Chapter 9
Jerry’s bug service paid $700 cash to
replace tires on the truck. This
expenditure does not extend the useful
life of the truck or increase its efficiency
Repairs and Maintenance Expense 700
Cash 700
Must be paid either with cash or with goods and services within one year or within the entity’s operating cycle
Current liabilities
What is the difference between common stock and preferred stock ?
CS: Represents basic ownership
PS: gives owners certain advantages over common stock
What are the three most commonly used depreciation methods ?
Straight line method
Units-of-production
Double-declining balance method
December’s taxable sales for Amazon total
$10,500. The company collects an additional
4% sales tax,which equals $420
Cash 10,920
Sales Revenue 10,500
Sales Tax Payable 420
What are the three important ratios used for comparison ?
-EPS
-Rate of return on common stockholders’ equity
-Price/earnings ratio
On July 1, Planet Fitness
discards equipment with a
cost of $12,000 and accumulated
depreciation of $12,000.
Accumulated Depreciation- Equipment 12,000
Equipment- 12,000
During May, Smart Touch Learning delivers
one-third of the work and earns $450
of the revenue. On May
31, the accounting clerk records
Unearned Revenue 450
Service Revenue 450
Tim’s Games, Inc has 2,200 outstanding shares of 5%, $75 par value preferred stock. The dividend is computed as follows:
Preferred dividend = 8250
Assume Disney pays $175,000 to
acquire a patent on January 1. The useful
life of the patent is determined to be 4 years
Amortization expense = 43,750
Employers must pay at least three payroll taxes:
Employer FICA
State unemployment compensation (SUTA)
Federal unemployment compensation tax (FUTA)
Greg’s Games distributes a 6% common stock
dividend on
3,500,000 shares issued and
outstanding when the market
value is $65 per share and par
value is $1 per share. Declaration date entry:
Stock dividend -13,650,000
Common Stock Dividend Distributable- 210,000
Paid-In Capital in Excess of Par- common 13,440,000
Assume an oil well cost $750,000 and is
estimated to hold 60,000 barrels of oil.
There is no residual value. 3,500 barrels are
extracted during the year.
DPU= 12.50 per barrel
Depletion expense = 43,750
On May 1, Smart Touch Learning purchases merchandise
inventory with a 10%, 90-day note payable, for $8,000.
Assume a perpetual inventory system.
Merchandise Inventory 8000
Notes Payable 8000
On May 1, Smart Touch Learning declares a $0.06 per
Share cash dividend on 19,500 outstanding shares of
Common stock.
Cash Dividends 1170
Dividends Payable-Common 1170