4
2. The purpose of adjusting is to update accounts to the latest balance before
3. The internal transactions make it necessary to make adjustments.
Example: Rent expiring over a period of time.
5. We need the Accumulated Depreciation account because it records a history of
6. False; Depreciation Expense goes on the income statement.
8. Accrued salaries are salaries that have been earned but are unpaid and
9. The balances of accounts, which appear on formal statements, were
10. The worksheet provides all the data to prepare the financial statements. The
11. All expenses that are incurred in the old year (whether paid or not) should be
SOLUTIONS TO CONCEPT CHECKS
1.
a.
$1,100.00
– 400.00
$700.00
Used up
b.
1
Accounts Affected
3
↑ ↓
4
Rules
5
T-Accounts
Office Supplies
Expense
↑
Dr.
Office Supplies Exp.
700
Office Supplies
↓
Cr.
Office Supplies
1,100
700
2.
a. $300 Expired
b.
1
Accounts Affected
2
Category
3
↑ ↓
4
Rules
5
T-Accounts
Rent Expense
Expense
↑
Dr.
Rent Expense
300
Prepaid Rent
Asset
↓
Cr
Prepaid Rent
900
300
c. $600
3.
a.
Equipment
b.
Acc. Depr., Equipment
c.
1
Accounts Affected
2
Category
3
↑ ↓
4
Rules
5
T-Accounts
Depr. Exp., Equip.
Expense
↑
Dr.
Depr. Expense, Equip.
1,700
Acc. Depr., Equip.
Contra-
Asset
↑
Cr.
Accum. Depr., Equip.
1,500
1,700
d.
Equipment
$9,800 Dr.
Acc. Depr., Equip
3,200 Cr.
Depr. Exp., Equip.
1,700 Dr.
SOLUTIONS TO CONCEPT CHECKS (CONTINUED)
4.
a.
1
Accounts Affected
2
Category
3
↓ ↑
4
Rules
5
T-Accounts
Salaries Expense
Expense
↑
Dr.
Salaries Expense
1,000
125
Salaries Payable
Liability
↑
Cr.
Salaries Payable
125
b.
Salaries Expense
$1,125 Dr.
Salaries Payable
$125 Cr.
5.
A.
IC
H.
BD
B.
BC
I.
BD
C.
BD
J.
ID
D.
BD
K.
BC
E.
BC
L.
ID
F.
ID
M.
BC
G.
BC
N.
BC
6.
The worksheet shows individual account balances within the debit and credit
columns, but the balance sheet reports individual account balances along with
subtotals. Therefore, (A), which represents the net equipment balance, and (B),
which represents total liabilities, do not appear on the worksheet.
SOLUTIONS TO SET A EXERCISES
4A–1.
Account
Category
Normal
Balance
Financial
Statement(s)
Found on
Accumulated Depr., Office
Equipment
Contra-Asset
Cr.
Balance Sheet
Prepaid Rent
Asset
Dr.
Balance Sheet
Office Equipment
Asset
Dr.
Balance Sheet
Depreciation Expense,
Office Equipment
Expense
Dr.
Income Statement
B. Reel, Capital
Capital
Cr.
Statement of Owner’s Equity
and Balance Sheet
B. Reel, Withdrawals
Withdrawal
Dr.
Statement of Owner’s Equity
Wages Payable
Liability
Cr.
Balance Sheet
4A–2.
Accounts Affected
Category
↑ ↓
Rules
a) Depreciation Expense,
Equipment
Expense
↑
Dr. $700
Accumulated Depreciation,
Equipment
Contra-Asset
↑
Cr. $700
b) Rent Expense
Expense
↑
Dr. $400
Prepaid Rent
Asset
↓
Cr. $400
4-5
EXERCISES (CONTINUED)
4A-4.
J. REVERE
WORKSHEET
FOR MONTH ENDED JANUARY 31, 201X
Balance Sheet
12
12
6
8
38
8
46
4
10
4
5
20
3
46
46
Income
Statement
46
46
46
9
15
6
3
5
38
8
46
Adjusted Trial
Balance
12
12
6
46
8
84
4
10
4
5
20
3
9
15
6
3
5
84
Adjustments
(B)3
(C)5
(A) 6
(D)8
22
(D)8
(A) 6
(B)3
(C)5
22
Trial Balance
6
12
6
46
70
4
10
7
10
20
3
9
7
70
Account Titles
Cash
Accounts Receivable
Prepaid Insurance
Store Supplies
Store Equipment
Acc. Dep., Store Equip.
Accounts Payable
J. Revere, Capital
J. Revere, Withdrawals
Revenue from Clients
Rent Expense
Wage Expense
Dep. Exp., Store Equip.
Insurance Expense
Store Supplies Expense
Wages Payable
Net Income
EXERCISES (CONTINUED)
4A-5. (a)
J. REVERE
INCOME STATEMENT
4-7
EXERCISES (CONTINUED)
Liabilities and Owner’s Equity
00
00
00
0
1
1
2
1
3
$
$
00
00
2
8
1
$
Owner’s Equity
Accounts Payable
Wages Payable
Total Liabilities
J. Revere, Capital
Total Liabilities and
Owner’s Equity
J. REVERE
BALANCE SHEET
JANUARY 31, 201X
00
00
00
00
00
10
4
5
8
1
3
$
00
00)
20
(12
$
Accts. Receivable
Prepaid Insurance
Store Equipment
Less: Acc. Depr.
Assets
Store Supplies
Total Assets
(c)
SOLUTIONS TO SET B EXERCISES
4B–1.
Account
Category
Normal
Balance
Financial
Statement(s)
Found on
Accounts Payable
Liability
Cr.
Balance Sheet
Prepaid Insurance
Asset
Dr.
Balance Sheet
Computer Equipment
Asset
Dr.
Balance Sheet
Depreciation Expense,
Computer Equipment
Expense
Dr.
Income Statement
B. Free, Capital
Capital
Cr.
Statement of Owner’s Equity
and Balance Sheet
B. Free, Withdrawals
Withdrawal
Dr.
Statement of Owner’s Equity
Salaries Payable
Liability
Cr.
Balance Sheet
Accumulated Depreciation,
Computer Equipment
Contra-Asset
Cr.
Balance Sheet
4-9
EXERCISES (CONTINUED)
4B-4.
J. TUTLE
WORKSHEET
FOR MONTH ENDED MARCH 31, 201X
Balance Sheet
10
11
26
2
49
16
65
22
8
7
7
11
10
65
65
Income
Statement
29
29
29
3
5
1
1
3
13
16
29
Adjusted Trial
Balance
10
11
26
29
2
78
22
8
7
7
11
10
3
5
1
1
3
78
Adjustments
(B) 1
(C) 3
(A) 1
(D)2
7
(D)2
(A) 1
(B) 1
(C) 3
7
Trial Balance
9
11
26
29
75
22
8
8
10
11
10
3
3
75
Account Titles
Cash
Accounts Receivable
Prepaid Insurance
Store Supplies
Store Equipment
Accum. Depr., Store Eq.
Accounts Payable
J. Tutle, Capital
J. Tutle, Withdrawals
Revenue from Clients
Rent Expense
Wage Expense
Dep. Exp., Store Eq.
Insurance Expense
Store Supplies Expense
Wages Payable
Net Income
EXERCISES (CONTINUED)
4B-5. (a)
J.TUTLE
INCOME STATEMENT