Beruflich Dokumente
Kultur Dokumente
Exercises
Problems
21 - 23, 25,
33, 35,
40 - 42, 46,
29, 30
36, 38
47, 52, 54
23, - 25,
32 - 36,
29, 30
38
Cases and
Projects
55 - 58
40 - 43,
46 - 49,
55 - 58
52 - 54
40 - 42,
26
39
55, 58
50, 53, 54
LO5 Describe the process of closing
temporary accounts.
LO6 Analyzing
changes in
balance sheet accounts.
27, 28, 30
25, 29
31, 33,
42, 44 - 46,
37, 39
49 - 54
32, 34 - 36,
38
53
55
56
3-1
DISCUSSION QUESTIONS
Q3-1.
Q3-2.
The fiscal year is the annual accounting period adopted by a firm. A firm using a
fiscal year ending on December 31 is on a calendar-year basis.
Q3-3.
Q3-4.
A general journal is a book of original entry that may be used for the initial
recording of any type of transaction. It contains space for dates and for accounts
to be debited and credited, columns for the amounts of the debits and credits, and
a posting reference column for numbers of the accounts that are posted.
Q3--5. When entries are posted, the page number and identifying initials of the
appropriate journal are placed next to the amounts in the appropriate accounts.
The account number is entered beside the related amount posted in the journal's
posting reference column. This procedure enables interested users to trace
amounts in the ledger back to the originating journal entry and permits us to know
which entries have been posted.
Q3-6.
A compound journal entry is a journal entry containing more than one debit entry
or one credit entry.
Q3-7.
A chart of accounts is a list of the accounts appearing in the general ledger, with
the account numbering system indicated. Normally the accounts are classified as
asset, liability, owners' equity, revenue, and expense accounts, and often the
numbering system identifies the account classification. For example, a coding
system might assign the numbers 100199 to assets, 200299 to liabilities, and
so on.
Q3-8.
Many of the transactions reflected in the accounting records through the first two
steps of the accounting cycle affect the net income of more than one period.
Therefore, adjustments to the account balances are ordinarily necessary at the
end of each accounting period to record the proper amount of revenue and to
match expenses with revenue properly. This process is also intended to achieve a
more accurate picture of financial position by adjusting balance sheet amounts to
show unexpired costs, up-to-date amounts of obligations, and so on.
Q3-9.
Q3-10. Jan. 31
78
78
Q3-11. A contra account is an account that is related to, and deducted from, another
account when financial statements are prepared or when book values are
computed. Accumulated depreciation is deducted from the cost of a depreciable
asset in computing and portraying the asset's book value.
Q3-12. The building is five years old by the end of 2014, so the accumulated depreciation
of $800,000 represents five years of depreciation at an annual rate of $160,000
($800,000/5). If the annual depreciation is $160,000, then the expected life of the
building must be 25 years.
At the end of 2021, the building will be twelve years old, and the accumulated
depreciation will be 12$160,000, or $1,920,000. The book value of the building
(defined as original cost less accumulated depreciation) will be $2,080,000.
3-3
Q3-13. (a)
(b)
Jan. 1
Cash (+A)
Subscriptions received in advance (+L)
To record receipt of two-year subscriptions.
Jan. 31 Subscriptions received in advance (-L)
Subscriptions revenue (+R,+SE)
To record subscription revenue earned during
January ($9,720/24 = $405).
Q3-14. Jan. 31
Q3-15. Jan. 31
9,720
9,720
405
405
190
360
190
360
Q3-19. The cost principle and the matching concept support Dehning's handling of its
catalog costs. Prepaid Catalog Costs is an asset account that is initially recorded
at the amount that the catalogs cost Dehning. This is consistent with the cost
principle that states that assets are initially recorded at the amounts paid to
acquire the assets. The catalogs help Dehning generate sales revenues. The
matching concept states that the catalog costs should be matched as expenses
with the revenues they help generate. Dehning does this by expensing the
catalog costs over their estimated useful lives.
Q3-20. (a) Supplies Expense ($825 + $260 $630 = $455) for the period is omitted from
the income statement, overstating net income by $455 (ignoring taxes).
(b) Both Supplies and Owners' Equity are overstated by $455 on the January 31
balance sheet (again, before considering taxes).
3-5
MINI EXERCISES
M3-21. (45 mintes)
a.
Balance Sheet
Transaction
June 1. Invested
$12,000 cash.
June 2. Paid $950
cash for June rent.
June 3. Purchased
$6,400 of office
equipment on
account.
June 6. Purchased
$3,800 of supplies;
$1,800 cash,
$2,000 on account.
June 11. $4,700 billed
for services.
Cash
Noncash
Liabil+
=
Asset
Assets
ities
+12,000
=
Cash
-950
+6,400
Office
Equipment
-1,800
+3,800
Cash
Supplies
+4,700
Accounts
Receivable
TOTALS
5,750
-950
Retained
Earnings
Accounts
= Payable
+ 11,650
=
+950
Rent Expense
Accounts
= Payable
+4,700
+4,700
Retained
Earnings
Service Fees
Earned
-900
Retained
Earnings
Retained
Earnings
Retained
Earnings
= 5,400
-350
-2,500
+ 12,000 +
4,700
+350
Utilities
Expense
+2,500
Salaries
Expense
3,800
-950
+2,000
Payable
Cash
Net
Income
+6,400
-3,000
= Accounts
Cash
-2,500
Revenues - Expenses =
-3,250
Accounts
Receivable
-350
Earned
Capital
Common
Stock
Cash
Income Statement
Contrib.
+
+
Capital
+12,000
+4,700
-350
-2,500
900
M3-21. continued
b. June 1
Cash (+A)
12,000
Common stock (+SE)
Owner invested cash for stock.
12,000
950
950
6,400
Supplies (+A)
Cash (-A)
Accounts payable (+L)
Purchased $3,800 of supplies; paid $1,800 down
with balance due in 30 days.
3,800
6,400
1,800
2,000
4,700
17 Cash (+A)
Accounts receivable (-A)
Collections from clients on account.
3,250
3,000
4,700
3,250
3,000
900
350
900
350
2,500
2,500
3-7
M3-21. concluded
c.
+
June 1
17
+
June 11
Cash (A)
12,000
950
3,250
1,800
3,000
900
350
2,500
June 2
6
19
25
30
30
+
June 1
+
June 6
+
June 3
June 19
Supplies (A)
3,800
+
June 3
June 6
+
June 2
+
June 30
+
June 30
Balance Sheet
Transaction
April 1. Invested
$9,000 in cash.
April 2. Paid $2,850
cash for lease.
April 3. Borrowed
$10,000.
April 3. Purchased
$5,500 equipment
for $2,500 cash
with rest on
account.
April 4. Paid $4,300
cash for supplies.
April 7. Paid $350
cash for ad.
Cash
Noncash
Liabil+
=
Asset
Assets
ities
+9,000
=
Cash
-2,850
+2,850
Cash
Prepaid Van
Lease
+10,000
+5,500
+3,000
Equipment
Accounts
Payable
=
+4,300
Supplies
-350
Cash
+3,500
Accounts
Receivable
-3,000
+2,300
-2,300
Cash
Accounts
Receivable
-1,000
-1,750
Common
Stock
Note
Payable
Cash
Cash
Net
Revenues - Expenses =
Income
+10,000
-2,500
-4,300
Earned
Capital
=
=
Cash
Contrib.
+
+
Capital
+9,000
=
-350
Retained
Earnings
+3,500
+3,500
Retained
Earnings
Cleaning Fees
Earned
-3,000
= Accounts
Cash
+350
Ad.
Expense
-350
+3,500
Payable
Cash
Cash
-995
TOTALS
4,555
Cash
+ 13,850
=
-1,000
Retained
Earnings
Retained
Earnings
Retained
Earnings
= 10,000 + 9,000 +
-1,750
-995
-595
3,500
+1,750
Wages
Expense
Van Fuel
Expense
3,095
+995
3-9
-1,750
-995
405
M3-22 continued
b. April
Cash (+A)
Common stock (+SE)
Owner invested cash for stock.
9,000
2,850
9,000
2,850
Cash (+A)
Notes payable (+L)
Borrowed money from bank for one year at
10% interest.
10,000
10,000
Equipment (+A)
Cash (-A)
Accounts payable (+L)
Purchased $5,500 of equipment; paid $2,500 down
with balance due in 30 days.
5,500
Supplies (+A)
Cash (-A)
Purchased supplies for cash.
