3-1–121
PROBLEM 3-36A b. (cont.)
Bower Consulting Company
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Service Revenue
$48,000
Expenses
Salaries Expense
$9,000
Depreciation Expense
2,500
Insurance Expense
4,500
Supplies Expense
1,550
Total Expenses
(17,550)
Net Income
$30,450
3-1–122
PROBLEM 3-36A b. (cont.)
Assets
Cash
$47,800
Prepaid Insurance
900
Supplies
250
Office Furniture
12,000
Accumulated Depreciation
(2,500)
Total Assets
$58,450
Liabilities
Unearned Revenue
$ 3,000
Total Liabilities
$ 3,000
Stockholders’ Equity
Common Stock
$13,000
Retained Earnings
42,450
Total Stockholders’ Equity
55,450
Total Liabilities and Stockholders’ Equity
$58,450
3-1–123
PROBLEM 3-36A b. (cont.)
Bower Consulting Company
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Received Cash from Customers1
$51,000
Paid Cash for Expenses2
(16,200)
Net Cash Flow from Operating Activities
$34,800
Cash Flows From Investing Activities
Purchased Office Furniture
(12,000)
Net Cash Flow from Financing Activities
(12,000)
Cash Flows From Financing Activities:
-0-
Net Change in Cash
22,800
Plus: Beginning Cash Balance
25,000
Ending Cash Balance
$47,800
1(4) $39,000 + (6) $12,000 = $51,000
2(2) $5,400 + (3) $1,800 + (5) $9,000 = $16,200
3-1–124
SOLUTIONS TO PROBLEMS – SERIES A – CHAPTER 3
PROBLEM 3-25B
Item
Account
Balance
No.
Account
Balance
a.
Retained Earnings
Credit
k.
Interest Receivable
Debit
b.
Prepaid Insurance
Debit
l.
Interest Revenue
Credit
c.
Insurance Expense
Debit
m.
Dividends
Debit
d.
Accounts Receivable
Debit
n.
Operating Expense
Debit
e.
Salaries Payable
Credit
o.
Unearned Revenue
Credit
f.
Cash
Debit
p.
Accounts Payable
Credit
g.
Common Stock
Credit
q.
Supplies
Debit
h.
Rent Expense
Debit
r.
Service Revenue
Credit
i.
Salaries Expense
Debit
s.
Prepaid Rent
Debit
j.
Land
Debit
t.
Supplies Expense
Debit
3-1–125
PROBLEM 3-26B
Event
Type of Event
Account Debited
Account Credited
1.
AS
Cash
Common Stock
2.
AS
Accounts Receivable
Service Revenue
3.
AE
Prepaid Rent
Cash
4.
AU
Operating Expenses
Cash
5.
AS
Cash
Unearned Revenue
6.
AU
Salaries Expense
Cash
7.
AU
Utilities Expense
Cash
8.
AU
Accounts Payable
Cash
9.
AU
Dividends
Cash
10.
AS
Supplies
Accounts Payable
11.
AS
Cash
Service Revenue
12.
AS
Interest Receivable
Interest Revenue
13.
AU
Rent Expense
Prepaid Rent
14.
CE
Unearned Revenue
Service Revenue
15.
CE
Salaries Expense
Salaries Payable
3-1–126
PROBLEM 3-27B
a.
Little Co.
T-Accounts, 2016
Cash
Accounts Payable
Common Stock
1. 40,000
6. 8,000
12. 840
5. 840
1. 40,000
2. 2,000
8. 1,000
13. 300
Bal. 40,000
3. 9,000
9. 7,200
14. 250
7. 17,000
10. 6,000
Bal. 550
Dividends
11. 4,000
11. 4,000
12. 840
Bal. 4,000
Bal. 40,960
Unearned Revenue
15. 6,000
3. 9,000
Service Revenue
Bal. 3,000
2. 2,000
Accounts Receivable
4. 24,000
4. 24,000
7. 17,000
Salaries Payable
15. 6,000
Bal. 7,000
16. 1,800
Bal. 32,000
Bal. 1,800
Salaries Expense
Interest Receivable
10. 6,000
19. 900
16. 1,800
Bal. 900
Bal. 7,800
Advertising Expense
Supplies
13. 300
5. 840
17. 1,600
Bal. 300
8. 1,000
Bal. 240
Utilities Expense
14. 250
Prepaid Rent
Bal. 250
9. 7,200
18. 1,800
Bal. 5,400
Supplies Expense
17. 1,600
Land
Bal. 1,600
6. 8,000
Bal. 8,000
Rent Expense
18. 1,800
Bal. 1,800
Interest Revenue
19. 900
Bal. 900
3-127
PROBLEM 3-27B (cont.)
b.
