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3-6-82
3-6-83
EXERCISE 3-23A
a.
Company
Total
Debt
Total
Assets
=
Debt to Assets
Ratio
Ever-Well
$ 96,000
$320,000
=
30.0%
Eat-Right
$280,000
$700,000
=
40.0%
3-6-84
EXERCISE 3-24A
a. The differences between IFRS and U.S. GAAP can be summarized in a
few broad categories. First, some differences are minor, for instance
3-6-85
SOLUTIONS TO EXERCISES - SERIES B - CHAPTER 3
EXERCISE 3-1B
Account
Category
Used to Increase
This Account
Used to Decrease
This Account
Insurance Expense
Debit
Credit
Rent Expense
Debit
Credit
Prepaid Rent
Debit
Credit
Interest Revenue
Credit
Debit
Accounts Receivable
Debit
Credit
Accounts Payable
Credit
Debit
Common Stock
Credit
Debit
Land
Debit
Credit
Unearned Revenue
Credit
Debit
Service Revenue
Credit
Debit
Retained Earnings
Credit
Debit
3-6-86
EXERCISE 3-2B
Neil was right when he said both students were correct. Jake was correct
1. Debits increase account balances:
2. Credits decrease account balances:
3. Credits increase account balances:
4. Debits decrease account balances:
3-6-87
EXERCISE 3-3B
Account
Normal Balance
a. Unearned Revenue
Credit
b. Service Revenue
Credit
c. Dividends
Debit
d. Land
Debit
e. Accounts Receivable
Debit
f. Cash
Debit
g. Common Stock
Credit
h. Prepaid Rent
Debit
i. Supplies
Debit
j. Accounts Payable
Credit
k. Interest Revenue
Credit
l. Rent Expense
Debit
3-6-88
EXERCISE 3-4B
a.
Event
Account Debited
Account Credited
1. Provided services for
cash.
Cash
Service Revenue
2. Recognized accrued
salaries at the end of
the period.
Salaries Expense
Salaries Payable
3. Recognized accrued
interest revenue
Interest Receivable
Interest Revenue
4. Provided services on
account
Accounts Receivable
Service Revenue
5. Paid cash for operating
expenses.
Operating Expense
Cash
6. Acquired cash from the
issue of common
stock.
Cash
Common Stock
7. Purchased supplies on
account.
Supplies
Accounts Payable
8. Purchased land for
cash.
Land
Cash
9. Paid a cash dividend to
the stockholders.
Dividends
Cash
b.
No.
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
1.
+
NA
+
+
NA
+
+ OA
2.
NA
+
−
NA
+
−
NA
3.
+
NA
+
+
NA
+
NA
4.
+
NA
+
+
NA
+
NA
5.
−
NA
−
NA
+
−
− OA
6.
+
NA
+
NA
NA
NA
+ FA
7.
+
+
NA
NA
NA
NA
NA
8.
+/−
NA
NA
NA
NA
NA
− IA
9.
−
NA
−
NA
NA
NA
− FA
3-6-89
EXERCISE 3-5B
Event Number
Account Debited
Account Credited
a.
Cash
Unearned Revenue
b.
Supplies
Accounts Payable
c.
Prepaid Rent
Cash
d.
Cash
Common Stock
e.
Accounts Receivable
Service Revenue
f.
Accounts Payable
Cash
g.
Salaries Payable
Cash
h.
Unearned Revenue
Service Revenue
i.
Operating Expenses
Cash
j.
Salaries Expense
Cash
k.
Cash
Accounts Receivable
l.
Rent Expense
Prepaid Rent
m.
Interest Receivable
Interest Revenue
n.
Dividends
Cash
3-6-90
EXERCISE 3-6B
Stockholders’ Equity
Event
No.
Type of
Event
Assets
=
Liabilities
+
Common
Stock
+
Retained
Earnings
a.
AS
+ Debit
NA
NA
+ Credit
b.
AE
+ Debit
− Credit
NA
NA
NA
c.
CE
NA
− Debit
NA
+ Credit
d.
AE
+ Debit
− Credit
NA
NA
NA
e.
AS
+ Debit
NA
NA
+ Credit
f.
AS
+ Debit
+ Credit
NA
NA
g.
AU
− Credit
− Debit
NA
NA
h.
AU
− Credit
NA
NA
− Debit
i.
CE
NA
+ Credit
NA
− Debit
j.
AU
− Credit
NA
NA
− Debit
k.
AS
+ Debit
+ Credit
NA
NA
l.
AU
− Credit
NA
NA
− Debit
m.
AE
+ Debit
− Credit
NA
NA
NA
n.
AS
+ Debit
NA
NA
+ Credit
3-6-91
EXERCISE 3-7B
Assets
=
Liabilities
+
Stockholders’ Equity
Debit
Credit
Debit
Credit
Debit
Credit
Increase
Decrease
Decrease
Increase
Decrease
Increase
Revenue
Debit
Credit
Decrease
Increase
Expense
Debit
Credit
Increase
Decrease
EXERCISE 3-8B
a.