4,300
2,500
3,000
4,300
350
350
3,500
3,000
28 Cash (+A)
Accounts receivable (-A)
Collections from customers on account.
2,300
1,000
1,750
3,500
3,000
2,300
1,000
1,750
995
995
continued next page
M3-22 concluded
c.
+
April 1
3
28
+
April 4
Cash (A)
9,000
2,850
April 2
10,000
2,500
3
2,300
4,300
4
350
7
3,000
23
1,000
29
1,750
30
995
30
Supplies(A)
4,300
+
April 2
April 3
-
+
April 3
+
April 1
+
Advertising Expense (E)
April 7
350
+
April 30
+
April 21
Equipment (A)
5,500
+
April 3
+
April 30
3-11
Income Statement
Cash
Noncash
LiabilContrib.
+
=
+
+
Transaction
Asset
Assets
ities
Capital
1. Received $20,100 in +20,100
+20,100
advance for
Cash
= Unearned
Service
contract work.
Earned
Capital
Net
Revenues - Expenses =
Income
-
Fees
Jan.
1 Cash (+A)
Unearned service fees (+L)
To record fee received in advance.
20,100
20,100
b.
Balance Sheet
Cash
Asset
Transaction
Income Statement
Noncash
LiabilContrib.
=
+
+
Assets
ities
Capital
-3,350
Unearned
=
Service
Fees
Earned
Capital
+3,350
Retained
Earnings
Net
Revenues - Expenses =
Income
+3,350
+3,350
Service
=
Fees
3,350
3,350
c.
Balance Sheet
Cash
Asset
Transaction
3. Adjusting entry for
fees earned but not
billed.
Jan. 31
Noncash
Liabil=
Assets
ities
+570
Fees
=
Income Statement
Contrib.
+
Capital
Receivable
Earned
Capital
+570
Retained
Earnings
Net
Revenues - Expenses =
Income
+570
+570
Service
=
Fees
570
570
Transaction
1. Adjusting entry for
prepaid insurance.
Jan.
Noncash
Liabil+
=
Assets
ities
-185
=
Prepaid
Income Statement
Contrib.
+
+
Capital
Retained
Earnings
Insurance
31
Earned
Capital
-185
Net
Revenues - Expenses =
Income
+185
-185
- Insurance =
Expense
185
185
2.
Balance Sheet
Cash
Asset
Transaction
2. Adjusting entry for
supplies used.
Jan.
31
Noncash
Liabil=
Assets
ities
-1,080
=
Supplies
Income Statement
Contrib.
+
Capital
Earned
Capital
-1,080
Revenues - Expenses =
-
Retained
Earnings
+1,080
Supplies
Expense
Net
Income
-1,080
1,080
1,080
3.
Balance Sheet
Cash
Asset
Transaction
Noncash
Assets
3. Adjusting entry
for
depreciation
of equipment.
Jan.
31
Contra
Assets
+62
Accumulated
Depreciation
Liabilities
Income Statement
+
Contrib.
Capital
Earned
Capital
Revenues
-62
Retained
Earnings
Expenses
Net
Income
+62
-62
Depreciation
Expense
62
62
3-13
M3-24. concluded
4.
Balance Sheet
Cash
Asset
Transaction
4. Adjusting entry for
rent.
Noncash
LiabilContrib.
+
=
+
+
Assets
ities
Capital
-875
= Unearned
Rent
Revenue
Income Statement
Earned
Capital
+875
Net
Revenues - Expenses =
Income
+875
+875
Retained Rent Revenue
=
Earnings
875
875
5.
Balance Sheet
Cash
Asset
Transaction
5. Adjusting entry for
accrued salaries.
Jan.
Noncash
LiabilContrib.
=
+
+
Assets
ities
Capital
+490
= Salaries
Payable
Income Statement
Earned
Capital
-490
Retained
Earnings
Revenues - Expenses =
-
+490
Salaries
Expense
Net
Income
-490
490
490
Transaction
Inventory purchases
(total).
Noncash
= Liabilities
Assets
+3,734
+3,734
Inventory
Income Statement
Contrib.
+
Capital
Earned
Capital
Revenues - Expenses =
Accounts
Payable
Net
Income
Income Statement
Balance Sheet
Cash
Asset
Transaction
-3,617
Inventory
Contrib.
Capital
Earned
Capital
-3,617
Retained
Earnings
Revenues
Expenses
= Net Income
+3,617
Cost of Goods
Sold
Beginning Inv balance + Purchases Cost of goods sold = Ending Inv balance. So
$897 + $3,734 COGS = $1.014. Thus COGS = $3,617
*
3-15
-3,17
Retained
Earnings
$18,000
(9,700)
29,900
$38,200
Total
Stockholders
Equity
$48,000
6,000
(9,700)
29,900
$74,200
M3-27. (5 minutes)
Ending balance = Beginning balance + Credit from closing revenue Debit from closing
expenses: $137,600 = $99,000 + $347,400 - $308,800
M3-28. (15 minutes)
a.
Debit
Credit
84,900
84,900
55,900
36,000
1,900
8,200
9,800
Closing the revenue and expense accounts into retained earnings has the effect of
increasing the retained earnings balance by an amount equal to net income (revenue
minus expenses). The balance of Smiths Retained Earnings after closing entries are
posted is:
$101,100 credit ($72,100 + $84,900 - $55,900).
M3-28 concluded
b.
+
Bal.
Bal.
+
Bal.
Bal.
+
Bal.
Bal.
+
Bal.
Bal.
Transaction
Recognize cost of
goods sold
Noncash
=
Assets
-5,206
Merchandise
=
Inventory
Liabilities
Income Statement
Contrib.
+
Capital
Earned
Capital
-5,206
Retained
Earnings
Revenues -
Expenses
+5,206
Cost of
goods sold
=
=
5,206
5206
3-17
Net
Income
-5,206
M3-29. concluded
b. Beginning Inv balance + Purchases Cost of goods sold = Ending Inv balance. So
$1,370 + Purchases - $5,206 = $1,375. Thus purchases = $5,211
Balance Sheet
Cash
Asset
Transaction
Recognize cost of
goods sold.
Noncash
Liabil
+
=
Assets
-ities
+5,211
+5,211
Merchandise = Account
inventory
Payable
Income Statement
Contrib.
+
Capital
Earned
Capital
Revenues -
Expenses
Net
Income
-
5,211
5,211
Cash
Asset
a. Dec. 31 Interest
earned.
Noncash
Liabil=
Assets
ities
+600
=
Interest
Income Statement
Contrib.
+
Capital
Earned
Capital
+600
Retained
Earnings
Receivable
Net
Revenues - Expenses =
Income
+600
+600
=
Interest
Income
600
600
2,400
2,400
c.
Income Statement
Balance Sheet
Transaction
c. 1/31 Receipt of
$900 interest.
Cash
Asset
+900
Cash
Noncash
Liabil=
Assets
ities
-600
=
Interest
Contrib.
+
Capital
Receivable
2014
Jan. 31 Cash (+A)
Interest income (+R, +SE)
Interest receivable (-A)
To record cash receipt of interest.
Earned
Capital
+ 300
Retained
Earnings
Net
Revenues - Expenses =
Income
+300
+300
=
Interest
Income
900
300
600
EXERCISES
E3-31. (30 minutes)
a.
Dec. 31
31
80,300
82,300
80,300
20,800
45,700
5,600
10,200
b.
+
Bal.
Bal.
+
(2)
Bal.
Bal.
+
Bal.
Bal.
+
Bal.
Bal.
(2)
(2)
(1)
(2)
(2)
Bal.
Bal.
+
Bal.
(1)
Bal.
3-19
Transaction
Noncash
Assets
-1,890
Supplies
+610
Accumulated
Depreciation
+300
Interest
Receivable
-2,290
610
Earned
Capital
Revenues
Expenses
Net
Income
+610
Depreciation
Expense
-610
-1,890
Retained
Earnings
+1,890
Supplies
Expense
-1,890
-390
Retained
Earnings
+390
Utilities
Expense
-390
-700
Retained
Earnings
+700
Rent
Expense
-700
-468
Unearned
Premium
Revenue
=
+965
Wages
Payable
+468
Retained
Earnings
+468
-965
+300
Retained
Earnings
+300
Interest
Income
+300
-3,787
768
-3,787
+390
Utilities
Payable
Income Statement
Contrib.
+
Capital
-610
Retained
Earnings
-700
Prepaid
Rent
Liabilities
TOTALS
Contra
Assets
887
+468
Premium
Revenue
-965
Retained
Earnings
+965
Wage
Expense
4,555
610
610
1,890
1,890
$1,100 = $1,890).