Little Company
Before-Closing Trial Balance for 2016
Account Titles
Debit
Credit
Cash
$40,960
Accounts Receivable
7,000
Interest Receivable
900
Supplies
240
Prepaid Rent
5,400
Land
8,000
Accounts Payable
$ 550
Unearned Revenue
3,000
Salaries Payable
1,800
Common Stock
40,000
Dividends
4,000
Service Revenue
32,000
Salaries Expense
7,800
Advertising Expense
300
Utilities Expense
250
Supplies Expense
1,600
Rent Expense
1,800
Interest Revenue
900
Totals
$78,250
$78,250
3-128
PROBLEM 3-27A (cont.)
c.
Little Co.
Effect of Transactions on Financial Statements for 2016
Balance Sheet
Income Statement
Stmt. of
Event
Assets
=
Liab.
+
S. Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
1.
+
NA
+
NA
NA
NA
+ FA
2.
+
NA
+
+
NA
+
+ OA
3.
+
+
NA
NA
NA
NA
+ OA
4.
+
NA
+
+
NA
+
NA
5.
+
+
NA
NA
NA
NA
NA
6.
+ −
NA
NA
NA
NA
NA
− IA
7.
+ −
NA
NA
NA
NA
NA
+ OA
8.
+ −
NA
NA
NA
NA
NA
− OA
9.
+ −
NA
NA
NA
NA
NA
− OA
10.
−
NA
−
NA
+
−
− OA
11.
−
NA
−
NA
NA
NA
− FA
12.
−
−
NA
NA
NA
NA
− OA
13.
NA
+
−
NA
+
−
NA
14.
NA
+
−
NA
+
−
NA
15.
NA
−
+
+
NA
+
NA
16.
NA
+
−
NA
+
−
NA
17.
−
NA
−
NA
+
−
NA
18.
−
NA
−
NA
+
−
NA
19.
+
NA
+
+
NA
+
NA
3-129
PROBLEM 3-28B
Effect of Transactions on Financial Statements
Balance Sheet
Income Statement
Stmt. of
Event
Assets
=
Liab.
+
S. Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
1.
+
NA
+
NA
NA
NA
+ FA
2.
+
NA
+
+
NA
+
NA
3.
+/–
NA
NA
NA
NA
NA
+ OA
4.
+
+
NA
NA
NA
NA
NA
5.
+
+
NA
NA
NA
NA
+ OA
6.
+
NA
+
+
NA
+
+ OA
7.
−
NA
−
NA
+
−
− OA
8.
+/−
NA
NA
NA
NA
NA
− OA
9.
−
NA
−
NA
+
−
− OA
10.
NA
−
+
+
NA
+
NA
11.
−
NA
−
NA
+
−
NA
12.
−
NA
−
NA
+
−
NA
13.
−
NA
−
NA
NA
NA
− FA
3-130
PROBLEM 3-29B
Entry Date
Description of Transaction
January 1
Acquired cash from the issuance of common stock.
February 1
Paid cash in advance to rent space.
March 1
Collected cash for services to be performed in the
future.
April 1
Performed services on account.
May 1
Purchased supplies on account.
May 31
Paid cash for salaries.
June 30
Paid cash for property taxes.
September 1
Performed services for cash.
October 2
Received cash from customers on account.
December 1
Paid a cash dividend to stockholders.
December 31
Recognized expense for supplies that had been used
during the period.
December 31
Recognized rent expense. Cash had been paid in a
prior transaction.
December 31
Recognized revenue that had been earned during the
period. Cash had been received in a prior transaction.
3-131
PROBLEM 3-30B
General Journal
No.
Date
Account Titles
Debit
Credit
a.
Oct. 1
Prepaid Rent
8,400
Cash
8,400
Dec. 31
Rent Expense ($8,400 x 3/12)
2,100
Prepaid Rent
2,100
b.
May 1
Prepaid Insurance
4,800
Cash
4,800
Dec. 31
Insurance Expense ($4,800 x 8/12)
3,200
Prepaid Insurance
3,200
c.
June 15
Supplies
1,600
Accounts Payable
1,600
Dec. 31
Supplies Expense ($1,600 − $200)
1,400
Supplies
1,400
d.
Sept. 1
Cash
4,800
Unearned Revenue
4,800
Dec. 31
Unearned Revenue ($4,800 x 4/12)
1,600
Service Revenue
1,600
PROBLEM 3-31B
a.
1. Debits would be greater by $2,000. Assets are overstated by $2,000.
2. Debits and credits would be equal, but assets are understated and
3. Debits and credits would be equal; both assets and equity (revenue)
4. Debits and credits would be equal; total debits and total credits would
5. Debits and credits would be equal; assets and liabilities would both be
6. Debits and credits would be equal; liabilities would be understated,
3-133
PROBLEM 3-31B (cont.)
c.
Klein Inc.
