1460T_c03.qxd11/18/0508:34 am Page113 EQA Exercises·113 Merchandise Inventory 12/31/07 $60.000 Cost of Goods Sold $225,700 Common Stock 75.000 Selling Expenses 16,000 Retained Earnings 45.000 Administrative Expenses 38.000 Dividends 18.000 Income Tax Expense 30,000 Sales Returns and Allowances 12,000 Sales Discounts 15.000 Sales 410,000 Instructions Prepare closing entries for Homer Winslow Co.on December 31,2007.(Omit explanations.) (L0 4)E3-19 (Transactions of a Corporation,Including Investment and Dividend)Scratch Miniature Golf and Driving Range Inc.was opened on March 1 by Scott Verplank.The following selected events and transactions occurred during March. Mar.1 Invested S50,000 cash in the business in exchange for common stock. 3 Purchased Michelle Wie's Golf Land for $38,000 cash.The price consists of land $10,000;building $22,000;and equipment $6,000.(Make one compound entry.) 5 Advertised the opening of the driving range and miniature golf course,paying advertising expenses of $1,600. Paid cash $1,480 for a one-year insurance policy 10 Purchased golf equipment for $2,500 from Singh Company,payable in 30 days. 18 Received golf fees of $1.200 in cash. 25 Declared and paid a $500 cash dividend. 30 Paid wages of S900. 30 Paid Singh Company in full. 31 Received $750 of fees in cash. Scratch uses the following accounts:Cash;Prepaid Insurance;Land;Buildings;Equipment;Accounts Payable;Common Stock;Dividends;Service Revenue;Advertising Expense;and Wages Expense Instructions Journalize the March transactions.(Provide explanations for the journal entries.) ⊕ (L0 9)*E3-20 (Cash to Accrual Basis)Jill Accardo,M.D.,maintains the accounting records of Accardo Clinic on a cash basis.During 2007,Dr.Accardo collected $142,600 from her patients and paid $55,470 in expenses At January 1,2007,and December 31,2007,she had accounts receivable,unearned service revenue,accrued expenses,and prepaid expenses as follows.(All long-lived assets are rented.) January 1,2007 December 31,2007 Accounts receivable $9,250 $15,927 Unearned service revenue 2,840 4,111 Accrued expenses 3,435 2,108 Prepaid expenses 1,917 3,232 Instructions Prepare a schedule that converts Dr.Accardo's "excess of cash collected over cash disbursed"for the year 2007 to net income on an accrual basis for the year 2007. (L0 9)*E3-21 (Cash and Accrual Basis)Wayne Rogers Corp.maintains its financial records on the cash basis of accounting.Interested in securing a long-term loan from its regular bank,Wayne Rogers Corp.requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis.You are provided with the following summarized data covering 2006,2007,and 2008. 2006 2007 2008 Cash receipts from sales: On 2006 sales $295,000 $160,000 $30,000 On 2007 sales -0- 355.000 90,000 On 2008 sales 408,000 Cash payments for expenses: On 2006 expenses 185.000 67,000 25.000 On 2007 expenses 40,000 160,000 55,000 On 2008 expenses 45,000 218,000 Prepayments of 2007 expenses. PPrepayments of 2008 expenses Instructions (a)Using the data above,prepare abbreviated income statements for the years 2006 and 2007 on the cash basis.Exercises • 113 Merchandise Inventory 12 ⁄ 31 ⁄ 07 $ 60,000 Cost of Goods Sold $225,700 Common Stock 75,000 Selling Expenses 16,000 Retained Earnings 45,000 Administrative Expenses 38,000 Dividends 18,000 Income Tax Expense 30,000 Sales Returns and Allowances 12,000 Sales Discounts 15,000 Sales 410,000 Instructions Prepare closing entries for Homer Winslow Co. on December 31, 2007. (Omit explanations.) E3-19 (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March. Mar. 1 Invested $50,000 cash in the business in exchange for common stock. 3 Purchased Michelle Wie’s Golf Land for $38,000 cash. The price consists of land $10,000; building $22,000; and equipment $6,000. (Make one compound entry.) 5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,600. 6 Paid cash $1,480 for a one-year insurance policy. 10 Purchased golf equipment for $2,500 from Singh Company, payable in 30 days. 18 Received golf fees of $1,200 in cash. 25 Declared and paid a $500 cash dividend. 30 Paid wages of $900. 30 Paid Singh Company in full. 31 Received $750 of fees in cash. Scratch uses the following accounts: Cash; Prepaid Insurance; Land; Buildings; Equipment; Accounts Payable; Common Stock; Dividends; Service Revenue; Advertising Expense; and Wages Expense. Instructions Journalize the March transactions. (Provide explanations for the journal entries.) *E3-20 (Cash to Accrual Basis) Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2007, Dr. Accardo collected $142,600 from her patients and paid $55,470 in expenses. At January 1, 2007, and December 31, 2007, she had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.) January 1, 2007 December 31, 2007 Accounts receivable $9,250 $15,927 Unearned service revenue 2,840 4,111 Accrued expenses 3,435 2,108 Prepaid expenses 1,917 3,232 Instructions Prepare a schedule that converts Dr. Accardo’s “excess of cash collected over cash disbursed” for the year 2007 to net income on an accrual basis for the year 2007. *E3-21 (Cash and Accrual Basis) Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2006, 2007, and 2008. 2006 2007 2008 Cash receipts from sales: On 2006 sales $295,000 $160,000 $30,000 On 2007 sales –0– 355,000 90,000 On 2008 sales 408,000 Cash payments for expenses: On 2006 expenses 185,000 67,000 25,000 On 2007 expenses 40,000a 160,000 55,000 On 2008 expenses 45,000b 218,000 a Prepayments of 2007 expenses. b Prepayments of 2008 expenses. Instructions (a) Using the data above, prepare abbreviated income statements for the years 2006 and 2007 on the cash basis. (L0 4) (L0 9) (L0 9) 1460T_c03.qxd 11/18/05 08:34 am Page 113