Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Chapter 3
Adjusting Accounts for
Financial Statements
QUICK STUDIES
Quick Study 3-1 (10 minutes)
Quick Study 3-2 (10 minutes)
Cash Accounting
Revenues (cash receipts) ……………………………………………… $37,000
Quick Study 3-3 (10 minutes)
a. Unearned revenue d. Prepaid expenses
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Quick Study 3-4 (15 minutes)
Debit
Credit
a.
Salaries Expense
Salaries Payable
c.
Quick Study 3-5 (15 minutes)
a. Step 1: Prepaid Insurance equals $4,700
b. Step 1: Prepaid Insurance equals $5,890
c. Step 1: Prepaid Rent equals $24,000
Step 2: Prepaid Rent should equal $20,000 (the unexpired part)*
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-6 (15 minutes)
a. Step 1: Supplies equal $300 ($300 beginning + $0 purchased)
b. Step 1: Supplies equal $2,900 ($800 beginning + $2,100 purchased)
c. Step 1: Supplies equal $13,400 ($4,000 beginning + $9,400 purchased)
Quick Study 3-7 (10 minutes)
a. Insurance Expense ………………………………………………. 1,200
Prepaid Insurance …………………………………………. 1,200
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Quick Study 3-8 (15 minutes)
a. Step 1: Accumulated Depreciation equals $13,500
Step 2: Accumulated Depreciation should equal $28,100; adding current
b. Step 1: Accumulated Depreciation equals $0
Step 2: Accumulated Depreciation should equal $8,800; adding current
c. Step 1: Accumulated Depreciation equals $0
Step 2: Accumulated Depreciation should equal $4,000; adding current
Study 3-9 (10 minutes)
a. Depreciation Expense—Equipment ………………………. 3,600
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Quick Study 3-10 (15 minutes)
a. Step 1: Unearned Rent Revenue equals $6,000
Step 2: Unearned Rent Revenue should equal $5,000; adjusted by current
b. Step 1: Unearned Services Revenue equals $300
Step 2: Unearned Services Revenue should equal $75; adjusted by current
c. Step 1: Unearned Rent Revenue equals $24,000
Step 2: Unearned Rent Revenue should equal $8,000; adjusted by current
Quick Study 3-11 (15 minutes)
a. Unearned Revenue ……………………………………………….. 7,500
Legal Revenue ………………………………………………. 7,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-12 (15 minutes)
a. Instructor note: 4 months of 6 months contracted were provided of the $3,000 service.
Dec. 31 Unearned Revenue ……………………………………….. 2,000
Quick Study 3-13 (15 minutes)
a. Step 1: Salaries Payable equals $0
Step 2: Salaries Payable should equal $15,500 (not yet recorded)
Step 3: Adjusting entry to get from Step 1 to Step 2
c. Step 1: Interest Payable equals $0
Step 2: Interest Payable should equal $875 (not yet recorded)
Quick Study 3-14 (10 minutes)
Salaries Expense ………………………………………………….. 400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-15 (15 minutes)
a. Step 1: Accounts Receivable equals $0
Accounts Receivable ……………………………………………….
Record services revenue earned but not yet received.
b. Step 1: Interest Receivable equals $0
Step 2: Interest Receivable should equal $390 (not yet recorded)
Record interest earned but not yet received.
c. Step 1: Accounts Receivable equals $0
Step 2: Accounts Receivable should equal $1,300 (not yet recorded)
Accounts Receivable ……………………………………………….
Quick Study 3-16 (15 minutes)
Accounts Debited and Credited
Financial Statement
a.
Debit
Unearned Revenue
Balance Sheet
Credit
Services Revenue
Income Statement
Debit
Wages Expense
Income Statement
Credit
Wages Payable
Balance Sheet
c.
Debit
Accounts Receivable
Balance Sheet
Credit
Services Revenue
Debit
Insurance Expense
Income Statement
Credit
Balance Sheet
e.
Debit
Depreciation Expense
Income Statement
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148
Quick Study 3-17 (15 minutes)
The answer is b.
Explanation:
Assets
=
Liabilities
+
Equity
Equity explanation
1. Forgot to
reduce
• Forgot to reduce Prepaid
Insur.→ Asset overstated.
2. Forgot to
record
• Forgot to record Sal.
Payable→ Liab. understated.
Quick Study 3-18 (15 minutes)
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
No.
Account
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash………………………………..
