4 - (Chapter 04 ~ Adjustments, Financia! Statements, and the Qualit} of Eamings PROBLEMS Pat. Req. 1 Dell Inc. Adjusted Trial Balance At January 31, 2012 (in millions of dollars) Debit Credit ’ Cash $ 8,352 Marketable securities 740 Accounts receivable 6,443 inventories 867 Property, plant, and equipment 4,510 Accumulated depreciation $ 2.233 Other assets 7,824 Accounts payable 8,308 Accrued expenses payable 3,788 Long-term debt 1898” Other tlabilities 8,234 Contributed capital 14,189 Retained earnings (deficit) 9,396 Sales revenue 61,101 Other income 134 Cost of sales 50,144 Selling, general, and administrative expenses 7,102 Research and development expense 665 Income tax expense 848, Totals $96,886 $96,686 Reg. 2 Since debits are supposed to equal credits in a trial balance, the balance in Retained Earnings is determined as the amount in the debit column necessary to make debits equal credits (a “plugged figure).‘Chapter 04 - Adjustments, Financial Statements, ané the Qualty of Eamings Deferred expense Accrued revenue Accrued expense Deferred revenue Accrued expense e f g. A a. b. c Deferred expense d. Deferred revenue Accrued expense Reg. 2 @. Unearned rent revenue (-L)....... 5,600 Rent revenue (+R, +SE) (88,400 + 6 months = $1,400 per mot b. Interest expense (+E, -SE) ... 540 Interest payable (+L) ($18,000 x 12 x 3/12) cc. Depreciation expense (+£, ~SE) .. 2,600 Accumulated depreciation (+KA, ~A) .. d. _Uneamed service revenue (-L) . 500 Service revenue (+R, +SE) ($3,000 x 2/12) 4,800 @. Insurance expense (+E, -SE)..... Prepaid insurance (~A)... soceeaneeceee ($9,000 + 12 months = $750 per month x 2 months of coverage) f Accounts receivable (+A), 4,000 Service revenue (+R, +S). g. Wage expense (+E, -SE) 14,000 Wages payable (+L) h. Property tax expense (+E, ~SE) 500 Property tax payable (+L). 452 5,600 540 2,500 500 1,500 4,000 14,000 §00Chapter 04 - Adjustinents, Financial Statements, and the Quality of Earnings P4-3, Req. 1 a. Deferred expense e. Accrued revenue 6. Deferred expense f Deferred expense c. Accrued expense g. Accrued expense d. Accrued expense h. Accrued expense Reg. 2 a. Depreciation expense (+E, -SE) 4,000 Accumulated depreciation (+XA, ~A) .. 4,000 b. Supplies expense (+E, -SE)...... 4,150 ‘Supplies (-A) 1,180 (Beg. Inventory of $400 + Purchases $1,000 — Ending Inventory $250) 6. Repairs expense (+E, -SE) 1,200 Accounts payable (+L).. 1,200 Property tax expense (+E, -SE) 4,500 Property tax payable (+1) ... 1,600 @. Accounts recelvable (+A)....... 8,000 Service revenue (+R, +E). 6,000 f Insurance expense (+E, ~SE)... 200 Prepaid insurance (-A). nnn 200 ($1,200 + 36 months x 6 months of coverage) g. Interest expense (+£, -SE) 385 Interest payable (+L). 385 (811,000 x .14 x 3/12) ‘h. Income tax expense (+E, -SE} 8,270 Income tax payable (+L) 8,270 To acorue income tax expense incurred but no’ Income before adjustments (given) 330, 000 Effect of adjustments (a) through (g) (2.435) (-$4,000-$1, 150-$1,200 Income before income taxes 27,565 ~$1,500+$6,000~$200-$385) Income tax rate x_30% Income tax expense 8.270 (rounded) 433