P4-7 Tunstall Inc

CP4-2Urban Outfitters

Complete P4-7 (page 209) and CP4-2 (page 217) from Chapter 4 of your Financial Accounting textbook.

Libby, R., Libby, P. A., & Short, D. G. (2014). Financial accounting (8th ed.) [Custom text bundle]. New York, NY: McGraw-Hill. ISBN: 9781259329029.

P4-7 Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement  Including Earnings per Share LO4-1, 4-2, 4-4

Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period, December 31, 2014:

Account Titles  Debit Credit

  Cash          $42,000

  Accounts receivable           11,600

   Supplies                900

  Prepaid insurance               800

   Service trucks           19,000

  Accumulated depreciation         $9,200

  Other assets            8,300

  Accounts payable           3,000

  Wages payable

  Income taxes payable

  Note payable (3 years; 10% interest due each December 31)         17,000

  Common stock (5,000 shares outstanding)             400

  Additional paid-in capital         19,000

  Retained earnings           6,000

  Service revenue         61,360

  Remaining expenses (not detailed; excludes income tax)          33,360

   Income tax expense

      Totals       $115,960     $115,960

Data not yet recorded at December 31, 2014, included:

a. The supplies count on December 31, 2014, reflected $300 remaining supplies on hand to be used in 2015.

b. Insurance expired during 2014, $800.

c. Depreciation expense for 2014, $3,700.

d. Wages earned by employees not yet paid on December 31, 2014, $640.

e. Income tax expense, $5,540.

Required:

1 Record the 2014 adjusting entries. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

A                     b                      c                      d                      e

Required:

2-a. Prepare an income statement that includes the effects of the preceding five transactions. (Round “Earnings per share” to 2 decimal places.)

TUNSTALL, INC.

Income Statement

For the Year Ended December 31, 2014

Operating revenue:

Operating expenses:

Total expenses

Net income

$16,720

Earnings per share

 Required:

2-b. Prepare a classified balance sheet that includes the effects of the preceding five transactions. (Amounts to be deducted should be indicated by a minus sign.)

TUNSTALL, INC.

Balance Sheet

At December 31, 2014

Assets

Liabilities and Stockholders Equity

Current assets:

Current liabilities:

Required:

3 Record the 2014 closing entry. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

CP4-2 Finding Financial Information LO4-2, 4-3, 4-4

Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book.

Required:

1. How much is in the Prepaid Expenses and Other Current Assets account at the end of the most recent year (for the year ended January 31, 2012)?         (in thousands)

Where did you find this information?

2. What did the company report for Deferred Rent and Other Liabilities at the end of the most recent year (for the year ended January 31, 2012)? (in thousands)

Where did you find this information?

3. What is the difference between prepaid rent and deferred rent?

4. Describe in general terms what accrued liabilities are.

5. What would generate the interest income that is reported on the income statement?

6. What company accounts would not have balances on a post-closing trial balance?

7. Describe the closing entry, if any, for Prepaid Expenses.

8. What is the company’s earnings per share (basic only) for the three years reported?

9. Compute the company’s total asset turnover ratio for the three years reported. Dollars in thousands.)

What does the trend suggest to you about Urban Outfitters?