390
390
700
700
468
468
9 = $468].
965
965
300
300
Transaction
Noncash
Assets
= Liabilities +
Income Statement
Contrib.
+
Capital
+4,700
= Salaries
Payable
Earned
Capital
-4,700
Retained
Earnings
2013
Dec. 31 Salaries expense (+E,-SE)
Salaries payable (+L)
To record accrued salaries payable.
b.
Revenues -
Expenses
+4,700
Salaries
Expense
Net
Income
-4,700
4,700
4,700
250,000
250,000
c.
Balance Sheet
Transaction
c. Paid salaries.
2014
Jan.
Cash
Asset
-12,000
Cash
Noncash
Assets
= Liabilities +
Income Statement
Contrib.
+
Capital
-4,700
= Salaries
Payable
Earned
Capital
-7,300
Retained
Earnings
Revenues -
Expenses
+7,300
Salary
Expense
Net
Income
-7,300
4,700
7,300
12,000
$620 = $1,140.
$500 = $2,700.
3-21
Transaction
Noncash
Assets
-475
Prepaid
Rent
-210
Prepaid
Advertising
-1,900
Supplies
Income Statement
Contrib.
+
+
Capital
=
=
+800
Fees
Receivable
Liabilities
-1,785
-300
Unearned
Refinish.
Fees
=
-300
Earned
Capital
-475
Retained
Earnings
- 210
Retained
Earnings
-1,900
Retained
Earnings
+800
Retained
Earnings
+300
Retained
Earnings
+800
Refinish.
Revenue
+300
Refinish.
Revenue
-1,485
1,100
Revenues -
Expenses
+475
Rent
Expense
+210
Advertising
Expense
+1,900
Supplies
Expense
=
=
-210
=
-1,900
=
+800
=
+300
=
2,585
475
475
210
210
1,900
1,900
800
800
300
300
Net
Income
-475
-1,485
E3-35. concluded
c.
Bal.
Bal.
(1)
Bal.
Bal.
Bal.
Bal.
(2)
(5)
(4)
(3)
(3)
+
(2)
+
(1)
3-23
Cash
Asset
Recognize
inventory
purchases.
Noncash
Assets
+482,303
Inventory
Liabilities
Income Statement
Contrib.
Capital
Earned
Capital
= +482,303
Account
Payable
Revenues -
Expenses
Net
Income
482,303
*Beginning Inv balance + Purchases Cost of goods sold = Ending Inv. So $43,526
+ Purchases - $456,664= $69,165. Thus purchases = $482,303
b. Beginning compensation payable + Compensation expense Compensation paid =
Ending compensation payable, so
$10,529 + $40,000 Payments = $10,841
Payments = $39,688
c.
92,500
2,200
94,700
31
64,700
41,800
4,300
8,700
9,900
E3-37. concluded
b.
- Retained Earnings (SE) +
64,700 42,700
Bal.
94,700
(1)
72,700
Bal.
(2)
(1)
(1)
(2)
Bal.
Bal.
(2)
Bal.
Bal.
(2)
(2)
(1)
Cash
Asset
+200,000
Cash
Noncash
Assets
Liabilities
Income Statement
+
Contrib.
Capital
Earned
Capital
Revenues -
+200,000
= Customer
Expenses
Net
Income
Deposits
+489,004
Cash
-189,956
= Customer
Deposits
+678,960 +678,960
Retained
Earnings
Cash (+A)
Customer deposits* (+L)
Sales
Revenue
+678,960
200,000
200,000
(2)
678,960
3-25
E3-38. concluded
b.
Transaction
Record inventory
purchases.
Cash
Asset
Noncash
Assets
-337,152
Inventory
Balance Sheet
Liabil
=
+
-ities
=
Income Statement
Contrib.
+
Capital
Earned
Capital
Revenues -
+337,152
Acc.
Payable
Expenses
Net
Income
337,152
337,152
$71,000
(18,000)
(37,100)
Depreciation expense...
(7,000)
Net income......................................................................................................................
$8,900
SOLOMON CORPORATION
Statement of Stockholders Equity
For Year Ended December 31, 2013
Common
Stock
$43,000
Retained
Earnings
$20,600*
Total Stockholders
Equity
$63,600
(8,000)
(8,000)
_______
8,900
8,900
$43,000
$21,500
$64,500
*12,600 + 8,000 The dividend was paid and debited to retained earnings prior to the end of the period.
continued next page
Cambridge Business Publishers, 2014
3-26
E3-39. continued
SOLOMON CORPORATION
Balance Sheet
December 31, 2013
Assets
Liabilities
$ 4,000 Notes payable
6,500
Total Liabilities
Cash
Accounts receivable
Equipment
Less:Accumulated
depreciation
$ 10,000
10,000
$ 78,000
64,000
Owners Equity
14,000
Common stock
Retained earnings
$74,500 Total Liabilities and Owners Equity
Total Assets
43,000
21,500
$74,500
b.
1.
2.
3.
4.
71,000
18,000
37,100
7,000
The cash dividend has already been paid and is already reflected in the adjusted
trial balance.
continued next page
3-27
E3-39. concluded
c. Only the T-accounts affected by closing process are shown here.
+ Depreciation Expense (E) Bal.
7,000
7,000
Bal
0
Bal.
Bal.
(4)
(1)
(3)
Bal.
Bal
(2-4)
(2)
Bal.
(1)
Bal.
PROBLEMS
P3-40. (90 minutes)
a.
+
Cash (A)
Apr. 1
5
18
Bal.
11,500
1,800
4,900
2,880
6,100
1,000
675
100
2,500
+
Apr. 1
2
2
29
30
30
4,945
Apr. 12
30
Bal.
+
Apr. 5
Unadj. bal.
Adj. bal.
+
Apr. 1
Unadj. bal.
Adj bal.
+
Apr. 2
Bal.
+
Apr. 30
Adj. Bal.
+
Apr. 30
Bal.
5,500 4,900
4,000
4,600
Apr. 18
Supplies (A)
1,200
1,200 800 (d)
400
Apr. 30
+
Apr. 30
Apr. 2
Bal.
-
Trucks (A)
6,100
6,100
+
Apr. 2
5
Bal.
+
Apr. 29
Bal.
+
Apr. 1
Bal.
-
3-29
P3-40. continued
a. continued
+
Insurance Expense (E)
Apr. 30
(d) 120
Adj. Bal.
120
+ Depreciation Expense Equip. (E) Apr. 30
(d)
35
Adj. Bal.
35
+
Wages Expense (E)
Apr. 30
2,500
Bal.
2,500
- Accumulated Deprec. Equip. (XA) +
35 (d) Apr. 30
35
Adj. Bal.
b.
Balance Sheet
Cash
Noncash
+
Transaction
Asset
Assets
Apr. 1. Cash received for +11,500
stock.
Cash
Apr. 1. Purchase liability
insurance.
-2,880
Cash
-6,100
Cash
-1,000
Cash
+1,800
Cash
+4,900
Cash
= Liabilities
=
+2,880
Prepaid
=
Insurance
+ 6,100
=
Truck
+3,100
+2,100
Equipment = Accounts
Payable
+ 1,200
+1,200
Supplies = Accounts
Payable
+1,800
Unearned
=
Roofing
Fees
+5,500
Accounts =
Receivable
-4,900
Accounts =
Receivable
-675
Cash
-100
Cash
-2,500
Cash
4,945
+4,000
Accounts =
Receivable
+
17,880
=
Income Statement
Contrib.
+
+
Capital
+11,500
Common
Stock
5,100
Earned
Capital
+5,500
Retained
Earnings
11,500
-675
Retained
Earnings
-100
Retained
Earnings
-2,500
Retained
Earnings
+4,000
Retained
Earnings
6,225
Revenues -
Expenses
+5,500
Roofing Fees Revenue
+5,500
+675
- Fuel Expense =
-675
+100
- Ad. Expense =
-100
+2,500
Wages
Expense
-2,500
+4,000
Roofing fees
Earned
9,500
Net
Income
=
+4,000
=
3,275
6,225
P3-40. continued
b. continued
Date 2014
Apr.
1
12
18
29
30
30
30
Description
Cash (+A)
Common stock (+SE)
Owner invested cash.
Debit Credit
11,500
11,500
2,880
Trucks (+A)
Cash (-A)
Purchased used truck for $6,100 cash.
6,100
Equipment (+A)
Cash (-A)
Accounts payable (+L)
Purchased ladders and other equipment, $1,000 down with
$2,100 balance due in 30 days.