Trial Balance
As of May 31, 2016
Account Titles
Debit
Credit
Cash ($7,200 + $1,600 + $1,200 − $800)
$ 9,200
Accounts Receivable ($1,770 +$900 − $1,200)
1,470
Supplies
420
Prepaid Insurance
2,400
Land ($5,000 − $2,000)
3,000
Accounts Payable ($1,500 + $1,600 − $800 +
$1,050)
$ 3,350
Common Stock
1,800
Retained Earnings
7,390
Dividends
400
Service Revenue ($19,600 + $900)
20,500
Rent Expense
3,600
Salaries Expense
9,000
Operating Expenses
2,500
Utilities Expense ($-0- + $1,050)
1,050
Totals
$33,040
$33,040
3-134
PROBLEM 3-32B
Price Corporation
General Journal, 2016
Date
Account Titles
Debit
Credit
Jan. 1
Cash
25,000
Common Stock
25,000
Mar. 1
Prepaid Rent
8,400
Cash
8,400
Apr. 14
Supplies
400
Accounts Payable
400
June 30
Cash
12,000
Unearned Revenue
12,000
July 5
Accounts Payable
300
Cash
300
Aug. 1
Accounts Receivable
4,800
Service Revenue
4,800
Aug. 8
Cash
1,600
Service Revenue
1,600
Sept. 1
Salaries Expense
18,000
Cash
18,000
Sept. 9
Cash
4,250
Accounts Receivable
4,250
Oct. 5
Accounts Receivable
17,000
Service Revenue
17,000
Nov. 2
Dividends
500
Cash
500
3-135
PROBLEM 3-32B a. (cont.)
Price Corporation
General Journal (cont)
Date
Account Titles
Debit
Credit
Adjusting Entries
Dec. 31
Unearned Revenue ($12,000 x 6/12)
6,000
Service Revenue
6,000
Dec. 31
Salaries Expense
1,100
Salaries Payable
1,100
Dec. 31
Rent Expense ($8,400 x 10/24)
3,500
Prepaid Rent
3,500
Dec. 31
Supplies Expense ($400 − $50)
350
Supplies
350
3-136
PROBLEM 3-32B (cont.) b.
Price Corporation T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
1/1 25,000
3/1 8,400
7/5 300
4/14 400
1/1 25,000
6/30 12,000
7/5 300
Bal. 100
Bal. 25,000
8/8 1,600
9/1 18,000
9/9 4,250
11/2 500
Retained Earnings
Bal. 15,650
Unearned Revenue
Bal. -0-
12/31 6,000
6/30 12,000
Accounts Receivable
Bal. 6,000
Dividends
8/1 4,800
9/9 4,250
11/2 500
10/5 17,000
Bal. 500
Bal. 17,550
Salaries Payable
12/31 1,100
Service Revenue
Supplies
Bal. 1,100
8/1 4,800
4/14 400
12/31 350
8/8 1,600
Bal. 50
10/5 17,000
12/31 6,000
Prepaid Rent
Bal. 29,400
3/1 8,400
12/31 3,500
Bal. 4,900
Rent Expense
12/31 3,500
Bal. 3,500
Salaries Expense
9/1 18,000
12/31 1,100
Bal. 19,100
Supplies Expense
12/31 350
Bal. 350
3-137
PROBLEM 3-32B (cont.)
c.
Price Corporation
Trial Balance
December 31, 2016
Account Titles
Debit
Credit
Cash
$15,650
Accounts Receivable
17,550
Supplies
50
Prepaid Rent
4,900
Accounts Payable
$ 100
Unearned Revenue
6,000
Salaries Payable
1,100
Common Stock
25,000
Dividends
500
Service Revenue
29,400
Rent Expense
3,500
Salaries Expense
19,100
Supplies Expense
350
Totals
$61,600
$61,600
3-138
PROBLEM 3-32B (cont.)
d.
Price Corporation
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Service Revenue
$29,400
Expenses
Salaries Expense
$19,100
Rent Expense
3,500
Supplies Expense
350
Total Expenses
(22,950)
Net Income
$ 6,450
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
25,000
Ending Common Stock
$25,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
6,450
Less: Dividends
(500)
Ending Retained Earnings
5,950
Total Stockholders’ Equity
$30,950
3-139
PROBLEM 3-32B d. (cont.)
Price Corporation
Balance Sheet
As of December 31, 2016
Assets
Cash
$15,650
Accounts Receivable
17,550
Supplies
50
Prepaid Rent
4,900
Total Assets
$38,150
Liabilities
Accounts Payable
$ 100
Unearned Revenue
6,000
Salaries Payable
1,100
Total Liabilities
$ 7,200
Stockholders’ Equity
Common Stock
$25,000
Retained Earnings
5,950
Total Stockholders’ Equity
30,950
Total Liabilities and Stockholders’ Equity
$38,150
3-140
PROBLEM 3-32B d. (cont.)
Price Corporation
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Received Cash from Customers*
$17,850
Paid Cash for Expenses**
(26,700)
Net Cash Flow from Operating Activities
$( 8,850)
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Received Cash from Stock Issue
$25,000
Paid Cash for Dividends
(500)
Net Cash Flow from Financing Activities
24,500
Net Change in Cash
15,650
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$15,650
*(6/30) $12,000 + (8/8) $1,600 + (9/9) $4,250 = $17,850
**(3/1) $8,400 + (7/5) $300 + (9/1) $18,000 = $26,700