CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-1LESSON 14-1

Distributing Corporate Earnings to Stockholders

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-1

STOCKHOLDERS’ EQUITY ACCOUNTS STOCKHOLDERS’ EQUITY ACCOUNTS USED BY A CORPORATIONUSED BY A CORPORATION page 405

(3000) STOCKHOLDERS’ EQUITY3110 Capital Stock3120 Retained Earnings3130 Dividends3140 Income Summary

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-1

DECLARING A DIVIDENDDECLARING A DIVIDEND

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page 406

December 15. Hobby Shack’s board of directors declared a quarterly dividend of $2.00 per share; capital stock issued is 2,500 shares; total dividend, $5,000.00. Date of payment is January 15. Memorandum No. 79.

4. Write the debit amount.

3. Write the memorandum number.

2. Write the title of the account debited.

1. Write the date.

5. Write the title of the account credited.

6. Write the credit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-1

PAYING A DIVIDENDPAYING A DIVIDEND

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page 407

January 15. Paid cash for quarterly dividend declared December 15, $5,000.00. Check No. 379.

1. Write the date.

2. Write the account title.

3. Write the check number.

4. Write the debit account.

5. Write the credit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-2LESSON 14-2

Beginning an 8-Column Work Sheet for a Merchandising Business

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-2

RECORDING A TRIAL BALANCE ON A RECORDING A TRIAL BALANCE ON A WORK SHEETWORK SHEET page 410

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221. Account title

2. Account balance

3. Total, prove, and rule the debit and credit columns

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-2

ANALYZING AND RECORDING SUPPLIES ANALYZING AND RECORDING SUPPLIES ADJUSTMENTSADJUSTMENTS page 411

Adj. (a) 2,730.00

Supplies Expense—Office

Dec. 31 Bal. 3,480.00 Adj. (a) 2,730.00

(Adj Bal. 750.00)

Supplies—Office

Adj. (b) 2,910.00

Supplies Expense—Store

Dec. 31 Bal. 3,944.00 Adj. (b) 2,910.00

(Adj Bal. 1,034.00)

Supplies—Store

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-2

RECORDING SUPPLIES ADJUSTMENTS RECORDING SUPPLIES ADJUSTMENTS ON A WORK SHEETON A WORK SHEET page 412

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1. Write the debit amounts in the Adjustments Debit column.

2. Write the credit amounts in the Adjustments Credit column.

3. Label the two parts of the Supplies—Office adjustment with small letter a and small letter b in parentheses.

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-2

ANALYZING AND RECORDING A ANALYZING AND RECORDING A PREPAID INSURANCE ADJUSTMENTPREPAID INSURANCE ADJUSTMENT

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1. Enter the amount of insurance used in the Adjustments Credit column.

2. Enter the same amount in the Adjustments Debit column.

3. Label the two parts of the adjustment with a small letter c in parentheses.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-3LESSON 14-3

Planning and Recording a Merchandise Inventory Adjustment

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-3

MERCHANDISE INVENTORYMERCHANDISE INVENTORY page 415

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-3

ANALYZING AND RECORDING A ANALYZING AND RECORDING A MERCHANDISE INVENTORY ADJUSTMENTMERCHANDISE INVENTORY ADJUSTMENT

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1. Write the debit amount.

3. Label the two parts of this adjustment with a small letter d in parentheses.

2. Write the credit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-3

ANALYZING AN ADJUSTMENT WHEN ENDING ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORYBEGINNING MERCHANDISE INVENTORY page 417

Jan. 1 Bal. 294,700.00

Adj. (d) 4,200.00

(New Bal. 298,900.00)

Merchandise Inventory

Adj. (d) 4,200.00

Income Summary

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-4LESSON 14-4

Planning and Recording an Allowance for Uncollectible Accounts Adjustment

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-4

ALLOWANCE METHOD OF RECORDING ALLOWANCE METHOD OF RECORDING LOSSES FROM UNCOLLECTIBLE ACCOUNTSLOSSES FROM UNCOLLECTIBLE ACCOUNTS page 419

