Problem 3-3B (Concluded)
AUGUSTUS INSTITUTE
Balance Sheet
December 31, 2013
Assets
Cash …………………………………………………………………… $ 60,000
Accounts receivable …………………………………………… 5,750
Teaching supplies ………………………………………………. 20,000
Prepaid insurance ………………………………………………. 9,500
Total assets ………………………………………………………… $117,350
Liabilities
Accounts payable ……………………………………………….. $ 11,200
Salaries payable …………………………………………………. 450
Total liabilities ……………………………………………………. 11,650
Equity
Problem 3-4B (45 minutes) — Part 1
Account
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Cash …………………………………….…..
$ 45,000
$ 45,000
Accounts receivable ………….…..
60,000
6,660
66,660
Office supplies ………………………..
40,000
23,000
17,000
Prepaid insurance …………………..
8,200
4,600
3,600
Office equipment ………………..…..
120,000
120,000
Accumulated depreciation—
Office equipment ………………………..
$ 20,000
10,000
$30,000
Accounts payable …………………..
26,000
6,000
32,000
Interest payable…………………..…..
2,150
2,150
Salaries payable ……………………..
16,000
16,000
Unearned consulting fees ……..
40,000
12,200
27,800
Long–term notes payable ….…..
75,000
75,000
Z. Yan, Capital ……………………..…..
80,200
80,200
Z. Yan, Withdrawals ………………..
20,000
20,000
Consulting fees earned …….…..
234,600
6,660
12,200
253,460
Depreciation expense—
Office equipment ……………..…..
10,000
10,000
Salaries expense ………………..…..
112,000
16,000
128,000
Interest expense ……………………..
8,600
2,150
10,750
Insurance expense ………………..
4,600
4,600
Rent expense ……………………..…..
20,000
20,000
Office supplies expense ………..
23,000
23,000
Advertising expense ………….…..
42,000
_______
6 ,000
______
48,000
_______
Totals ………………………………………..
$475,800
$475,800
$80,610
$80,610
$516,610
$516,610
Adjustment Descriptions
(a) Earned but uncollected revenues.
(b) Cost of office supplies used.
(c) Cost of expired insurance coverage.
Problem 3-4B (continued)
Part 2
YAN CONSULTING COMPANY
Income Statement
For Year Ended December 31, 2013
Revenues
Consulting fees earned ………………………………. $253,460
Expenses
Depreciation expense—Office equipment ……. $ 10,000
Salaries expense ……………………………………….. 128,000
Interest expense ………………………………………… 10,750
YAN CONSULTING COMPANY
Statement of Owner’s Equity
For Year Ended December 31, 2013
Z. Yan, Capital, December 31, 2012 ……………….. $ 80,200
Plus: Net income ………………………………………….. 9,110
Problem 3-4B (Concluded)
Part 2
YAN CONSULTING COMPANY
Balance Sheet
December 31, 2013
Assets
Cash ……………………………………………………………………..
$ 45,000
Accounts receivable ……………………………………………..
66,660
Office supplies ……………………………………………………...
17,000
Prepaid insurance ………………………………………………...
3,600
Office equipment …………………………………………………..
$120,000
Accumulated depreciation—Office equipment ……….
(30,000)
90,000
Total assets …………………………………………………………..
$222,260
Liabilities
Accounts payable ………………………………………………….
$ 32,000
Interest payable …………………………………………………….
2,150
Salaries payable …………………………………………………...
16,000
Unearned consulting fees ……………………………………..
27,800
Long-term notes payable ……………………………………….
75,000
Total liabilities ……………………………………………………...
152,950
Equity
Z. Yan, Capital ……………………………………………………….
69,310
Total liabilities and equity ……………………………………..
$222,260
Problem 3-5B (50 minutes)
Part 1
SPEEDY COURIER
Income Statement
For Year Ended December 31, 2013
Revenues
Delivery fees earned ………………………………. $611,800
Interest earned ……………………………………….. 34,000
Total revenues ……………………………………….. $645,800
Expenses
Depreciation expense—Trucks ……………….. 29,000
Depreciation expense—Equipment …………. 48,000
Salaries expense ……………………………………. 74,000
Wages expense ……………………………………… 300,000
SPEEDY COURIER
Statement of Owner‘s Equity
For Year Ended December 31, 2013
L. Horace, Capital, December 31, 2012 ……… $125,000
Plus : Net income ……………………………………. 86,000
Problem 3-5B (Concluded)
SPEEDY COURIER
Balance Sheet
December 31, 2013
Assets
Cash …………………………………………………………….
$ 58,000
Accounts receivable ……………………………………..
120,000
Interest receivable …………………………………………
7,000
Notes receivable (due in 90 days)…………………….
210,000
Office supplies ……………………………………………..
22,000
Trucks ………………………………………………………….
$ 134,000
Accumulated depreciation—Trucks ……………….
(58,000)
76,000
Equipment …………………………………………………….
270,000
Accumulated depreciation—Equipment …………
(200,000)
70,000
Land ……………………………………………………………..
100,000
Total assets ………………………………………………….
$663,000
Liabilities
Accounts payable …………………………………………
$134,000
Interest payable …………………………………………….
20,000
Salaries payable ……………………………………………
28,000
Unearned delivery fees ………………………………….
