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Quick Study 3-18 (10 minutes)
a. Under IFRS, financial statements normally present assets from least
liquid to most liquid.
Quick Study 3-19 (10 minutes)
Quick Study 3-20A (5 minutes)
EXERCISES
Exercise 3-1 (20 minutes)
Balance Sheet Insurance Asset using Insurance Expense using
Accrual
Basis*
Cash
Basis
Accrual
Basis**
Cash
Basis
Dec. 31, 2013.................$13,000 $0 2013...............................$ 5,000 $18,000
Explanations:
*Accrual asset balance equals months left in the policy x $500 per month (monthly
cost is computed as $18,000 / 36 months).
Months Left Balance
12/31/2013... 26 $13,000
**Accrual insurance expense equals months covered in the year x $500 per month.
Months Covered Expense
2013...................................10 $ 5,000
2014...................................12 6,000
Exercise 3-2 (10 minutes)
Exercise 3-3 (15 minutes)
a. Adjusting entry:
2015
Dec. 31 Wages Expense..............................................................
1,250
Wages Payable....................................................... 1,250
To record accrued wages for one day.
(5 workers x $250)
b. Payday entry:
2016
Exercise 3-4 (15 minutes)
a. Supplies expense for current year: $2,550
Proof:
(a) (b) (c) (d)
Supplies available – prior year-end......... $ 400 $1,200 $ 1,260 $2,288
Supplies purchased in current year........ 2,800 6,500 8,490 3,000
Exercise 3-5 (25 minutes)
a.
Apr. 30 Legal Fees Expense............................................ 3,500
Legal Fees Payable..................................... 3,500
To record accrued legal fees.
May 12 Legal Fees Payable............................................. 3,500
May 20 Interest Payable................................................... 3,000
Interest Expense*................................................ 6,000
Cash.............................................................. 9,000
To record payment of accrued and current
interest. *($9,000 monthly interest x 20/30)
c.
Apr. 30 Salaries Expense................................................. 4,000
Exercise 3-6 (25 minutes)
($6,000 - $1,100).
c. Office Supplies Expense.................................................. 3,880
Office Supplies**............................................................ 3,880
To record office supplies used ($700 + $3,480 - $300).
e. Insurance Expense............................................................ 5,800
Prepaid Insurance......................................................... 5,800
To record insurance coverage that expired.
Notes:
Prepaid Insurance*Office Supplies**
? Used ? Used
End. Bal. 1,100 End. Bal. 300
Exercise 3-7 (30 minutes)
a. Unearned Fee Revenue..................................................... 5,000
Fee Revenue.................................................................. 5,000
To record earned portion of fee received in advance
($15,000 x 1/3).
d. Office Supplies Expense.................................................. 5,000
Office Supplies*............................................................. 5,000
To record office supplies used ($240 + $5,200 - $440).
g. Interest Expense.............................................................. 2,500
Interest Payable........................................................... 2,500
To record interest incurred but not yet paid.
Notes:
Prepaid Insurance†Office Supplies*
Exercise 3-8 (25 minutes)
Dec. 31 Accounts Receivable.............................................. 2,100
Fees Earned..................................................... 2,100
To record earned but unbilled fees (30% x $7,000).
To record depreciation on office furniture.
31 Salaries Expense.................................................... 2,250
Salaries Payable.............................................. 2,250
To record accrued salaries.
31 Insurance Expense.................................................. 1,400
Prepaid Insurance........................................... 1,400
To record expired prepaid insurance.
To record incurred and unpaid utility costs.
Exercise 3-9 (20 minutes)
adidas AG
Balance Sheet
December 31, 2013
(Euros in millions)
Assets
Noncurrent assets
Intangible assets.................................................... € 148
Tangible and other assets..................................... 304
Cash and cash equivalents................................... 736
Total current assets............................................... 2 ,766
Total assets............................................................... € 6 ,694
Equity
Total equity............................................................... € 2,489
Liabilities
Exercise 3-10 (10 minutes)
a. $ 4,361 / $ 44,500 = 9.8%
b. $ 97,706 / $ 398,800 = 24.5%
Analysis and Interpretation: Company c has the highest profitability
