Question

Articulation Exercise

Listed below are selected account balances for Moby Corporation at December 31, Year 2 and Year 1. Also available for you is selected information from the income statement for Moby for the year ended December 31, Year 2.

Selected balance sheet accounts:       Year 2                                       Year 1

Assets:

Accounts Receivable                           $18                                           $22

Prepaid Salaries                                     8                                              7

Prepaid Rent                                         3                                              5

Property, Plant & Equipment                310                                           283

(Accumulated Depreciation)                (75)                                          (68)

Investments                                         26                                             24

Liabilities & Stockholders’

Equity:

Salaries Payable                                   12                                              9

Unearned Sales Rev.                              4                                              1

Notes Payable                                     39                                             34

Dividends Payable                                 6                                              4

Contributed Capital                              32                                             24

Retained Earnings                                42                                             39

Selected income statement information for the year ended December 31, Year 2:

Sales revenue                                     $74

Depreciation                                       18

Salaries Expense                                  27

Gain on sale of equipment                       7

Loss on sale of investments                     3

Net Income                                         21

Additional information:

1. During Year 2, Property, Plant & Equipment costing $26 was sold causing a gain.
2. During Year 2, $22 of Notes Payable were issued in exchange for Property, Plant and Equipment. This involves an exchange of Notes Payable for Property, Plant and Equipment.
3. During Year 2, the firm sold Investments for $8 cash.

Required: Determine the correct dollar amounts for each of the following items. Place your answers in the spaces provided.

1. Cash paid for salaries in Year 2.                                                                  $_________                                              
2. Payments for the purchase of Investments in Year                                        $_________           

3. Notes Payable paid off in Year 2.                                                                 $_________                                                           

4. Cash dividends paid in Year 2                                                                     $_________                      
5. Cash received from the sale of Property, Plant and Equipment in Year 2              $_________                                                           
6. Cash paid for Property, Plant & Equipment in Year 2                                      $_________           

7. Cash collected from customers in Year 2                                                         $_________

Answer 1

	Amount In USD
Cash paid for salaries in Year 2.	25
Payments for the purchase of Investments in Year	6
Notes Payable paid off in Year 2.	17
Cash dividends paid in Year 2	16
Cash received from the sale of Property, Plant and Equipment in Year 2	22
Cash paid for Property, Plant & Equipment in Year 2	31
Cash collected from customers in Year 2	78

Dr	Salaries A/c		Cr
Particulars	Amount	Particulars	Amount
To opening Balance (Prepaid Salaries)	7	By Opening Balance (Salary Payable)	9
To Bank A/c (Salaries paid) (Bal.Fig)	25	By Income Statement	27
To Closing Balance (Salary Payable)	12	By Closing Balance (Prepaid Salaries)	8
	44		44
Dr	Investment A/c		Cr
To opening Balance	24	By Income Statement (Loss on Sale)	3
To Income Statement (Gain on sale of equipment )	7	By Bank A/c (Sale of Investment)	8
To Bank A/c (B.F) (Purchase)	6	By Closing Balance	26
	37		37
Dr	Notes Payable A/c		Cr
To Bank/Cash A/c (Notes Payable Pay off) (Bal.Fig)	17	By Opening Balance	34
To Closing Balance	39	By Property, Plant and Equipment	22
	56		56
Dr	Dividends Payable A/c		Cr
Particulars	Amount	Particulars	Amount
		By Opening Balance	4
To Bank (Dividend Paid)	16	By Statement of Retained Earning(Dividend Transferred from Retained Earning)	18
To Closing Balance	6
	22		22
Statement of Retained Earning
Opening Balance	39
Add: Net Income	21
	60
Less Closning Balance	42
	18
Dr	Property, Plant & Equipment A/c (at Cost)		Cr
Particulars	Amount	Particulars	Amount
To Balance B/d	283	By AD A/c(Dep transfer)	11
To Notes Payable a/c (PPE Purchased)	22	By Bank A/c (Sale)	22
To Income Statememt (gain on sale of PPE)	7
To Bank A/c (Purchase of PPE-Bal.Fig)	31	By Closing Balance	310
	343		343
Dr	Accumulated Depreciation A/c		Cr
Particulars	Amount	Particulars	Amount
To PPE A/c (Transfer of Accumulated Dep on Sale of PPE)	11	By Opening Balance	68
		By Depreciation	18
To Closing Balance	75
	86		86
Cost of PPE Sold	26
Less AD	11
Net Cost	15
Profit on Sale	7
Sale Value	22
Dr	Accounts Receivable A/c		Dr
Particulars	Amount	Particulars	Amount
To Opening Balance	22	By Bank/Cash (Cash Collected from Customers)	78
To Unearned Sales Revenue	1
To Sales Revenue (USD 74-USD 1)	73	By Closing Balance	18
	96		96