BRIEF EXERCISE 3-7
1. Dec. 31 Interest Expense …………………………………… 400
2. 31 Accounts Receivable …………………………….. 1,900
3. 31 Salaries and Wages Expense …………………. 900
BRIEF EXERCISE 3-8
Account
(a)
Type of Adjustment
(b)
Related Account
Accounts Receivable
Accrued Revenues
Service Revenue
Prepaid Insurance
Prepaid Expenses
Insurance Expense
Accum. Depr.—Equipment
Prepaid Expenses
Depreciation Expense
Interest Payable
Accrued Expenses
Interest Expense
Unearned Service Revenue
Unearned Revenues
Service Revenue
BRIEF EXERCISE 3-9
PARSONS COMPANY
Income Statement
For the Year Ended December 31, 2015
Revenues
Service revenue ……………………………………………. $37,000
Expenses
Salaries and wages expense …………………………. $16,000
Rent expense ……………………………………………….. 4,000
BRIEF EXERCISE 3-10
PARSONS COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2015
Retained earnings, January 1 ………………………………………………… $ 7,240
19,440
Less: Dividends …………………………………………………………………… 7,000
*BRIEF EXERCISE 3-11
(a) Apr. 30 Supplies ……………………………………………….. 700
(b) 30 Service Revenue ……………………………………. 3,000
BRIEF EXERCISE 3-12
BRIEF EXERCISE 3-13
BRIEF EXERCISE 3-14
BRIEF EXERCISE 3-15
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 3-1
DO IT! 3-2
1. Insurance Expense ………………………………………………. 300
2. Supplies Expense ($2,500 – $1,100) ………………………. 1,400
3. Depreciation Expense ………………………………………….. 500
(To record revenue for services provided)
DO IT! 3-3
1. Salaries and Wages Expense ……………………………….. 1,300
(To record accrued interest)
3. Accounts Receivable …………………………………………… 2,400
DO IT! 3-4
(a) The net income is determined by adding revenues and subtracting
expenses. The net income is computed as follows:
Revenues
Service revenue………………………………………… $11,360
Expenses
Salaries and wages expense ……………………… 7,400
Rent expense ……………………………………………. 1,200
Assets
Cash ………………………………………………………… $ 5,360
Equipment ……………………………………………….. $12,000
Liabilities
Notes payable …………………………………………… $ 4,000
Accounts payable …………………………………….. 790
(c) Retained Earnings, April 1 ……………………………….. $ –0–
Add: Net income ……………………………………………… 2,550
SOLUTIONS TO EXERCISES
EXERCISE 3-1
EXERCISE 3-2
(a) Accrual-basis accounting records the transactions that change a
company’s financial statements in the periods in which the events
occur rather than in the periods in which the company receives or pays
EXERCISE 3-2 (Continued)
(c) Dear Senator,
It is my understanding, after having taken a beginning course in account–
I am shocked at such a practice! There must be billions of dollars of
liabilities hidden in many contracts that have not been recorded yet for
Sincerely,
CONCERNED STUDENT
EXERCISE 3-3
(a) Cash received from revenue …………………………..………. $105,000
(b) Revenues [($105,000 – $25,000) + $40,000] ………………. $120,000
EXERCISE 3-4
EXERCISE 3-5
1. Interest Expense …………………………………………….. 400
Interest Payable
2. Supplies Expense …………………………………………… 1,550
3. Depreciation Expense …………………………………….. 1,000
4. Insurance Expense …………………………..…………….. 1,225
5. Unearned Service Revenue …………………………..… 7,500
6. Accounts Receivable ……………………………………… 4,200
7. Salaries and Wages Expense ………………………….. 5,400
EXERCISE 3-6
Item
(a)
Type of Adjustment
(b)
Accounts before Adjustment
1.
Accrued Revenues
Assets Understated
Revenues Understated
2.
Prepaid Expenses
Assets Overstated
Expenses Understated
3.
Accrued Expenses
Expenses Understated
Liabilities Understated
4.
Unearned Revenues
Liabilities Overstated
Revenues Understated
5.
Accrued Expenses
Expenses Understated
Liabilities Understated
6.
Prepaid Expenses
Assets Overstated
Expenses Understated
EXERCISE 3-7
1. Mar. 31 Depreciation Expense ($400 X 3) …………….. 1,200
2. 31 Unearned Rent Revenue ………………………… 3,400
3. 31 Interest Expense ……………………………………. 500
4. 31 Supplies Expense ………………………………….. 1,900
5. 31 Insurance Expense ($200 X 3) ………………… 600
EXERCISE 3-8
1. Jan. 31 Accounts Receivable ……………………………… 875
2. 31 Utilities Expense ……………………………………. 650
3. 31 Depreciation Expense ……………………………. 400
31 Interest Expense ……………………………………. 500
4. 31 Insurance Expense ($24,000 ÷ 12) …………… 2,000
5. 31 Supplies Expense ($1,600 – $400) …………… 1,200
EXERCISE 3-9
1. Oct. 31 Supplies Expense ………………………………….. 2,000
2. 31 Insurance Expense ………………………………… 100
3. 31 Depreciation Expense ……………………………. 50
4. 31 Unearned Service Revenue …………………….. 600