3,100
Supplies (+A)
Accounts payable (+L)
Purchased supplies on account.
1,200
Cash (+A)
Unearned roofing fees (+L)
Received advance payment for services.
Accounts receivable (+A)
Roofing fees earned (+R,+SE)
Billed customers for services.
Cash (+A)
Accounts receivable (-A)
Collection on account from customers.
2,880
6,100
1,000
2,100
1,200
1,800
1,800
5,500
5,500
4,900
4,900
675
100
675
100
2,500
4,000
2,500
4,000
3-31
P3-40. continued
c.
LOUGEE ROOFING SERVICE
Unadjusted Trial Balance
April 30, 2014
Debit
$ 4,945
4,600
1,200
2,880
6,100
3,100
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Trucks
Equipment
Accounts Payable
Unearned Roofing Fees
Common Stock
Roofing Fees Earned
Fuel Expense
Advertising Expense
Wages Expense
Credit
$ 3,300
1,800
11,500
9,500
675
100
2,500
$26,100
$26,100
d.
Balance Sheet
Transaction
Cash
Asset
1. Recognize
one month of
insurance
expense.
2. Recognize
supplies
expense.
3. Recognize
depreciation
expense
Trucks.
4. Recognize
depreciation
expense on
equipment.
5. Recognize
roofing fees
earned.
Totals
Noncash
+
Assets
-120
Prepaid
Insurance
-800
Supplies
-920
Contra
Assets
= Liabilities
Income Statement
+
Contrib.
Capital
Earned
Capital
-120
Retained
Earnings
Revenues
Expenses
+120
Insurance
Expense
Net
Income
=
-120
=
+800
=
Supplies
Expense
+125
=
Depreciation
Expense
-800
+125
=
Accumulated
Depreciation
-800
Retained
Earnings
-125
Retained
Earnings
+35
=
Accumulated
Depreciation
-35
Retained
Earnings
+35
=
Depreciation
Expense
-35
-450
Unearned
Roofing
Fees
+450
-450
-630
160
+450
Retained
Earnings
+450
Roofing
Fees
Earned
-630
450
1,080
-125
P3-40. concluded
d. continued
Date 2014
Description
April 30 Insurance expense (+E,-SE)
Prepaid insurance (-A)
Debit
120
Credit
120
30
30
800
800
$400 = $800).
125
125
30
35
35
30
450
450
3-33
Cash
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Supplies
Equipment
Accounts Payable
Unearned Photography Fees
Common Stock
Photography Fees Earned
Wages Expense
Utilities Expense
Credit
$1,910
2,600
24,000
34,480
11,000
3,420
$62,990
______
$62,990
b.
Balance Sheet
Transaction
1. Fees earned
but not
received.
2. Recognize
depreciation
expense for
one year.
3. Recognize
utilities
expense.
4. Recognize
rent expense
for year.
5. Recognize
photo
revenues.
6. Recognize
insurance
expense.
7. Recognize
supplies
expense.
8. Recognize
wages
expense.
Totals
Cash
Asset
Noncash
+
Assets
+925
Fees
Receivable
-
-6,300
Prepaid
Rent
-990
Prepaid
Insurance
-2,730
Supplies
-9,095
Contra
Assets
= Liabilities
=
+2,280
Accumulated
=
Depreciation
+400
Utilities
Payable
-2,600
= Unearned
Photo Fees
Income Statement
Contrib.
Capital
2,280
+375
Wages
Payable
= -1,825
Earned
Capital
+925
Retained
Earnings
-2,280
Retained
Earnings
-400
Retained
Earnings
-6,300
Retained
Earnings
+2,600
Retained
Earnings
-990
Retained
Earnings
-2,730
Retained
Earnings
-375
Retained
Earnings
-9,550
Revenues
Expenses
+925
Photography Fees Earned
-
3,525
+2,280
Depreciation
=
Expense
+400
Utilities
Expense
+6,300
Rent
Expense
-2,280
-400
=
-6,300
=
+2,600
=
+990
Insurance
Expense
+2,730
Supplies
Expense
+375
Wages
Expense
13,075
-990
=
-2,730
=
-375
=
=
Net
Income
+925
+2,600
Photography Fee Earned
-
-9,550
P3-41. continued
b. continued
Date 2013 Description
Dec. 31
Fees receivable (+A)
Photography fees earned (+R, +SE) `
Debit
925
Credit
925
31
2,280
2,280
31
400
400
31
6,300
6,300
31
2,600
2,600
31
990
990
31
2,730
2,730
31
375
375
3-35
P3-41. concluded
c.
+ Cash (A) Unadj. bal.
2,150
Adj. bal.
2,150
+ Accounts Receivable (A) Unadj. bal.
3,800
Adj. bal.
3,800
+ Fees Receivable (A) Dec. 31
(1) 925
Adj. bal.
925
+ Prepaid Rent (A) Unadj. bal.
Dec.31
12,600 6,300 (4)
Adj. bal.
6,300
+ Prepaid Insurance (A) Unadj. bal.
Dec.31
2,970 990 (6)
Adj. bal.
1,980
+ Supplies (A) Unadj. bal.
Dec.31
4,250 2,730 (7)
Adj. bal.
1,520
Cash
Asset
Noncash
Assets
-775
1. Recognize
rent
expense.
2. To recognize
supplies
expense.
3. To recognize
depreciation
expense.
4. To recognize
wages
expense.
5. To recognize
utilities
expense.
6. To recognize
fees earned.
Prepaid
Rent
-1,700
Supplies
Contra
Assets
Date 2014
June 30
-2,095
Expenses
Net
Income
+775
-775
Rent
Expense
-1,700
+74
Retained
Earnings
-74
+210
-210
+300
-300
Utilities
Expense
+380
+380
Retained
Earnings
Service
Fees
Earned
-2,679
380
Description
Rent expense (+E, -SE)
Prepaid rent (-A)
+74
Wages
Expense
-300
Utilities
Payable
= 510
Retained
Earnings
= +300
= -1,700
Depreciation
Expense
-210
Wages
Payable
74
Retained
Earnings
= +210
+1,700
Supplies
Expense
-74
Accum.
Deprec.
=
-
Retained
Earnings
+380
Accounts
Receivable
Revenues
-775
Earned
Capital
Retained
Earnings
Totals
Income Statement
Contrib.
+
Capital
Liabilities
Debit
775
= +380
3,059
= -2,679
Credit
775
30
30
1,700
1,700
$820 = $1,700).
74
74
30
210
210
30
300
300
30
380
380
3-37
P3-42. continued
b.
+ Cash (A) 1,180
Adj. bal.
1,180
+ Accounts Receivable (A) Unadj. bal
450
Jun. 30
(6) 380
Adj. bal.
830
Unadj. bal
Jun.30
Adj. bal.
Unadj. bal
Adj. bal.
Unadj. bal
Adj. bal.
Jun.30
Jun.30
P3-42. continued
c.
MURDOCK CARPET CLEANERS
Income Statement
For Year Ended June 30, 2014
Revenues
Service fees.
$5,030
Expenses
Rent expense
$ 775
Wages expense
1,230
Supplies expense
1,700
Utilities expense.
300
Depreciation expense
74
Total expenses
4,079
Liabilities
$ 1,180 Accounts payable
830 Wages payable
Cash
Accounts receivable
Supplies
Prepaid rent
Equipment
Less: Accumulated
depreciation
Total Assets
$ 760
210
4,366
300
1,270
Owners Equity
Common stock
Retained earnings
$9,521 Total Liabilities and Owners Equity
2,000
6,251
$9,521
3-39
P3-42. concluded
d.
1.
2.
3.
4.
5.
6.
1.
2.
3.
4.
5.
Bal.
775
1,700
1,230
300
74
5,030
3.
5.
775
1,700
1,230
300
74
5,030
Bal.
1.
Bal.
2.
Bal.
6.
Cash
Asset
Noncash
Assets
1. Accrue salary
expense.
2. Accrue
interest
expense.
3. Accrue fees
receivable.
+900
=
=
Liabilities
Income Statement
+
Contrib.
Capital
-400
+720
-720
Retained
Earnings
+200
-200
Interest
Payable
Retained
Earnings
b.
Date
Dec 31
31
31
31
+238
+900
Printing
Revenue
-160
Retained
Earnings
+2,175
2,175
Description
Salaries expense (+E, -SE)
Salaries payable (+L)
To accrue salaries at December 31 ($1,800
+720
-720
-200
+900
-400
-300
-160
+38
-2,175
+200
+400
Maintenanc
e Expense
+300
Ad.
