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Chapter 5 Homework

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Chapter 5 Homework

Uploaded by

sofia tominaga
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 5 Homework

EA1. Identify whether each of the following accounts is nominal/temporary or


real/permanent.
A. Accounts Receivable – Real/Permanent
B. Fees Earned Revenue – Nominal/Temporary
C. Utility Expense – Nominal/Temporary
D. Prepaid Rent – Real/Permanent
EA2. For each of the following accounts, identify whether it is nominal/temporary or
real/permanent, and whether it is reported on the Balance Sheet or the Income Statement.
A. Interest Expense
Nominal/Temporary
Income Statement
B. Buildings
Real/Permanent
Balance Sheet
C. Interest Payable
Real/Permanent
Balance Sheet
D. Unearned Rent Revenue
Real/Permanent
Balance Sheet

EB1. Identify whether each of the following accounts are nominal/temporary or


real/permanent.
A. Rent Expense – Nominal/Temporary
B. Unearned Service Fee Revenue – Real/Permanent
C. Interest Revenue – Nominal/Temporary
D. Accounts Payable – Real/Permanent
EB2. For each of the following accounts, identify whether it is nominal/temporary
or real/permanent, and whether it is reported on the Balance Sheet or the Income
Statement.
A. Salaries Payable
Real/Permanent
Balance Sheet
B. Sales Revenue
Nominal/Temporary
Income Statement
C. Salaries Expense
Nominal/Temporary
Income Statement
D. Prepaid Insurance
Real/Permanent
Balance Sheet

EA3. For each of the following accounts, identify whether it would be closed at year-end
(yes or no) and on which financial statement the account would be reported (Balance
Sheet, Income Statement, or Retained Earnings Statement).
A. Accounts Payable
No (not closed)
Balance Sheet
B. Accounts Receivable
No (not closed)
Balance Sheet
C. Cash
No (not closed)
Balance Sheet
D. Dividends
Yes (closed)
Retained Earnings Statement
E. Fees Earned Revenue
Yes (closed)
Income Statement
F. Insurance Expense
Yes (closed)
Income Statement
G. Prepaid Insurance
No (not closed)
Balance Sheet
H. Supplies
No (not closed)
Balance Sheet

EB3. For each of the following accounts, identify whether it would be closed at year-end
(yes or no) and on which financial statement the account would be reported (Balance
Sheet, Income Statement, or Retained Earnings Statement).
A. Retained Earnings
No (not closed)
Retained Earnings Statement
B. Prepaid Rent
No (not closed)
Balance Sheet
C. Rent Expense
Yes (closed)
Income Statement
D. Rent Revenue
Yes (closed)
Income Statement
E. Salaries Expense
Yes (closed)
Income Statement
F. Salaries Payable
No (not closed)
Balance Sheet
G. Supplies Expense
Yes (closed)
Income Statement
H. Unearned Rent Revenue
No (not closed)
Balance Sheet

EA4. The following accounts and normal balances existed at year-end. Make the four journal
entries required to close the books:

1. Close Service Revenue to Income Summary


- Debit Service Revenue $85,000
- Credit Income Summary $85,000
2. Close Expenses to Income Summary
- Debit Income Summary $67,100 (Total of all expenses: $5,600 + $6,000 + $48,000 + $7,500)
- Credit Advertising Expense $5,600
- Credit Rent Expense $6,000
- Credit Salaries Expense $48,000
- Credit Utilities Expense $7,500
3. Close Income Summary to Retained Earnings
- Net Income = $85,000 - $67,100 = $17,900
- Debit Income Summary $17,900
- Credit Retained Earnings $17,900
4. Close Dividends to Retained Earnings
- Debit Retained Earnings $4,000
- Credit Dividends $4,000
EA5. The following accounts and normal balances existed at year-end. Make the four journal
entries required to close the books:

