EXERCISE 3-9 (Continued)
6. Oct. 31 Interest Expense ………………………………. 95
7. 31 Salaries and Wages Expense ……………. 1,625
EXERCISE 3-10
GOPITKUMAR CO.
Income Statement
For the Month Ended July 31, 2015
Revenues
Service revenue ($5,500 + $650) ……………………….. $6,150
Expenses
Salaries and wages expense ($2,300 + $300) …….. $2,600
Supplies expense ($1,200 – $250) …………………….. 950
EXERCISE 3-11
Answer Computation
(a) Supplies balance = $800 Supplies expense $ 950
EXERCISE 3-11 (Continued)
(c) Salaries and wages
payable = $1,400 Cash paid $3,500
Salaries and wages
Less: Salaries and wages
expense 2,900
EXERCISE 3-12
(a) July 10 Supplies ……………………………………………….. 650
14 Cash ……………………………………………………… 2,000
15 Salaries and Wages Expense …………………. 1,200
20 Cash ……………………………………………………… 1,000
(b) July 31 Supplies Expense ………………………………….. 800
31 Accounts Receivable ……………………………… 500
31 Salaries and Wages Expense …………………. 1,200
31 Unearned Service Revenue …………………….. 1,150
EXERCISE 3-13
Aug. 31 Accounts Receivable ………………………………. 2,000
31 Supplies Expense …………………………………… 1,400
31 Insurance Expense …………………………………. 1,500
31 Depreciation Expense …………………………….. 900
31 Salaries and Wages Expense ………………….. 1,100
31 Unearned Rent Revenue …………………………. 900
EXERCISE 3-14
FRINZI COMPANY
Income Statement
For the Year Ended August 31, 2015
Revenues
Service revenue ………………………………………………. $36,000
Rent revenue …………………………………………………… 11,900
EXERCISE 3-14 (Continued)
FRINZI COMPANY
Retained Earnings Statement
For the Year Ended August 31, 2015
Retained earnings, September 1, 2014 …………………………………… $ 3,600
FRINZI COMPANY
Balance Sheet
August 31, 2015
Assets
Cash ……………………………………………………………………… $10,400
Accounts receivable ……………………………………………….. 10,800
Supplies ………………………………………………………………… 900
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable ……………………………………………. $ 5,800
Salaries and wages payable ……………………………… 1,100
EXERCISE 3-15
(a) 1. Cash …………………………………………………………. 9,000
2. Unearned Service Revenue ………………………… 25,000
3. Cash …………………………………………………………. 38,000
Unearned Service Revenue
($38,000 – $17,000) …………………………..………… 21,000
4. Accounts Receivable …………………………………. 115,000
5. Cash …………………………………………………………. 101,000
*EXERCISE 3-16
1. Prepaid Insurance …………………………………………… 1,125
2. Service Revenue …………………………..………………… 30,000
3. Supplies ………………………………………………………… 900
*EXERCISE 3-17
(a) Jan. 2 Insurance Expense ……………………………….. 1,920
10 Supplies Expense …………………………………. 1,700
15 Cash …………………………………………………….. 6,100
Cash
Service Revenue
1/15 6,100
1/2 1,920
1/10 1,700
1/15 6,100
Insurance Expense
Supplies Expense
1/2 1,920
1/10 1,700
(b) Jan. 31 Prepaid Insurance ($160 X 11 months) …… 1,760
31 Supplies ………………………………………………. 650
31 Service Revenue …………………………………… 3,600
Prepaid Insurance
Supplies
Unearned Service
Revenue
1/31 1,760
1/31 650
1/31 3,600
Insurance Expense
Supplies Expense
Service Revenue
1/2 1,920
1/31 1,760
1/10 1,700
1/31 650
1/31 3,600
1/15 6,100
Bal. 160
Bal. 1,050
Bal. 2,500
(c) Prepaid insurance ……………………………………………………………. $1,760
Supplies ………………………………………………………………………….. 650
Unearned service revenue ……………………………………………….. 3,600
*EXERCISE 3-18
*EXERCISE 3-19
(a) This is a violation of the historical cost principle. The inventory was
written up to its fair value when it should have remained at cost.
(b) This is a violation of the economic entity assumption. The treatment of
(c) This is a violation of the time period assumption. This assumption
*EXERCISE 3-20
*EXERCISE 3-21
(a) The primary objective of financial reporting is to provide financial
(b) The investors must feel as if the company will show earnings in the
(c) The change from Canadian dollars to U.S. dollars for reporting purposes
*EXERCISE 3-22
(a) Accounting information is the compilation and presentation of
financial information for a company. It provides information in the form
of financial statements and additional disclosures that is useful for
decision making.
(b) Ana is correct in her understanding that the low success rate for new
biotech products will be a cause of concern for investors. Her
SOLUTIONS TO PROBLEMS
PROBLEM 3-1A
(a)
J4
Date
Account Titles
Ref.
Debit
Credit
2015
May 31
Supplies Expense …………………………..
Supplies ………………………………..
631
126
900
900
31
Utilities Expense …………………………….
Accounts Payable ………………….
736
201
250
250
31
Insurance Expense …………………………
Prepaid Insurance
($3,600 ÷ 24 months) …………..
722
130
150
150
31
Unearned Service Revenue …………….
Service Revenue
($2,000 – $400) ……………………
209
400
1,600
1,600
31
Salaries and Wages Expense ………….
Salaries and Wages Payable
[(3/5 X $900) X
2 employees] ……………………..
726
212
1,080
1,080
31
Depreciation Expense …………………….
Accumulated Depreciation—
Equipment ………………………….
717
150
190
190
31
Accounts Receivable ……………………..
Service Revenue ……………………
112
400
1,700
1,700
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
Balance
4,500
PROBLEM 3-1A (Continued)
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
31
Balance
Adjusting
J4
1,700
6,000
7,700
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
31
Balance
Adjusting
J4
900
1,900
1,000
Prepaid Insurance No. 130
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
31
Balance
Adjusting
J4
150
3,600
3,450
Equipment No. 149
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
Balance
11,400
Accumulated Depreciation—Equipment No. 150
Date
Explanation
Ref.
Debit
Credit
Balance
2015
May 31
Adjusting
J4
190
190