Expense
+160
Rent
Expense
+38
+38
Retained
Earnings
Interest
Revenue
-2,175
0
Net
Income
Retained
Earnings
= 1,080 +
Interest
Expense
+900
Rent
Payable
Accumulated
Depreciation
Retained
Earnings
+160
Expenses
Salaries
Expense
-300
Interest
Receivable
Retained
Earnings
-
+38
Retained
Earnings
Prepaid
Advertising
6. Accrue rent
expanse.
Revenues
-400
Prepaid
Maintenance
-300
Earned
Capital
Salaries
Payable
Fees
Receivable
4. Accrue
maintenanc
e expense.
5. Accrue ad.
Expense.
7. Accrue
interest
revenue.
8. Accrue
depreciation
expense.
Totals
Contra
Assets
+2,175
Depreciation
Expense
-3,017
938
Debit
720
3,955
= -3,017
Credit
720
2/5 = $720).
200
900
400
200
900
400
continued next page
3-41
P 3-43. concluded
b. continued
Date
Description
Dec. 31
31
31
31
Debit
300
160
38
Credit
300
160
38
2,175
2,175
$58,400
$12,000
33,400
4,700
3,250
720
630
54,700
$ 3,700
continued next page
P3-44. concluded
a. continued
TRUEMAN CONSULTING INC.
Statement of Stockholders Equity
For the Year Ended December 31, 2013
Common
Retained
Stock
Earnings
Balance at December 31, 2012 .............. $1,000
Stock issuance .......................................
Total Stockholders
Equity
$3,305
$4,305
3,700
3,700
$7,005
$8,005
Dividends ................................................
TRUEMAN CONSULTING
Balance Sheet
December 31, 2013
Assets
Liabilities
Cash
Accounts receivable
Supplies
Prepaid insurance
Equipment
Less:
Accumulated
depreciation
Total Assets
$ 2,700
3,270
3,060
1,500
$ 6,400
1,080
Accounts payable
Long-term notes payable
$ 845
7,000
Total Liabilities
7,845
Owners Equity
5,320
$15,850
Common stock
1,000
Retained earnings
Total Liabilities and Owners Equity
7,005
$15,850
b.
Date 2013 Description
Dec. 31 Service fees earned (-R)
Retained earnings (+SE)
To close the revenue account.
31 Retained earnings (-SE)
Rent expense (-E)
Salaries expense(-E)
Supplies expense (-E)
Insurance expense (-E)
Depreciation expenseEquip (-E)
Interest expense (-E)
To close the expense accounts.
Debit
58,400
Credit
58,400
54,700
12,000
33,400
4,700
3,250
720
630
3-43
31
Description
Service fees earned (-R)
Miscellaneous income (-R)
Retained earnings (+SE)
To close the revenue accounts.
Debit
97,200
4,200
74,800
Credit
101,400
42,800
13,400
1,800
8,000
8,800
b. After the closing entries are posted, Retained Earnings has a $45,700 credit balance
($19,100 + $26,600 net income).
c.
Wilson Company
Post-Closing Trial Balance
December 31, 2013
Debit
Cash
Accounts Receivable
Prepaid Insurance
Equipment
Accumulated Depreciation
Accounts Payable
Income Tax Payable
Common Stock
Retained Earnings
Credit
$8,500
8,000
3,600
72,000
______
$92,100
$12,000
600
8,800
25,000
45,700
$92,100
Cash
Asset
1. Recognize
Advertising
expense.
Noncash
Assets
-400
Prepaid
Advertising
2. Accrue wage
expense.
-1,140
Prepaid
Insurance
4. Recognize
service fees
earned.
3. Recognize
insurance
expense.
Liabilities
Income Statement
Contrib.
+
Capital
+1,300
Wages
Payable*
Totals
+1,000
Rent
Receivable
-540
-1,140
Retained
Earnings
=
=
Revenues -
-1,300
Retained
Earnings
-2,400
Unearned
= Service Fees
5. Recognize
rent revenue.
Earned
Capital
-400
Retained
Earnings
-1,100
+2,400 Retained
Earnings
+2,400
Service
Fees
Earned
+1,000
Retained
Earnings
560
+1,000
Rental
Income
3,400
Expenses
+400
Advertising
Expense
+1,300
Wages
Expense
+1,140
Insurance
Expense
Net
Income
-400
-1,300
=
-1,140
=
+2,400
+1,000
2,840
*Assumes wages earned had not been accrued or recognized yet as an expense.
Date 2013
Dec. 31
Description
Advertising expense (+E, -SE)
Prepaid advertising (-A)
To record advertising expense ($1,200
31
Debit
400
Credit
400
$800 = $400).
1,300
1,300
31
31
1,140
1,140
$2,280 = $1,140).
2,400
2,400
31
1,000
1,000
3-45
560
P3-46. concluded
b.
Balance Sheet
Transaction
Cash
Asset
1. Pay
-2,400
wages of
Cash
$2,400.
2. Receipt of +1,000
$1,000 rent
Cash
revenue.
Date 2014
Jan.
Noncash
Assets
-1,000
Rent
Receivable
Income Statement
Contrib.
= Liabil-ities +
+
Capital
Earned
Capital
-1,300
-1,100
Wages
Payable
Retained
Earnings
Revenues -
Expenses
+1,100
Wages
Expense
Description
Credit
Wages payable (-L)
Wages expense (+E, -SE)
Cash (-A)
=
=
Net
Income
-1,100
Debit
1,300
1,100
2,400
Cash (+A)
Rent receivable (-A)
1,000
1,000
6/10
6/28
6/1
6/2
6/2
6/12
6/15
6/18
6/26
6/30
5.
6/30
6/1
2.
6/2
6/1
P3-47. continued
a. continued
6/2
6/1
6/1
4.
1.
4.
6/12
6/26
2.
6/18
6/30
1.
6/15
- Retained Earnings(SE) +
1,500
3.
6/2
6/10
6/28
5.
3-47
P3-47. continued
b.
Balance Sheet
Cash
Asset
Transaction
6/1. Investment for
common stock.
6/1. Purchase of
assets for cash &
on account.
Noncash
Assets
+24,000
Liabilities
Earned
Capital
Revenues -
+24,000
Cash
Income Statement
Contrib.
Capital
Common Stock
-4,400
+ 11,040
+9,480
Cash
Office
Equipment
Accounts Payable
=
Expenses
Net
Income
+2,840
Supplies
6/2. Pay rent $875.
-875
6/2.Purchase $930
of advertising in
advance.
6/2Signed research
contract.
-930
+930
Cash
Prepaid
Advertising
+6,400
+5,800
Accounts
Receivable
-3,600
-1,240
Cash
-520
Cash
-3,600
Cash
+6,400
Cash
6/15. Paid travel
expenses.
Retained
Earnings
= Unearned Service
Fees
Cash
-875
Cash
+5,200
Accounts
Receivable
+7,800
-7,800
Cash
Acts. Rec.
+5,800
+5,800
Retained
Earnings
Service Fees
Earned
Retained
Earnings
Retained
Earnings
Retained
Earnings
Retained
Earnings
+5,200
+5,200
Retained
Earnings
Service
Fees Earned
-3,600
-520
-3,600
-1,500
-1,500
Cash
Retained
Earnings
Rent
Expense
-1,240
+875
+3,600
Salaries
Expense
+1,240
Travel
Expense
Postage
Expense
+520
+3,600
Salaries
Expense
-875
+5,800
-3,600
-1,240
-520
-3,600
+5,200
P3-47. continued
b. continued
Date 2014 Description
June 1 Cash (+A)
Common stock (+SE)
Debit
24,000
Credit
24,000
11,040
2,840
4,400
9,480
875
875
930
930
2 Cash (+A)
Unearned service fees (+L)
6,400
6,400
5,800
5,800
3,600
3,600
1,240
1,240
520
520
3,600
3,600
3-49
P3-47. continued
b. continued
Date 2014 Description
June 28 Accounts receivable (+A)
Service fees earned (+R, +SE)
Debit
5,200
Credit
5,200
30 Cash (+A)
Accounts receivable (-A)
7,800
7,800
1,500
1,500
c.
Cash
Accounts Receivable
Office Supplies
Prepaid Advertising
Office Equipment
Accounts Payable
Unearned Service Fees
Common Stock
Retained Earnings*
Service Fees Earned
Salaries Expense
Rent Expense
Travel Expense
Postage Expense
MARKET-PROBE
Unadjusted Trial Balance
June 30, 2014
Debit
$21,535
3,200
2,840
930
11,040
Credit
$9,480
6,400
24,000
1,500
11,000
7,200
875
1,240
520
______
$50,880
$50,880
* The negative (debit) balance in Retained Earnings reflects the dividend paid.
continued next page
P3-47. concluded
d.
