Question

The trial balance of Pacilio Security Services, Inc. as of January 1, Year 5, had the following normal balances:

Cash	$	62,860
Accounts receivable		20,500
Supplies		150
Prepaid rent		2,000
Merchandise inventory (9 @ $240)		2,160
Land		4,000
Accounts payable		980
Salaries payable		1,500
Common stock		50,000
Retained earnings		39,190

During Year 5, Pacilio Security Services experienced the following transactions:

1. Paid the salaries payable from Year 4.
2. On January 15, purchased 20 standard alarm systems for cash at a cost of $250 each.
3. On February 1, paid the accounts payable of $980, but not within the discount period. (The company uses the gross method.)
4. On March 1, leased a business van. Paid $4,800 for one year’s lease in advance.
5. Paid $7,200 on May 1 for one year’s rent on the office in advance.
6. Purchased with cash $500 of supplies to be used over the next several months by the business.
7. Purchased with cash another 25 alarm systems on August 1 for resale at a cost of $260 each.
8. On September 5, purchased on account 30 standard alarm systems at a cost of $265.
9. Installed 60 standard alarm systems for $33,000. Sales of $22,000 were on account, while $11,000 were cash sales.
10. Record the cost of goods sold related to the sale from Event 9 using the perpetual FIFO method.
11. Made a full refund to a dissatisfied customer who returned her alarm system. The sale had been a cash sale for $550 with a cost of $260. Record the reversal of revenue.
12. Made a full refund to a dissatisfied customer who returned her alarm system. The sale had been a cash sale for $550 with a cost of $260. Record the reversal of cost.
13. Paid installers and other employees a total of $21,000 cash for salaries.
14. Sold $45,000 of monitoring services during the year. The services are billed to the customers each month.
15. Sold an additional monitoring service for $1,200 for one year’s service. The customer paid the full amount of $1,200 on October 1.
16. Collected $74,000 of accounts receivable during the year.
17. Paid an additional $6,000 to settle some of the accounts payable.
18. Paid $3,500 of advertising expense during the year.
19. Paid $2,320 of utilities expense for the year.
20. Paid a dividend of $15,000 to the shareholders.

Adjustments

21. There was $200 of supplies on hand at the end of the year.
22. Recognized the expired rent from the prior year, van and office building for the year.
23. Recognized the revenue earned from transaction 15.
24. Accrued salaries at December 31, Year 5, were $1,000.

Analysis tab - Use a horizontal statements model to show how each transaction affects the balance sheet, income statement, and statement of cash flows.

activity. The first transaction is recorded as an example.

	Pacilio Security Services, Inc. Effect of Transactions on Financial Statements - Year 5 Transaction Balance Sheet Income Statement Statement of Cash Flows Assets = Liabilities + S. Equity Revenue − Expenses = Net Income 1. − − − OA 2. 3. 4. 5. 6. 7. 8. 9. 10.

Answer 1

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