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-4

EstimatedUncollectible

Accounts Expense

=Percentage×Total Saleson Account

$1,245.00=1%×$124,500.00

ESTIMATING UNCOLLECTIBLE ESTIMATING UNCOLLECTIBLE ACCOUNTS EXPENSEACCOUNTS EXPENSE page 420

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-4

1. Enter the estimated uncollectible amount.

ANALYZING AND RECORDING AN ANALYZING AND RECORDING AN ADJUSTMENT FOR UNCOLLECTIBLE ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS EXPENSEACCOUNTS EXPENSE

3. Label the two parts with a small letter e in parentheses.

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page 421

2. Enter the same amount in the Adjustments Debit column.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-5LESSON 14-5

Planning and Recording Depreciation Adjustments

Current Assets: Cash & other assets expected to be exchanged for cash or consumed within a year.

Plant Assets: Assets used for a number of years. Examples- computers, cash registers, display cases, furniture, vehicles.

Estimated Salvage Value: The amount the owner expects to receive when a plant asset is removed.\

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-5

CALCULATING DEPRECIATION EXPENSE CALCULATING DEPRECIATION EXPENSE AND BOOK VALUEAND BOOK VALUE page 424

Estimated TotalDepreciation

Expense=

EstimatedSalvage Value

–Original

Cost

$1,000.00=$250.00–$1,250.00

AnnualDepreciation

Expense=

Years ofEstimated

Useful Life÷

Estimated TotalDepreciation

Expense

$200.00=5÷$1,000.00

1. Subtract the asset’s estimated salvage value from original cost.

2. Divide the estimated total depreciation expense by the years of estimated useful life.

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(continued on next slide)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-5

CALCULATING DEPRECIATION EXPENSE CALCULATING DEPRECIATION EXPENSE AND BOOK VALUEAND BOOK VALUE page 424

20X3AccumulatedDepreciation

=20X3

DepreciationExpense

+20X2

AccumulatedDepreciation

$600.00=$200.00+$400.00

EndingBook Value

=AccumulatedDepreciation

–Original Cost

$650.00=$600.00–$1,250.00

(continued from previous slide)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-5

ANALYZING AND RECORDING ADJUSTMENTS ANALYZING AND RECORDING ADJUSTMENTS FOR DEPRECIATION EXPENSEFOR DEPRECIATION EXPENSE page 425

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1. Write the debit amounts.

2. Write the credit amounts.

3. Label the adjustments.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 14-6LESSON 14-6

Calculating Federal Income Tax and Completing a Work Sheet

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

FEDERAL INCOME TAX EXPENSE FEDERAL INCOME TAX EXPENSE ADJUSTMENTADJUSTMENT page 427

Total of Income Statement Credit column $

500,253.10Less total of Income Statement Debit column

before federal income tax–

396,049.91Equals Net Income before Federal Income Tax $

104,203.19

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

CALCULATING FEDERAL INCOME TAXCALCULATING FEDERAL INCOME TAX page 428

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

1. Calculate the amount of federal income tax expense adjustment.

RECORDING THE FEDERAL INCOME RECORDING THE FEDERAL INCOME TAX ADJUSTMENTTAX ADJUSTMENT

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2. Total and rule the Adjustments columns.

3. Extend account balances.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

COMPLETING A WORK SHEETCOMPLETING A WORK SHEET

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1. Total the Income Statement and Balance Sheet columns.

5. Rule double lines.

4. Calculate the column totals.

3. Extend the net income amount.

2. Calculate and enter the net income after federal income tax.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

A COMPLETED 8-COLUMN A COMPLETED 8-COLUMN WORK SHEETWORK SHEET page 432

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 14-6

A 10-COLUMN WORK SHEETA 10-COLUMN WORK SHEET page 434-435

1. Trial balance

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5. Extend balances

2. Adjustments

3. Extend adjusted balances

4. Total, prove, and rule

6. Calculate net income; total, prove and rule

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