Balance Sheet
Transaction
Cash
Asset
a. Recognize
supplies
expense.
b. Recognize
salaries
expense.
c. Accrue
depreciation
expense.
d. Recognize
advertising
expense.
e. Recognize
earned
service fees.
Noncash
+
Assets
-1,310
Office
Supplies
Contra
Assets
= Liabilities
=
+725
Salaries
Payable
+115
Accumulated
Depreciation
-310
Prepaid
Advertising
=
-
Date 2014
Description
June
30
Income Statement
Contrib.
+
+
Capital
-3,200
Unearned
Service Fees
Earned
Capital
-1,310
Retained
Earnings
-725
Retained
Earnings
-115
Retained
Earnings
-310
Retained
Earnings
+3,200
Retained
Earnings
Revenues
Expenses
+1,310
Supplies
Expense
+725
Salaries
Expense
+115
Depreciation
Expense
+310
Advertising
Expense
-
+3,200
Service
Fees
Earned
Debit
Net
Income
-1,310
-725
-115
-310
+3,200
Credit
1,310
1,310
30
725
725
30
115
115
30
310
310
30
3,200
3,200
3-51
Cash
Accounts Receivable
Prepaid Advertising
Supplies
Equipment
Notes Payable
Accounts Payable
Common Stock
Mailing Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Credit
$7,500
2,700
9,530
86,000
38,800
6,300
3,020
$105,730
________
$105,730
b.
Balance Sheet
Transaction
1. Recognize
advertising
expense.
2. Recognize
depreciation
expense.
3. Recognize
utilities
expense.
4. Accrue wages
expense.
5. Recognize
supplies
expense.
6. Accrue
interest
expense.
7. Recognize
rent
expense*.
Cash
Asset
Noncash
+
Assets
-1,540
Prepaid
Advertising
-
Contra
Assets
Liabilities
+5,280
Accumulated
Depreciation
=
-
-4,750
Supplies
+325
Accts
Payable
= +1,200
Wages
Payable
=
=
-
+450
Interest
Payable
= +430
Accts
Payable
Income Statement
+
Contrib.
Capital
Earned
Capital
-1,540
Retained
Earnings
-5,280
Retained
Earnings
-325
Retained
Earnings
-1,200
Retained
Earnings
-4,750
Retained
Earnings
-450
Retained
Earnings
-430
Retained
Earnings
Revenues
Expenses
+1,540
Advertising
Expense
+5,280
Depreciation
Expense
+325
Utilities
Expense
+1,200
Wages
Expense
+4,750
Supplies
Expense
+450
Interest
Expense
+430
Rent
Expense
Net
Income
= -1,540
=
-5,280
-325
-1,200
-4,750
-450
-430
*(1/2% $86,000 = $430). The rent for the year ($6,300 = $525 x 12) has already been recognized
in the accounts. See the beginning balances given in the problem statement.
continued next page
P3-48. continued
b. continued
Date 2013
Dec. 31
Description
Advertising expense (+E, -SE)
Prepaid advertising (-A)
Debit
1,540
Credit
1,540
31
5,280
5,280
.
31
325
325
31
1,200
1,200
31
4,750
4,750
31
450
450
31
430
430
3-53
P3-48. concluded
c.
Only the T-accounts needed to enter the adjustments are provided.
- Accounts Payable (L) +
2,700
325
430
Bal.
3.
7.
Bal.
1.
Bal.
5.
1.
6.
Bal.
7.
4.
Bal.
4.
Bal.
3.
5.
2.
6.
Cash
Asset
1. Recognize
rent
expense.
2. Recognize
supplies
expense.
3. Accrue
depreciation
expense.
4. Accrue wages
payable.
Noncash
+
Assets
-795
Prepaid
Rent
-1,980
Supplies
Contra
Assets
Liabilities
Income Statement
+
Contrib.
Capital
=
=
-
+335
Accumulated
Depreciation
=
-
5. Recognize
utilities
expense.
6. Recognize
service
revenue.
+560
Wages
Payable
=
+390
Accounts
Payable
=
-500
Unearned
Service
Revenue
Earned
Capital
-795
Retained
Earnings
-1,980
Retained
Earnings
-335
Retained
Earnings
-560
Retained
Earnings
-390
Retained
Earnings
+500
Retained
Earnings
31
Revenues
Expenses
+795
Rent
Expense
+1,980
Supplies
Expense
+335
Depreciation
Expense
+560
Wages
Expense
+390
Utilities
Expense
Net
Income
-795
-1,980
-335
-560
-390
+500
+500
Service
Revenue
Debit
Credit
795
795
31
1,980
1,980
31
335
335
31
560
560
31
390
390
31
500
500
3-55
P3-49. continued
b. Not all the T-accounts given are needed to enter the adjustments required. Also, the
closing entries required in part d are referenced by 1c, 2c etc.
- Accounts Payable (L) +
2,510
390
2,900
Bal.
5.
Bal.
6c.
3.
5.
1c.
2c.
3c.
4c.
5c.
-Service Revenue(R) +
12,860 12,360
500
Bal.
6.
3c.
5c.
6c.
7c.
Bal.
Bal.
1.
1.
1c.
2.
2c.
4c.
4.
Bal.
4.
P3-49. continued
c.
WHEEL PLACE COMPANY
Income Statement
For Month Ended March 31, 2014
Service
revenue....
$12,860
Expenses:
Utilities expense...
$390
Supplies expense..
1,980
Wages expense....
4,460
Depreciation expense.
335
Rent expense...
795
Net income
...
7,960
$4,900
Liabilities
$ 1,900 Accounts payable
3,820 Wages payable
Cash
Accounts receivable
Supplies
Prepaid rent
Equipment
Less:Accumulated
depreciation
Total Assets
$ 2,900
560
35,845
500
3,960
Owners Equity
Common stock
Retained earnings
$47,260 Total Liabilities and Owners Equity
38,400
4,900
$47,260
3-57
P3-49. concluded
d.
1c.
2c.
3c.
4c.
5c.
6c.
795
1,980
335
4,460
390
795
1,980
335
4,460
390
12,860
$ 168,300
49,700
$218,000
100,230
85,600
8,800
6,100
1,860
5,500
1,600
209,690
$8,310
TRAILS, INC.
Statement of Stockholders Equity
For Year Ended December 31, 2013
$25,000
$23,220
Total
Stockholders
Equity
$48,220
_____
$25,000
8,310
$31,530
8,310
$56,530
Common
Stock
Balance at December 31, 20012 ............
Stock issuance .....................................
Dividends .............................................
Net income ...........................................
Balance at December 31, 2013 ..............
Retained
Earnings
3-59
P3-50. Concluded
a. continued
TRAILS, INC.
Balance Sheet
December 31, 2013
Assets
Cash
Accounts receivable
Supplies
Prepaid insurance
Office equipment
Less:
Accum. depreciation
$3,400
8,600
4,200
930
Liabilities
Accounts payable
Unearned subscription revenue
Salaries payable
Total liabilities
$ 2, 100
10,000
3,500
15,600
$66,000
Stockholders' equity
11,000
Total assets
55,000
$72,130
Common stock
Retained earnings
Total stockholders' equity
Total liabilities and
stockholders' equity
$25,000
31,530
56,530
$72,130
b.
Date 2013 Description
Dec. 31 Subscription revenue (-R)
Advertising revenue (-R)
Retained earnings (+SE)
Debit
168,300
49,700
Credit
218,000
31
209,690
100,230
85,600
8,800
6,100
1,860
5,500
1,600
Description
Service fees earned (-R)
Retained earnings (+SE)
Debit
72,500
Credit
72,500
31
58,800
29,800
10,200
2,900
5,100
6,000
4,000
800
b. The balance in Retained Earnings after closing entries are posted is $29,250 credit
($15,550 + $13,700).
c.
MAYFLOWER MOVING SERVICE
Post-Closing Trial Balance
December 31, 2013
Debit
Cash
$ 3,800
Accounts Receivable
5,250
Supplies
2,300
Prepaid Advertising
3,000
Trucks
28,300
Accumulated DepreciationTrucks
Equipment
7,600
Accumulated DepreciationEquipment
Accounts Payable
Unearned Service Fees
Common Stock
Retained Earnings
______
$50,250
Credit
$10,000
2,100
1,200
2,700
5,000
29,250
$50,250
3-61
Transaction
1. Recognize
maintenance
expense.