1. Close Revenue Accounts:


Close the Fees Earned Revenue account to the Income Summary account.
- Debit Fees Earned Revenue $90,000
- Credit Income Summary $90,000
2. Close Expense Accounts:
Close all expenses (Selling Expenses, Administrative Expenses, Miscellaneous Expense) to the
Income Summary account.
- Debit Income Summary $63,300 (sum of all expenses: $45,000 + $16,000 + $2,300)
- Credit Selling Expenses $45,000
- Credit Administrative Expenses $16,000
- Credit Miscellaneous Expense $2,300
3. Close Income Summary to Retained Earnings:
After closing the revenues and expenses, the balance in the Income Summary represents net
income, which is transferred to Retained Earnings.
Net Income = Revenues $90,000 - Expenses $63,300 = $26,700
- Debit Income Summary $26,700
- Credit Retained Earnings $26,700
4. Close Dividends to Retained Earnings:
Close the Dividends account to Retained Earnings.
- Debit Retained Earnings $6,000
- Credit Dividends $6,000
PA1. Identify whether each of the following accounts would be considered a permanent
account (yes/no) and which financial statement it would be reported on (Balance Sheet, Income
Statement, or Retained Earnings Statement).
A. Accumulated Depreciation
Permanent: Yes
Financial Statement: Balance Sheet
B. Buildings
Permanent: Yes
Financial Statement: Balance Sheet
C. Depreciation Expense
D. Permanent: No
Financial Statement: Income Statement
E. Equipment
Permanent: Yes
Financial Statement: Balance Sheet
F. Fees Earned Revenue
Permanent: No
Financial Statement: Income Statement
G. Insurance Expense
Permanent: No
Financial Statement: Income Statement
H. Prepaid Insurance
Permanent: Yes
Financial Statement: Balance Sheet
I. Supplies Expense
Permanent: No
Financial Statement: Income Statement
J. Dividends
Permanent: No
Financial Statement: Retained Earnings Statement
PB1. LO 5.1 Identify whether each of the following accounts would be considered a
permanent account (yes/no) and which financial statement it would be reported on (Balance
Sheet, Income Statement, or Retained Earnings Statement).
A. Common Stock
Permanent: Yes
Financial Statement: Balance Sheet

B. Dividends
Permanent: No
Financial Statement: Retained Earnings Statement

C. Dividends Payable
Permanent: Yes
Financial Statement: Balance Sheet

D. Equipment
Permanent: Yes
Financial Statement: Balance Sheet

E. Income Tax Expense


Permanent: No
Financial Statement: Income Statement

F. Income Tax Payable


Permanent: Yes
Financial Statement: Balance Sheet

G. Service Revenue
Permanent: No
Financial Statement: Income Statement

H. Unearned Service Revenue


Permanent: Yes
Financial Statement: Balance Sheet

I. Net Income
Permanent: No
Financial Statement: Retained Earnings Statement
PB2. LO 5.3 Using the following Balance Sheet summary information, calculate for the two
years presented:
A. working capital
B. current ratio

Formulas:
1. Working Capital = Current Assets - Current Liabilities
2. Current Ratio= Current Assets ÷ Current Liabilities

Company P:
- Current Assets: $88,500
- Current Liabilities: $67,430

Working Capital for Company P:


$88,500 - $67,430 = $21,070
Working Capital = $21,070

Current Ratio for Company P:


$88,500 ÷ $67,430 ≈ 1.31
Current Ratio = 1.31

Company Q:
- Current Assets: $39,000
- Current Liabilities: $18,800

Working Capital for Company Q:


$39,000 - $18,800 = $20,200
Working Capital = $20,200

Current Ratio for Company Q:


$39,000 ÷ $18,800 ≈ 2.07
Current Ratio = 2.07

Summary:
- Company p:
- Working Capital = $21,070
- Current Ratio = 1.31
- Company Q:
- Working Capital = $20,200
- Current Ratio = 2.07

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