Cash
Common Stock
Debit
Credit
Debit
Credit
$40,000
$40,000
This is an asset source transaction. Assets are increased; stockholders’
3-93
EXERCISE 3-9B
a. e. & f.
Assets
=
Stockholders’ Equity
Cash
Accounts Rec.
Retained Earnings
2016
2016
2016
2. 24,000
1. 30,000
2. 24,000
cl 30,000
Bal. 24,000
Bal. 6,000
Bal. 30,000
2017
2017
3. 6,000
3. 6,000
Service Revenue
Bal. 30,000
Bal. -0-
2016
cl 30,000
1. 30,000
Bal. -0-
2017
-0-
b. & g. NC = Net Change in Cash
Ross Company
Effect of Transactions on the Financial Statements for 2016 and 2017
Assets
=
Liab.
+
Stockholders’ Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
No.
Cash
+
Acct.
Rec.
=
+
Com.
Stock
+
Ret.
Earn.
2016
1.
NA
30,000
NA
NA
30,000
30,000
NA
30,000
NA
2.
24,000
(24,000)
NA
NA
NA
NA
NA
NA
24,000 OA
Bal.
24,000
+
6,000
=
-0-
+
-0-
+
30,000
30,000
−
-0-
=
30,000
24,000 NC
2017
3.
6,000
(6,000)
NA
NA
NA
NA
NA
NA
6,000 OA
Bal.
30,000
+
-0-
=
-0-
+
-0-
+
30,000
-0-
−
-0-
=
-0-
6,000 NC
3-94
3-95
EXERCISE 3-9B (cont.)
c. 2016 Revenue = $30,000
3-96
EXERCISE 3-10B
a. b. & e.
Assets
=
Liabilities
+
Stockholders’ Equity
Accounts Rec.
Accounts Pay.
Retained Earnings
Debit
Credit
Debit
Credit
Debit
Credit
a1 36,000
a2 10,000
cl 8,200
cl 36,000
Bal. 36,000
Bal. 10,000
Bal. 27,800
Supplies
Service Revenue
Debit
Credit
Debit
Credit
a2 10,000
b. 8,200
a1 36,000
Bal. 1,800
Bal. 36,000
cl 36,000
Bal. -0-
Supplies Expense
Debit
Credit
b. 8,200
Bal. 8,200
cl 8,200
Bal. -0-
3-97
EXERCISE 3-10B (cont.)
c. NC = Net Change in Cash
Moss Consulting Services
Effect of Transactions on the Financial Statements for 2016
Assets
=
Liab.
+
Stockholders’ Equity
Revenue
−
Exp.
=
Net Inc.
Cash Flows
No.
Accts.
Rec.
+
Supplie
s
=
Accts.
Pay.
+
Common
Stock
+
Ret.
Earn.
a1.
36,000
NA
NA
NA
36,000
36,000
NA
36,000
NA
a2.
NA
10,000
10,000
NA
NA
NA
NA
NA
NA
b.
NA
(8,200)
NA
NA
(8,200)
NA
8,200
(8,200)
NA
Bal.
36,000
+
1,800
=
10,000
+
-0-
+
27,800
36,000
−
8,200
=
27,800
NC
d. Net income is $27,800; Net Cash Flow from Operating Activities is $-0-. $36,000 of revenue earned
was on account, but none was collected; $8,200 of supplies were used, but none were paid for.
3-98
EXERCISE 3-10B (cont.)
e.
Moss Consulting Service
General Journal
2016
Date
Account Titles
Debit
Credit
Closing Entries
Dec. 31
Service Revenue
36,000
Retained Earnings
36,000
Dec. 31
Retained Earnings
8,200
Supplies Expense
8,200
Closing entries are posted to the T-accounts in part a.
Moss Counsulting Services
Post-Closing Trial Balance
December 31, 2016
Account Titles
Debit
Credit
Accounts Receivable
$36,000
Supplies
1,800
Accounts Payable
$10,000
Retained Earnings
27,800
Totals
$37,800
$37,800
3-99
EXERCISE 3-11B
a. & b.
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Unearned Revenue
Service Revenue
a. 90,000
b. 75,000
a. 90,000
b. 75,000*
Bal. 15,000
3-100
EXERCISE 3-12B
Accounts Receivable
Debit
Credit
Beg. Bal. 105,000
Coll. 467,000
Rev. 448,000
End. Bal. 86,000
$467,000 of cash was collected [($105,000 + $448,000) − $86,000].
Cash inflow from operating activities = $467,000
3-101
EXERCISE 3-13B
Accounts Payable
Debit
Credit
Beg. Bal. 36,000
Paid 96,000
Exp. 108,000
End Bal. 48,000
$96,000 of cash was paid for expenses [($36,000 + $108,000) − $48,000].
