3-5

Margie Van Epps established Health Services, P.C., a professional corporation, in March of the current year. Health Services offers healthy living advice to its clients. The effect of each transaction on the balance sheet and the balances after each transaction for March are as follows. Each increase or decrease in retained earnings, except transaction h, affects net income.

1. Describe each transaction.

2. What is the amount of the net income for March?

3-7

The following accounts were taken from the unadjusted trial balance of Inter Circle Co., a congressional lobbying firm. Indicate whether or not each account would normally require an adjusting entry. If the account normally requires an adjusting entry, use the following notations to indicate the type of adjustment:

• AE—Accrued Expense

• AR—Accrued Revenue

• DR—Deferred Revenue

• DE—Deferred Expense

To illustrate, the answer for the first account is as follows.

Account		Answer
a.	Accounts Receivable	Normally requires adjustment (AR)
b.	Accumulated Depreciation
c.	Common Stock
d.	Dividends
e.	Interest Payable
f.	Interest Receivable
g.	Land
h.	Office Equipment
i.	Prepaid Rent
j.	Supplies
k.	Unearned Fees
l.	Wages Expense

E-13

Laguna Realty Co. pays weekly salaries of $8,000 on Friday for a five-day week ending on that day. What is the adjustment at the end of the accounting period, assuming that the period ends (a) on Monday or (b) on Wednesday? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.

E-29

La-Z-Boy Inc. (LZB) is one of the world’s largest manufacturer of furniture and is best known for its reclining chairs. The following data (in thousands) were adapted from recent financial statements:

Accounts payable	$ 62,403
Accounts receivable	154,055
Accrued expenses payable	118,721
Accumulated depreciation	339,890
Common stock	46,788
Cash	136,871
Intangible assets	93,444
Inventories	184,841
Debt due within one year	223
Long-term debt	199
Other current assets	42,451
Other long-term assets	100,423
Other long-term liabilities	86,205
Other stockholders’ equity items	286,784
Property, plant, and equipment	520,772
Retained earnings	291,644

Prepare a classified balance sheet as of April 28.
 

Transcribed Image Text:

BALANCE SHEET Assets = Liabilities + Stockholders' Equity Accounts Accounts Common Retained Cash + Receivable + Supplies = Payable Stock Earnings + a. 35,000 35,000 b. 1,800 1,800 Bal. 35,000 1,800 1,800 35,000 (800) (800) C. Bal. 34,200 1,800 1,000 35,000 d. 31,300 31,300 Bal. 65,500 1,800 1,000 35,000 31,300 е. (25,000) (25,000) Bal. 40,500 1,800 1,000 35,000 6,300 f. (1,250) (1,250) Bal. 40,500 550 1,000 35,000 5,050 g. 8,900 8,900 Bal. 40,500 8,900 550 1,000 35,000 13,950 h. (6,000) (6,000) Bal. 34,500 8,900 550 1,000 35,000 7,950 STATEMENT OF CASH FLOWS INCOME STATEMENT d. Fees earned a. Financing c. Operating 35,000 31,300 e. Expenses f. Expenses (800) (25,000) d. Operating 31,300 (1,250) e. Operating (25,000) g. Fees earned 8,900 h. Financing (6,000) 13,950 34,500 BALANCE SHEET Assets = Liabilities + Stockholders' Equity Accounts Accounts Common Retained Cash + Receivable + Supplies = Payable Stock Earnings + a. 35,000 35,000 b. 1,800 1,800 Bal. 35,000 1,800 1,800 35,000 (800) (800) C. Bal. 34,200 1,800 1,000 35,000 d. 31,300 31,300 Bal. 65,500 1,800 1,000 35,000 31,300 е. (25,000) (25,000) Bal. 40,500 1,800 1,000 35,000 6,300 f. (1,250) (1,250) Bal. 40,500 550 1,000 35,000 5,050 g. 8,900 8,900 Bal. 40,500 8,900 550 1,000 35,000 13,950 h. (6,000) (6,000) Bal. 34,500 8,900 550 1,000 35,000 7,950 STATEMENT OF CASH FLOWS INCOME STATEMENT d. Fees earned a. Financing c. Operating 35,000 31,300 e. Expenses f. Expenses (800) (25,000) d. Operating 31,300 (1,250) e. Operating (25,000) g. Fees earned 8,900 h. Financing (6,000) 13,950 34,500

Answer rating: 100% (QA)

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