2. Recognize supplies
expense.
Noncash
+
Assets
-1,800
Prepaid
Maintenance
-5,200
Supplies
3. Accrue earned
commissions.
Balance Sheet
Liabil=
+
ities
Income Statement
Contrib.
+
Capital
=
=
-4,500
Unearned
=
Commis
-sion Fees
+2,800
Fees
Receivable
+2,800
Retained
Earnings
-913
Retained
Earnings
5. Rent expense.
=
Earned
Capital
-1,800
Retained
Earnings
-5,200
Retained
Earnings
+4,500
Retained
Earnings
+913
Rent
Payable
Revenues
+4,500
Commission
Fees Earned
+2,800
Commission
Fees Earned
Expenses
+1,800
Maintenance
Expense
+5,200
Supplies
Expense
=
-5,200
=
+4,500
+2,800
+913
Rent
Expense
Debit
1,800
-913
=
Credit
1,800
5,200
5,200
$3,200 = $5,200).
4,500
4,500
2,800
2,800
913
913
Net
Income
-1,800
P3-52. concluded
b.
Balance Sheet
Cash
Asset
Transaction
1/10. Billing of
commission
fees earned.
Noncash
Assets
Liabilities
Income Statement
+
Contrib.
Capital
Earned
Capital
Revenues -
-2,800
+1,800
+1,800
Fees
Receivable
Retained
Earnings
Commission
Fees
Earned
+4,600
Expenses
Net
Income
+1,800
-
Accounts
Receivable
1/10. Payment of
additional rent
in cash.
2014
Jan. 10
-913
-913
= Rent Payable
Cash
4,600
2,800
1,800
10
913
913
2. Record
inventory
purchased
and used.
3. Recognize
recent
payments on
A/P.
4. Recognize
rent paid and
rent
expense.
5. Recognize
wage
expense and
wages paid.
6. Recognize
depreciation
expense.
Cash
+
Asset
+145,850
Cash
Noncash
Assets
= Liabil-ities +
=
+2,500
Inventories
-77,300
Cash
-24,000
Cash
Contra
Assets
+200
Prepaid
Rent
-12,500
Cash
= +76,200
Accounts
Payable
Income Statement
Contrib.
+
Capital
Earned
Capital
+145,850
Retained
Earnings
-73,700
Retained
Earnings
= -77,300
Accounts
Payable
=
=
+1,700
=
- Accumulated
Depreciation
+250
Wages
Payable
Revenues
+145,850
Sales
Revenue
Expenses
+73,700
Cost of
Sales
Net
Income
+145,850
-73,700
-23,800
Retained
Earnings
+23,800
Rent
Expense
-23,800
-12,750
Retained
Earnings
+12,750
Wages
Expense
-12,750
-1,700
Retained
Earnings
+1,700
Depreciation
Expense
-1,700
3-63
P3-53. continued
a. continued
1. Cash (+A) ............................................................................................
145,850
Sales revenue (+R,+SE) .....................................................................
145,850
2. Inventories (+A) ...................................................................................
2,500
Cost of goods sold (+E, -SE) ..............................................................
73,700*
Accounts payable (+L) ........................................................................
76,200
Or, make two separate entries with the same net effect:
5.
6.
P3-53. continued
b, d.
The closing entries required in part d are also included here and indicated by the
letter d before the relevent entry.
+ Cash (A) -
Bal.
1.
Bal.
8,500
145,850
77,300
24,000
12,500
3.
4.
5.
Bal.
2.
Bal.
40,550
Bal.
Bal.
Bal.
4.
Bal.
3.
d.
4.
Bal.
5.
Bal.
Bal.
Bal.
Bal.
2.
1.
2.
Bal.
6.
d.
Bal.
Bal.
d.
Bal.
d.
3-65
P3-53. concluded
c, d. Part c is easier to complete if the closing entries required in part d are journalized
and entered in the T-accounts. The appropriate T-account entries for part d have
been made earlier and indicated by the letter d.
Sales revenue (-R) ...................................................................................
145,850
Cost of goods sold (-E) .............................................................................
Rent expense (-E) ....................................................................................
Wages expense (-E) .................................................................................
Depreciation expense (-E) .........................................................................
Owners equity..........................................................................................
73,700
23,800
12,750
1,700
33,900
$145,850
73,700
72,150
$23,800
12,750
1,700
38,250
$33,900
2013
2014
$ 8,500
12,000
3,800
24,300
7,500
(3,000)
4,500
$ 28,800
$ 40,550
14,500
4,000
59,050
7,500
(4,700)
2,800
$ 61,850
$ 5,200
100
5,300
23,500
$ 28,800
$ 4,100
350
4,450
57,400
$ 61,850
Transaction
12/1. Investment for
common stock.
12/2. Rent paid in
cash.
12/2. Purchase
supplies on
account.
12/3. Office equipment
bought for 4,700
cash and rest on
account.
12/8. Paid for
supplies.
Noncash
Assets
= Liabilities
+20,000
Cash
-1,200
Cash
Contrib.
Capital
Earned
Capital
Revenues
+20,000
Common
Stock
-4,700
Cash
-1,200
Retained
Earnings
+1,080
= Accounts
Payable
+9,500
+4,800
Office
Accounts
=
Equipment
Payable
-1,080
Cash
-1,080
= Accounts
Payable
-900
Cash
+3,000
Cash
-900
Cash
+7,200
Fees
=
Receivable
-1,800
Cash
Expenses
+1,080
Supplies
Income Statement
-900
Retained
Earnings
+3,000
Retained
Earnings
-900
Retained
Earnings
+7,200
Retained
Earnings
-1,800
Retained
Earnings
+1,200
Rent
Expense
-1,200
=
=
=
+900
Wages
Expense
-900
=
+3,000
+7,200
Consulting
Revenue
Net
Income
+3,000
Consulting
Revenue
=
+900
Wages
Expense
-900
=
+7,200
b.
Dec. 1 Cash (+A)
Common stock (+SE)
20,000
20,000
1,200
1,200
2 Supplies (+A)
Accounts payable (+L)
1,080
1,080
3-67
P3-54. continued
b. continued
Dec.
9,500
4,700
4,800
1,080
1,080
Payment on account.
900
900
20 Cash (+A)
Consulting revenue (+R, +SE)
3,000
3,000
900
900
7,200
1,800
7,200
1,800
P3-54. continued
b. continued
The adjusting entries requested in part d are included and are denoted by the letter d
followed by a number 1 through 5. The closing entries requested in part g are indicated
by the letter g.
+
12/1
12/20
Bal.
Cash (A)
20,000
1,200
3,000
4,700
1,080
900
900
1,800
12,420
-Wages Payable(L) +
2d.
-Accumulated Depreciation+
Office Equipment (XA)
120
12/8
g.
3d.
Bal.
-Consulting Revenue(R)+
3,000
7,200
12,450 2,250
Bal.
+Depreciation Expense(E)120 120
0
12/2
12/3
12/8
12/14
12/28
12/31
12/2
Bal.
+Supplies(A)1,080 370
710
12/3
d1
270
-Common Stock(SE)+
3d.
12/2
12/3
Bal.
g.
Bal.
12/20
12/30
4d.
0
g.
20,000
12/2
Bal.
12/14
12/28
2d.
Bal.
12/30
4d.
Bal.
1d.
Bal.
12/1
g.
g.
g.
3-69
P3-54. continued
c.
RHOADES TAX SERVICES
Unadjusted Trial Balance
December 31, 2013
Debit
$12,420
7,200
1,080
9,500
Cash
Fees Receivable
Supplies
Office Equipment
Accounts Payable
Common Stock
Retained Earnings (Dividend)
Consulting Revenue
Wages Expense
Rent Expense
Credit
$4,800
20,000
1,800
10,200
1,800
1,200
$35,000
______
$35,000
d.
Transaction
1. Record
supplies
expense.
2. Accrue wages
expense.
3. Record
depreciation
expense.
4. Recognize
accrued
consulting
fees.
Cash
Asset
Noncash
+
Assets
-370
Supplies
Balance Sheet
Contra
Liabi=
Assets
lities
=
=
-
+120
Accumulated
Depreciation
+2,250
Fees
Receivable
+270
Wages
Payable
Income Statement
+
Contrib.
