	Ending Discount

Bond Carrying Value as of December 31, 2016


Bond Payable (Face Value)
Discount on Bonds Payable
Carrying Value

Account Titles	Debit	Credit

Interest Expense
Bond Discount
Cash

EXERCISE 10-20A

Date	Cash Payment	Interest Expense	Discount Amortization	Carrying Value
January 1, 2016				76,888
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
Totals	32,000	35,112	3,112

Bond liability	$
Less: Bond discount
Carrying value	$

EXERCISE 10-25A

Current Total Current Total

Situation Assets Assets Liabilities Liabilities

Currently

Using bonds

Using stock

If Bonds If Stock

Currently Are Issued Is Issued

Current ratio

Debt to assets ratio

(1)

(2)

(3)

(4)

(5)

b. Bonds Stock

EBIT

Interest expense

Pretax earnings

Tax expense (40%) (21,600) (24,000)

Net earnings

Dividends

Additional retained earnings $ $