Problem 1 Textbook Reference P14A Financial Accounting Revi

Problem 1 (Textbook Reference: P1-4A) - Financial Accounting Review Problem The Homer Company uses the perpetual inventory procedure. The 2013 bal follows ance sheet of the Homer Company is as Homer Company Balance Sheet December 31, 2013 Assets Current Assets: Cash Accounts receivable, net Inventory Prepaid Expenses S 60,000 $ 130,000 $210,000 S 20,000 $420,000 Total current assets Long-Term Assets S 50,000 Land Buildings and equipment $ 500,000 Less: Accumulated depreciation Total assets S(150,000) S350.000 $820,000 Liabilities and Stockholders\' Equity Current liabilities: Accounts payable Income taxes payable Accrued expeneses payable $ 70,000 S 50,000 $ 30,000 $150,000 Total current liabilites $200,000 $350,000 Bonds payable, 9% due 2040 Total liabilities Stockholders\' Equity Capital Stock $300,000 S30 par value, 10,000 shares outstanding Retained earnings S170,000 $470,000 Total stockhokders\' equity Total liabilities and stockhokders\' equity $820,000

Solution

1. In the books of Homer Company

2.

2.

Transaction	Journal Entry	Debit	Credit
		$	$
a.	Inventory	480,000
	Accounts Payable		480,000
b.	Accounts Receivable	980,000
	Sales Revenue		980,000
c.	Cost of Goods Sold	500,000
	Inventory		500,000
d.	Cash	1,000,000
	Accounts Receivable		1,000,000
e.	Accounts Payable	500,000
	Cash		500,000
f.	Prepaid Expenses	16,000
	Cash		16,000
g.	Miscellaneous Expenses	22,000
	Prepaid Expenses		22,000
h.	Bond Interest Expense	18,000
	Cash		18,000
i.	Salaries and Wages Expense	300,000
	Accrued Expenses Payable		300,000
j.	Accrued Expenses Payable	310,000
	Cash		310,000
k.	Income Taxes Payable	50,000
	Cash		50,000
l.	Depreciation Expense	50,000
	Accumulated Depreciation		50,000
m.	Bad Debt Expense	10,000
	Allowance for Doubtful Accounts		10,000
n.	Buildings and Equipment	70,000
	Cash		70,000
o.	Retained Earnings	10,000
	Cash		10,000
p.	Income Tax Expense	32,000
	Income Taxes Payable		32,000