Question

Sbrocchi’s Piano Rebuilding Company has been operating for one year (2013). At the start of 2014, its statement of earnings accounts had zero balances and the account balances on its statement of financial position were as follows:
Required
1. Create T-accounts for the accounts reported on the statement of financial position and for these additional accounts: rebuilding fees revenue, rent revenue, wages expense, and utilities expense. Enter the beginning balances.
2. Enter the following January 2014 transactions in the T- accounts, using the letter of each transaction as the reference:
a. Received a $ 600 deposit from a customer who wanted her piano rebuilt.
b. Rented a part of the building to a bicycle repair shop; received $ 820 for rent in January.
c. Rebuilt and delivered five pianos to customers who paid $ 18,400 in cash.
d. Received $ 7,200 from customers as payment on their accounts.
e. Received an electric and gas utility bill for $ 520 to be paid in February.
f. Ordered $ 960 in supplies.
g. Paid $ 2,140 on account to suppliers.
h. Received from Ella Sbrocchi, the major shareholder, a $ 920 tool (equipment) to use in the business in exchange for the company’s shares.
i. Paid $ 15,000 in wages to employees for work in January.
j. Declared and paid a cash dividend of $ 2,600.
k. Received and paid for the supplies ordered in (f).
3. Using the data from the T- accounts, calculate the amounts for the following on January 31, 2014:
Revenues, $ __________ – Expenses, $ __________ = Net earnings, $ __________ Assets, $ __________ = Liabilities, $ __________ + Shareholders’ Equity, $ __________
4. Calculate the company’s net earnings for January by using the cash basis of accounting. Why does this differ from the net earnings in (3) above? 5. Calculate the return on assets for January 2014. If the company had a return on assets of 6 percent in December 2013 and = percent in November 2013, what does your computation suggest to you about Sbrocchi’s Piano Rebuilding Company? What would you state in your report?


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  • CreatedAugust 04, 2015
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