Problem 3-5A (50 minutes)
Part 1
CHIARA COMPANY
Income Statement
For Year Ended December 31, 2015
Revenues
Fees earned ………………………………………. $484,000
Problem 3-5A (Concluded)
CHIARA COMPANY
Balance Sheet
December 31, 2015
Assets
Cash ………………………………………………………………
$ 30,000
Accounts receivable ……………………………………….
52,000
Interest receivable ………………………………………….
18,000
Notes receivable (due in 90 days) ……………………
168,000
Office supplies ……………………………………………….
16,000
Automobiles …………………………………………………..
$168,000
Accumulated depreciation—Automobiles ……….
(50,000)
118,000
Equipment ……………………………………………………..
138,000
Accumulated depreciation—Equipment ………….
(18,000)
120,000
Land …………………………..………………………………….
78,000
Total assets ……………………………………………………
$600,000
Liabilities
Accounts payable …………………………………………..
$ 96,000
Interest payable ……………………………………………..
20,000
Salaries payable …………………………..………………..
19,000
Unearned fees ………………………………………………..
30,000
Long-term notes payable ………………………………..
138,000
Total liabilities ………………………………………………..
303,000
Equity
Common stock ……………………………………………….
20,000
Retained earnings…………………………………………..
277,000
Total liabilities and equity ……………………………….
$600,000
Part 2
Profit margin = $87,200 / $508,000 = 17.2%
Problem 3-6A (90 minutes)
INSTRUCTOR: Ledger accounts are shown after Part 7 as they would appear after all entries are posted.
Part 2 — Transactions for April
April 1 Cash …………………………..…………………………. 101 30,000
Computer Equipment …………………………….. 167 20,000
Paid 12 months’ premium in advance.
14 Salaries Expense ……………………………………. 622 1,600
Cash ………………………………………………. 101 1,600
Paid two weeks’ salaries.
24 Cash …………………………..…………………………. 101 8,000
Problem 3-6A (Continued)
Part 3
ADVENTURE TRAVEL
Unadjusted Trial Balance
April 30, 2015
No. Account Title Debit Credit
Problem 3-6A (Continued)
Part 4
Adjusting entries
(a) Apr 30 Insurance Expense ……………………………………….. 637 133
Prepaid Insurance …………………………………… 128 133
Problem 3-6A (Continued)
Part 4
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30, 2015
No. Account Title Debit Credit
Problem 3-6A (Continued)
Part 5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30, 2015
Commissions earned ………………………………………….. $9,750
Expenses
Problem 3-6A (Continued)
Part 5—continued
ADVENTURE TRAVEL
Balance Sheet
Problem 3-6A (Continued)
Part 6
Closing entries
April 30 Commissions Earned …………………………….. 405 9,750
Income Summary ……………………………. 901 9,750
To close the revenue account.
Retained Earnings ………………………….. 318 2,197
To close the Income Summary account.
30 Retained Earnings …………………………………. 318 1,500
Dividends ……………………………………….. 319 1,500
To close the dividends account.
Part 7
Computer equipment ……………………….. $ 500
Problem 3-6A (Continued)
Part 7—continued
Ledger as of April 30
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
April 30 Adjusting 1,750 1,750
Office Supplies Acct. No. 124
Date Explanation PR Debit Credit Balance
Date Explanation PR Debit Credit Balance