Review Chapters 1-4 Solutions Requirement 1 a) Unearned sales revenue ……………………………….. 2,400 Sales revenue …………………………………………. 2,400 COGS ………………………………………………….. 1,500 Inventory ………………………………………………. 1,500 b) Insurance Exp ………………………………………… 750* Prepaid Ins Exp ……………………………………….. *Calculation: 1800*5/12=750 c) Depreciation Exp …………………………………….. Acc Depreciation …………………………………….. *Calculation=( 72,800-3,800)/5=13,800 13,800 13,800

750

d) Supplies exp …………………………………………… 1,100* Supplies on hand ………………………………………. 1,100 *Calculations=2050-X=950 e) Interest exp …………………………………………….. 1,750* Interest payable ………………………………………… 1,750 *Calculation:35,000*6%=2,100 Accrued interest exp= 2,100*10/12=1,750 f) Income Tax Expense …………………………………… 1290* Income Tax Payable …………………………………….. 1290 *Calculations=4300*30%1290

1

Requirement 2 Fashion World Inc Income Statement For the period ended December 31, 2009 ($ dollars) Sales1 COGS2 Gross Profit Operating Expenses Rent Expenses Salary Expenses Insurance Exp Depr Expense Supplies expenses Operating Profit Profit before interest and taxes Interest expenses Profit before Income Tax Income Tax Expense (30%) Profit EPS3 224,550 158500 66,050

13,850 30,500 750 13800 1100 6,050 6,050 1,750 4,300 1290 3,010 3.01

1 2

Calculations: 222,150+2,400=224,550 Calculations: 157,000+1,500=158,500 3 Calculations: 3,010/1,000=3.01

2

Requirement 3 Revenue ……………………………………… 224,550 Income Summary ……………………………. Income Summary ……………………………. 221,540 COGS ………………………………………… Rent Expense ………………………………… Salary Expense ………………………………. Insurance Expense …………………………… Depreciation Expense ………………………... Supplies expense ……………………………… Interest Expense ………………………………. Income Tax Expense …………………………. Income Summary …………………………… 3,010 Retained Earnings ………………………….. Retained earnings ………………………….. 10,000 Dividend declared ………………………….

224,550

158,500 13,850 30,500 750