120,000
Long-term notes payable ………………………………
200,000
Total liabilities ………………………………………………
502,000
Equity
L. Horace, Capital ………………………………………….
161,000
Total liabilities and equity ……………………………..
$663,000
Part 2
Problem 3-6BA (40 minutes)
Part 1
Method that records prepaid expenses and unearned revenues in balance sheet accounts
Apr. 1 Prepaid Consulting Fees ………………………………. 2,450
Cash ……………………………………………………… 2,450
Paid for future consulting services.
May 1 Prepaid Advertising ……………………………………… 4,450
Cash ……………………………………………………… 4,450
Paid for future advertising.
23 Cash …………………………………………………………… 10,450
Unearned Service Fees …………………………. 10,450
Received fees in advance.
31 Advertising Expense …………………………………….. 2,400
Prepaid Advertising ……………………………….. 2,400
To adjust prepaid advertising ($4,450 – $2,050).
31 Unearned Service Fees …………………………..…….. 5,500
Service Fees Earned ………………………………. 5,500
To adjust unearned service fees.
Problem 3-6BA (Continued)
Part 2
Method that records prepaid expenses and unearned revenues in income statement accounts
Apr. 1 Consulting Fees Expense ……………………………. 2,450
Cash ……………………………………………………. 2,450
Paid for future consulting services.
May 1 Advertising Expense …………………………………… 4,450
Cash ……………………………………………………. 4,450
Paid for future advertising.
23 Cash …………………………………………………………… 10,450
Service Fees Earned …………………………….. 10,450
Received fees in advance.
31 Prepaid Advertising ……………………………………. 2,050
Advertising Expense ……………………………. 2,050
To adjust for prepaid advertising.
31 Service Fees Earned …………………………………… 4,950
Unearned Service Fees ……………………….. 4,950
To adjust unearned service fees ($10,450 – $5,500).
Problem 3-6BA (Concluded)
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:
Prepaid consulting fees as of May 31 ………………………………….. $ 450
Consulting fees expense for two months …………………………….. 2,000
Prepaid advertising as of May 31 …………………………………………. 2,050
Advertising expense for two months …………………………………… 2,400
When prepaid expenses and unearned revenues are recorded in balance
sheet accounts, the related adjusting entries are designed to generate the
SERIAL PROBLEM – SP 3
Serial Problem, Success Systems (180 minutes) — Part 1
<Note: The general ledger is displayed at the end of Part 6>
Journal entries
Dec. 2 Advertising Expense ……………………………. 655 1,025
Cash ……………………………………………..101 1,025
Paid share of mall advertising costs.
14 Cash ……………………………………………………. 101 1,500
15 Computer Supplies ……………………………… 126 1,100
Accounts Payable ………………………….201 1,100
Purchased supplies on credit.
16 No entry recorded in the journal.
29 Mileage Expense …………………………………. 676 192
Cash ……………………………………………..101 192
Reimbursed Lopez for mileage.
31 A. Lopez, Withdrawals …………………………. 302 1,500
Cash ……………………………………………..101 1,500
Paid cash for owner withdrawal.
Serial Problem, SP 3 (Continued)
Part 2
Adjusting entries
Dec. 31 Computer Supplies Expense …………………….652 3,065
Computer Supplies …………………………...126 3,065
Adjustment for supplies used (supplies
balance less cost of supplies available).
31 Insurance Expense …………………………………..637 555
of $2,220 original prepaid amount).
31 Wages Expense ……………………………………….623 500
Wages Payable ………………………………….210 500
Adjustment for accrued wages.
31 Depreciation Expense–Computer Equip …….613 1,250
31 Depreciation Expense—Office Equip …………612 400
Accumulated Depreciation—Office
Expense for three months …………………. $400
31 Rent Expense …………………………………………..640 2,475
Prepaid Rent ……………………………………..131 2,475
Adjustment for expired rent (3/4 of
$3,300 original prepaid amount).
Serial Problem, SP 3 (Continued)
Part 3
SUCCESS SYSTEMS
Adjusted Trial Balance
December 31, 2013
Debit Credit
Cash ………………………………………………………………… $ 58,160
Accounts receivable …………………………………………. 5,668
Computer supplies …………………………………………… 580
Prepaid insurance …………………………………………….. 1,665
Prepaid rent ……………………………………………………… 825
A. Lopez, Capital ……………………………………………….. 83,000
A. Lopez, Withdrawals ……………………………………….. 7,100
Computer services revenue ………………………………. 31,284
Depreciation expense—Office equipment ………….. 400
Depreciation expense—Computer equipment …….. 1,250
Wages expense ………………………………………………… 3,875
Insurance expense …………………………………………… 555
Serial Problem, SP 3 (Continued)
Part 4
SUCCESS SYSTEMS
Income Statement
For Three Months Ended December 31, 2013
Revenue
Computer services revenue ………………………………… $31,284
Expenses
Rent expense …………………………………………………….. 2,475
Computer supplies expense ……………………………….. 3,065
Advertising expense …………………………………………… 2,965
Mileage expense ………………………………………………… 896
Part 5
SUCCESS SYSTEMS
Statement of Owner’s Equity
For Three Months Ended December 31, 2013
A. Lopez, Capital, October 1, 2013 ………………………… $83,000
Plus: Net income …………………………………………………. 14,248