Part 3
There are no differences between the two methods in terms of the amounts
that appear on the financial statements. In both cases, the financial
statements reflect the following:
Advertising expense for two months……………………………… $ 600
Prepaid advertising as of December 31………………………….. 1,200
Insurance expense for two months………………………………… 410
When prepaid expenses and unearned revenues are recorded in balance
sheet accounts, the related adjusting entries are designed to generate the
correct asset, expense, liability, and revenue account balances. When
prepaid expenses and unearned revenues are recorded in income
statement accounts, the related adjusting entries are designed to
accomplish exactly the same result.
PROBLEM SET B
Problem 3-1B (15 minutes)
1. H 5. B 9. I
Problem 3-2B (30 minutes)
Part 1
Adjustment (a)
Oct. 31 Office Supplies Expense………………………………… 4,370
Adjustment (b)
31 Insurance Expense………………………………………… 4,730
Policy Cost per Month
Months Active
in Fiscal Year
2015
Fiscal Year
2015
Expense
A $250 ($6,000/24 mo.) 12 $3,000
Adjustment (c)
31 Salaries Expense…………………………………………… 1,000
Problem 3-2B (Concluded)
Adjustment (d)
Oct.31 Depreciation Expense—Building……………………. 5,400
Adjustment (e)
31 Rent Receivable…………………………………………….. 1,000
Adjustment (f)
31 Unearned Rent………………………………………………. 1,450
Part 2
Cash Payment for (c)
Nov. 7 Salaries Payable……………………………………………. 1,000
Cash Payment for (e)
15 Cash…………………………………………………………….. 2,000
Problem 3-3B (90 minutes)
Parts 1 and 2
Cash Accounts Payable
Bal. 60,000 Bal. 11,200
Accounts Receivable Salaries Payable
Teaching Supplies Unearned Training Fees
Unadj. Bal. 70,000 Unadj. Bal. 28,600
(b) 50,000 (e) 28,600
Adj. Bal. 20,000 Adj. Bal. 0
Prepaid Insurance C. Alonzo, Capital
C. Alonzo, Withdrawals
Prepaid Rent Bal. 20,000
Unadj. Bal. 3,800
(h) 3,800
Adj. Bal. 0
Professional Library
Accumulated Depreciation—
Professional Library
Equipment
Bal. 40,000
Accumulated Depreciation—
Equipment
Problem 3-3B (Continued)
Parts 1 and 2
Tuition Fees Earned Advertising Expense
Training Fees Earned Utilities Expense
Unadj. Bal. 68,000 Bal. 13,400
(e) 28,600
Adj. Bal. 96,600
Depreciation Expense—
Professional Library
Depreciation Expense—
Equipment
Unadj. Bal. 0
(c) 5,000
Adj. Bal. 5,000
Salaries Expense
Insurance Expense
Unadj. Bal. 0
(a) 9,500
Adj. Bal. 9,500
Rent Expense
Teaching Supplies Expense
Unadj. Bal. 0
(b) 50,000
Adj. Bal. 50,000
Problem 3-3B (Continued)
Part 2
Adjustment (a)
Adjustment (b)
31 Teaching Supplies Expense………………………….. 50,000
Adjustment (c)
Adjustment (d)
31 Depreciation Expense—Professional Library…. 2,400
Adjustment (e)
31 Unearned Training Fees………………………………… 28,600
Adjustment (f)
Adjustment (g)
Adjustment (h)
31 Rent Expense ……………………………………………… 3,800
Problem 3-3B (Continued)
Part 3
ALONZO INSTITUTE
Adjusted Trial Balance
December 31, 2015
Debit Credit
Cash…………………………………………………………………. $ 60,000
Accounts receivable…………………………………………….. 5,750
Teaching supplies……………………………………………….. 20,000
Prepaid insurance……………………………………………….. 9,500
Prepaid rent………………………………………………………… 0
Professional library……………………………………………… 12,000
Problem 3-3B (Continued)
Part 4
ALONZO INSTITUTE
Income Statement
For Year Ended December 31, 2015
Revenues
Tuition fees earned…………………………………………… $134,950
Training fees earned…………………………………………. 96 ,600
Total revenues…………………………………………………. $231,550
Expenses
Depreciation expense—Professional library………. 2,400
ALONZO INSTITUTE
Statement of Owner’s Equity
For Year Ended December 31, 2015
C. Alonzo, Capital, December 31, 2014………….. $ 71,500
Problem 3-3B (Concluded)
ALONZO INSTITUTE
Balance Sheet
December 31, 2015
Assets
Cash…………………………………………………………………. $ 60,000
Accounts receivable………………………………………….. 5,750
Teaching supplies……………………………………………… 20,000