Capital
Earned
Capital
-370
Retained
Earnings
-270
Retained
Earnings
-120
Retained
Earnings
+2,250
Retained
Earnings
Revenues
+2,250
Consulting
Revenue
Expenses
Net
Income
=
-370
=
+370
Supplies
Expense
+270
=
Wages
Expense
+120
=
Depreciation
Expense
=
-270
-120
+2,250
P3-54. continued
d. continued
Date 2013
Description
Dec. 31 Supplies expense (+E, -SE)
Supplies (-A)
Debit
370
370
31
Credit
$710).
270
270
31
120
120
31
2,250
2,250
$75).
e.
RHOADES TAX SERVICES
Adjusted Trial Balance
December 31, 2013
Debit
Cash
$12,420
Fees Receivable
9,450
Supplies
710
Office Equipment
9,500
Accumulated Depreciation
Accounts Payable
Wages Payable
Common Stock
Retained Earnings
1,800
Consulting Revenue
Supplies Expense
370
Wages Expense
2,070
Rent Expense
1,200
Depreciation Expense
120
$37,640
Credit
$120
4,800
270
20,000
12,450
______
$37,640
3-71
P3-54. continued
f.
RHOADES TAX SERVICES
Income Statement
For the Month of December 2013
Revenue
Consulting revenue
Expenses
Wages expense
Rent expense
Supplies expense
Depreciation expense
Total expenses
Net income
$12,450
$ 2,070
1,200
370
120
3,760
$ 8,690
$0
20,000
Dividends .............................................
Net income ...........................................
_____
$20,000
Retained
Earnings
$0
(1,800)
8,690
$6,890
Total
Stockholders
Equity
$0
20,000
(1,800)
8,690
$26,890
$ 4,800
270
5,070
20,000
6,890
$31,960
P3-54. concluded
g.
Date 2013
Description
Dec.31 Consulting revenue (-R)
Retained earnings (+SE)
Debit Credit
12,450
12,450
3,760
2,070
1,200
370
120
h.
Cash
Fees Receivable
Supplies
Office Equipment
Accumulated Depreciation
Accounts Payable
Wages Payable
Retained Earnings
Common Stock
$32,080
Credit
$ 120
4,800
270
6,890
20,000
$32,080
3-73
Noncash
Assets
= +10,000
Loans
Payable
=
-25,000
Cash
+25,000
Equipment -
6. Purchased
inventory.
-62,000
Cash
7. Paid salaries.
-6,000
Cash
-13,000
Cash
+62,000
Inventory
b. Adjust rent
expense.
+12,000
Prepaid
Rent
+81,000
Sales
Revenue
-24,000
Retained
Earnings
Expenses
+24,000
Rent
Expanse
=
=
= +3,000
Salaries
Payable
=
+1,250
Accumulated
Depreciation
=
-
+300
Interest
Payable
-6,000
Retained
Earnings
-13,000
Retained
Earnings
+9,000
Retained
Earnings
+12,000
Retained
Earnings
-3,000
Retained
Earnings
-41,000
Retained
Earnings
-1,250
Retained
Earnings
-300
Retained
Earnings
+9,000
Sales
Revenue
+6,000
Salaries
Expense
+13,000
Misc.
Expenses
+81,000
-24,000
-12,000
Rent
Expense
+3,000
Salaries
Expense
+41,000
Cost of
Goods Sold
+1,250
Deprec.
Expense
+300
Interest
Expense
-6,000
-13,000
+9,000
=
+12,000
=
-3,000
-41,000
-1,250
-300
Net
Income
-41,000
Inventory
Revenues
+9,000
A/R
Earned
Capital
a. Recognize
credit sales.
Income Statement
Contrib.
+
+
Capital
+50,000
Investment
+81,000
Retained
Earnings
5. Purchased
equipment.
c. Accrue
salaries
expense.
d. Recognize
cost of
goods sold.
e. Accrue
depreciation
expense.
f. Accrue interest
expense*.
Liabilities
8. Paid other
expenses.
Contra
Assets
C3-55. continued
a. continued
a2. Journal entries are shown only for the adjustments a-f.
a. Accounts receivable (+A)
Sales revenue (+R, +SE)
9,000
9,000
12,000
12,000
3,000
3,000
41,000
41,000
1,250
1,250
300
300
3-75
C3-55. continued
b.
T-accounts: The opening balances shown are the amounts in the accounts prior to
the entry of the adjustments described in items a through f. The cash balance
represents the deposits made, $141,000, less the checks drawn, $130,000.
+ Cash (A) 11,000
Bal.
Bal.
b.
+ Equipment (A) 25,000
Bal.
a.
e.
Bal.
Bal.
+
Bal.
c.
+
f.
d.
Bal.
a.
b.
c.
Bal.
d.
e.
Bal.
f.
C3-55. continued
c.
SEASIDE SURF SHOP
Income Statement
July 1, 2010 to September 30 ,2014
Sales revenue
Cost of goods sold
Gross margin
Expenses:
Rent expense
Salaries expense
Depreciation expense
Interest expense
Misc. expenses
Net income
$90,000
41,000
49,000
$12,000
9,000
1,250
300
13,000
35,550
$13,450
Assets
Current assets
Cash
Accounts receivable
Inventory
Prepaid rent
Total current assets
$11,000
9,000
21,000
12,000
53,000
23,750
$76,750
$3,000
10,000
300
13,300
Owners equity*
Total liabilities and owners equity
63,450
$76,750
*$50,000 + $13,450
3-77
C3-55. concluded
d. Chapter 1 introduced the return on equity ratio as a simple performance measure
that can be used to evaluate how well this new business is doing. The return on
equity is calculated as the ratio of net income to average total equity. In this case,
the return on equity for the three-month period was 23.7% = $13,450 / [($50,000+
$63,450)/2]. This is a very good return for a three-month period and equates to 95%
annualized. However, the favorable performance evaluation should be tempered by
a few caveats:
(1) Because this business appears to be a sole proprietorship, any salary paid to
the owner is not deducted from net income. Instead, cash payments to the
owner are treated as dividends (or withdrawals). As a consequence, any
services provided by the owner to the business would not be reflected among the
expenses reported in the income statement, and net income would be
overstated.
(2) No expense is reported in the income statement for income taxes. This is
consistent with the business being a sole proprietorship, in which income taxes
are levied against the owner as an individual taxpayer. Again, this makes net
income appear to be larger than it otherwise might be.
(3) Retail businesses are notoriously seasonal. That is, sales (and profits) fluctuate
from season to season. A business such as this one would likely have its highest
sales in the second and third quarters. This seasonality must be considered
when we try to annualize quarterly results like these. Once the business has
operated for a year or two, the owner would likely have a better idea about how
seasonal fluctuations affect sales and returns and would be better able to
interpret quarterly performance measures.
(4) Finally, Seasides cash position is precarious. The firm has burned through most of
the $60 thousand cash raised to begin the business and is likely to have trouble
replacing its inventory as well as paying its bills. Perhaps they can convince lenders
to come to their rescue. If not, the firm will not last another three months.
$88,500
Liabilities
$45,900
51.9%
$42,600
48.1%
(2,250)
(2,250)
3,425
3,425
6,000
6,000
(5,650)
(8,400)
$87,275
______
$40,250
46.1%
5,650
(8,400)
$47,025
53.9%
3-79
Cash
Asset
-62,550
Cash
+ 849
Advertising
Credits
Receivable
-62,138
Prepaid
Catalog
Costs
b. Recognize
advertising
expense.
c. Recognize expiration
of advertising
credits.
Noncash
Assets
+62,550
Prepaid
Catalog
Costs
-336
Advertising
Credits
Receivable
+19,175
Cash
= Liabilities
Income Statement
+
Contrib.
Capital
Earned
Capital
Revenues -
+849
Retained
Earnings
-62,138
Retained
Earnings
-336
Retained
Earnings
+849
Advertising
Credits
Revenue
=
+62,138
Catalog
Expenses
-62,138
=
+336
Expense:
- Expiration of =
Advertising
Credits
+18,230
Gift
Certificate
Revenues
+18,230
-
62,550
62,550
849
849
b.
62,138
62,138
-336
Journal Entries:
a1. Prepaid catalog costs (+A)
Cash (-A)
Net
Income
+18,230
Retained
Earnings
+849
+19,175
Unearned
Gift
=
Certificate
Revenues
- 18,230
Unearned
Gift
=
Certificate
Revenues
Expenses
3-81
C3-58. concluded
c.
336
336
Advertising credits expire either because they were used to advertise or, if there was a
time limitation to their use, the time limit expired.
d1. Cash (+A)
Unearned gift certificate revenues (+L)
19,175
19,175
18,230
18,230