Page 55 - Accounting Principles (A Business Perspective)

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Salaries expense $120,000
Service revenue 300,000
Gas and oil expense 27,000
Rent expense 48,000
Dividends paid 40,000
Prepare an income statement for July 2010.
Exercise K Given the following facts, prepare a statement of retained earnings for Brindle Company, a tanning
salon, for August 2010:

Balance in retained earnings at end of July, USD 188,000.
Dividends paid in August, USD 63,600.
Net income for August, USD 72,000.
The column totals of a summary of transactions for Speedy Printer Repair, Inc., as of 2010 December 31, were as
follows:
Accounts payable $60,000
Accounts receivable 90,000
Capital stock 100,000
Cash 40,000
Land 80,000
Building 50,000
Equipment 30,000
Notes payable 20,000
Retained earnings ?
Prepare a balance sheet. We have purposely listed the accounts out of order.
Exercise M Merck & Co., Inc. is a world leader in the discovery, development, manufacture and marketing of a
broad range of human and animal health products. The company, which has 70,000 employees, spends over USD 2
billion every year on the research and development of new drugs. As of the end of 2, its 2.2 billion shares are valued
in the stock market for a total of USD 132 billion. Given the following data for Merck, calculate the equity ratios for
2003 and 2002. Then comment on the results.

2003 2002

Stockholders' equity USD 14,832,400,000 USD 13,241,600,000

Total equities USD 39,910,400,000 USD 35,634,900,000

Problems
Problem A Lakewood Personal Finance Company, which provides financial advisory services, engaged in the
following transactions during May 2010:
May 1Received USD 300,000 cash for shares of capital stock issued when company was organized.
2 The company borrowed USD 40,000 from the bank on a note.
7 The company bought USD 182,400 of computer equipment for cash.
11 Cash received for services performed to date was USD 15,200.

14 Services performed for a customer who agreed to pay within a month were USD 10,000.
15 Employee wages were paid, USD 13,200.
19 The company paid USD 14,000 on the note to the bank.
31 Interest paid to the bank for May was USD 140. (Interest is an expense, which reduces retained earnings.)
31 The customer of May 14 paid USD 3,200 of the amount owed to the company.

Accounting Principles: A Business Perspective 56 A Global Text