Q7SE - Horngren'S Financial And Managerial Accounting

Question

A partial worksheet for Ramey Law Firm is presented below. Solve for the missing information. Total 6 5 A J K L M 33 34 35 (a) \( 211,325 \) 202,950 (e) 8,375 (d) \( 24,850 \) 24,850 Debit Credit Debit Credit Income Statement Balance Sheet Net (b) (c) Total (f).

Step-by-Step Solution

Answer

(a) $16,475

(b) Income

(c) $8,375

(d) $24,850

(e) $211,325

(f) $211,325

Step 1: Explanation on (a)

Total debit in income statement is calculated as follows:

$\begin{array}{c}\mathbf{Total}\mathbf{ }\mathbf{Debits}\mathbf{=}\mathbf{Total}\mathbf{ }\mathbf{Credit}-\mathbf{Net}\mathbf{ }\mathbf{Income}\\ \mathbf{=}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{850}-\mathbf{\$}\mathbf{8}\mathbf{,}\mathbf{375}\\ \mathbf{=}\mathbf{\$}\mathbf{16}\mathbf{,}\mathbf{475}\end{array}$

Step 2: Explanation on (b)

In the income statement, total credits (revenues) are higher than total debits (expenses), hence it will result in net income. 

Step 3: Explanation on (c)

Net income is transferred to the retained earnings, hence in the worksheet it will be posted under credit side under balance sheet section. 

Step 4: Explanation on (d)

In the income statement, total credit balance equals $24,850, hence total debit balance should also be equal to $24,850. 

Step 5: Explanation on (e)

In the balance sheet section, total credit balance equals $211,325, hence total debit balance should also be equal to $211,325. 

Step 6: Explanation on (f)

As net income of $8,375 is posted on credit side of balance sheet, the total credit balance equals $211,325.