$8,000
$8,000
106
Accounts receivable ………..
2,000
$4,000
6,000
126
Supplies ………………………….
4,500
$2,500
2,000
307
Common stock ………………..
318
Retained earnings……………
403
Consulting revenue …………
622
Salaries expense ……………..
5,500
5,900
652
Supplies expense ……………
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Quick Study 3-19 (20 minutes)
a.
HAPP COMPANY
Income Statement
For Year Ended December 31
Plumbing revenue …………………………………………….. $84,000
Expenses
b.
HAPP COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year ………………… $24,600
150
Quick Study 3-19 (concluded)
c.
HAPP COMPANY
Balance Sheet
December 31
Assets
Cash ………………………………………………………… $ 7,000
Accounts receivable ………………………………… 27,200
Liabilities
Accounts payable …………………………………….. $ 15,000
Salaries payable ………………………………………. 4,200
Unearned revenue ……………………………………. 3,600
Total liabilities …………………………………………. 22,800
Equity
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Quick Study 3-20 (15 minutes)
Dec. 31 Services Revenue ………………………………….. 13,000
Income Summary ……………………………. 13,000
Close revenue account.
Quick Study 3-21 (10 minutes)
Retained Earnings
Dividends
Income Summary
18,000
2,000
0
(3)
5,000
(4)
2,000
(1)
33,000
2,000
28,000
5,000
Bal.
21,000
Bal.
0
Bal.
0
33,000
25,000
3,000
33,000
25,000
3,000
Bal.
0
Bal.
0
Bal.
0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-22 (10 minutes)
Dec. 31 Consulting Revenue ………………………………. 9,500
Income Summary ……………………………. 9,500
Close revenue account.
Quick Study 3-23 (5 minutes)
$4,000 increase in Retained Earnings.
Quick Study 3-24 (5 minutes)
a.
Included
c.
Included
e.
Excluded
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-25 (5 minutes)
1. (e) Analyzing transactions and events.
2. (h) Journalizing transactions and events.
Quick Study 3-26 (10 minutes)
1. Land Plant assets
2. Notes payable (due in 5 years) Long-term liabilities
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Quick Study 3-27 (15 minutes)
BUILDEX CO.
Income Statement
For Year Ended December 31
Revenues
Services revenue ……………………………….. $60,000
Interest revenue …………………………………. 5,000
Quick Study 3-28 (15 minutes)
CLANCY CONSULTING
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year ………….. $20,000
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Quick Study 3-29 (20 minutes)
JUAN CO.
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $ 18,000
Liabilities
Current liabilities
Accounts payable …………………………………… $ 11,000
Equity
Common stock ………………………………………… 10,000
Retained earnings ……………………………………. 40,000
†Due in 14 years. ‡Due in 5 years.
156
Quick Study 3-30 (15 minutes)
1.
SIERRA COMPANY
Income Statement
For Year Ended December 31
Consulting revenue …………………………………………….. $9,500
Expenses
2.
SIERRA COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year …………. $4,500
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Quick Study 3-31 (15 minutes)
SIERRA COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $ 5,000
Prepaid insurance ………………………………….. 500
Liabilities
Current liabilities
Accounts payable …………………………………… $ 2,500
Equity
Common stock ………………………………………… 6,000
Retained earnings ……………………………………. 6,000
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Quick Study 3-32 (10 minutes)
a. Profit margin = $48,025 / $425,000 = 11.3%
Quick Study 3-33 (5 minutes)
Current assets
Cash ……………………………………………………
$ 7,000
Accounts receivable …………………………..
18,000
Current liabilities
Accounts payable ………………………………..
$11,000
Unearned services revenue ………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
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Quick Study 3-34A (20 minutes)
a. Recording prepayment of an expense in an asset account and recording
prepayment of revenue received in a liability account
Jan. 1 Prepaid Insurance ………………………………………….. 6,000
Cash ……………………………………………………….. 6,000
Record advance cash payment of insurance.
b. Recording a prepayment of an expense in an expense account and
recording prepayments of revenue received in a revenue account
Jan. 1 Insurance Expense …………………………………………. 6,000
Cash ……………………………………………………….. 6,000
Record advance cash payment of insurance.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-35A (5 minutes)
The answer is explanation “a.”
Quick Study 3-36B (5 minutes)
Quick Study 3-37B (10 minutes)
Computation of Retained Earnings for the December 31 current year-end
balance sheet: