EXERCISE 3.9 (15–20 minutes)
(a)
10/15
Salaries and Wages Expense …………………………………………………..
800
Cash ………………………………………………………………………………..
800
(To record payment of October 15
payroll)
10/17
Accounts Receivable ……………………………………………………….
Service Revenue ……………………………………………………….
performed for which payment has
not yet been received)
10/20
Cash ……………………………………………………………………………………
650
Unearned Service Revenue …………………………..
650
(To record receipt of cash for
services not yet performed)
(b)
10/31
Supplies Expense ……………………………………………………….
470
Supplies ……………………………………………………….
470
(To record the use of supplies during
October)
10/31
Accounts Receivable ……………………………………………………….
Service Revenue ……………………………………………………….
(To record revenue for services perform
has not yet been received)
10/31
Salaries and Wages Expense …………………………………………………..
Salaries and Wages Payable …………………………..
600
(To record liability for accrued payroll)
10/31
Unearned Service Revenue ……………………………………………………..
400
Service Revenue ……………………………………………………….
400
Revenue account for service that
has been performed)
EXERCISE 3.10 (25–30 minutes)
(a)
1.
Aug. 31
Insurance Expense (¥4,500 X 3/12) …………………………..
1,125
Prepaid Insurance …………………………..
1,125
2.
Aug. 31
Supplies Expense (¥2,600 – ¥650) …………………………..
1,950
Supplies ……………………………………………………….
1,950
3.
Aug. 31
Depreciation Expense …………………………..
1,080
¥4,320 X 3/12 = ¥1,080)
Aug. 31
Depreciation Expense …………………………..
4.
Aug. 31
Unearned Rent Revenue …………………………..
3,800
Rent Revenue ……………………………………………………….
3,800
5.
Aug. 31
Salaries and Wages Expense …………………………..
375
Salaries and Wages Payable …………………………..
375
6.
Aug. 31
Accounts Receivable ……………………………………………………….
800
Rent Revenue ……………………………………………………….
800
7.
Aug. 31
Interest Expense ……………………………………………………….
1,000
Interest Payable
[(¥50,000 X 8%) X 3/12] …………………………..
1,000
EXERCISE 3.10 (Continued)
(b) UHURA RESORT
Adjusted Trial Balance
August 31, 2019
Debit
Credit
Cash ……………………………………………………………..
¥ 19,600
Accounts Receivable (6) …………………………..……
800
Prepaid Insurance (¥4,500 – ¥1,125) (1) …………….
Supplies (¥2,600 – ¥1,950) (2) …………………………..
Land ……………………………………………………………..
Accumulated Depreciation—Buildings (3) ………..
Equipment ……………………………………………………..
Accumulated Depreciation—Equipment (3) ………
Accounts Payable ………………………………………….
Unearned Rent Revenue (¥4,600 – ¥3,800) (4) ……
800
Salaries and Wages Payable (5) ………………………
Mortgage Payable …………………………………………..
Share Capital—Ordinary …………………………………
Retained Earnings ………………………………………….
Dividends ………………………………………………………
5,000
Rent Revenue (¥86,200 + ¥3,800 + ¥800) (4) & (6)
90,800
Salaries and Wages Expense (¥44,800 + ¥375) …
45,175
Utilities Expense …………………………………………….
9,200
Maintenance and Repairs Expense ………………….
Insurance Expense (1) ……………………………………
Supplies Expense (2) ……………………………………..
1,950
Depreciation Expense—(Buildings) (3) ……………..
Depreciation Expense—(Equipment) (3) …………..
Interest Expense (7) ……………………………………….
1,000
EXERCISE 3.11 (20–25 Minutes)
(a) CAVAMANLIS CO.
Income Statement
For the Year Ended December 31, 2019
Revenues
Service revenue ……………………………………….
$12,590
Expenses
Salaries and wages expense …………………….
Rent expense …………………………………………..
Depreciation expense …………………………..
Interest expense ………………………………………
(b) CAVAMANLIS CO.
Retained Earnings Statement
For the Year Ended December 31, 2019
Retained earnings, January 1 ……………………………………………..
$11,310
Add: Net income ……………………………………………………………..
2,762
Less: Dividends ………………………………………………………………..
Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only) 3-25
EXERCISE 3.11 (Continued)
(c) CAVAMANLIS CO.
Statement of Financial Position
December 31, 2019
Assets
Noncurrent assets
Property, plant, and equipment
Equity and Liabilities
Equity
Share capital—ordinary ………………………………
$20,000
Retained earnings ………………………………………
11,072
$31,072
Current liabilities
Notes payable …………………………………………….
Accounts payable ………………………………………
Interest payable ………………………………………….
83
Total current liabilities …………………………..
Equipment …………………………………………………..
$18,050
Current assets
Prepaid rent …………………………………………………
Accounts receivable …………………………………….
Cash ……………………………………………………….…..
18,972
Total current assets ………………………………..
EXERCISE 3.12 (20–25 Minutes)
(a) FLYNN DESIGN
Income Statement
For the Year Ended December 31, 2019
Revenues
Service revenue ………………………………………
€58,500
Expenses
Salaries and wages expense …………………….
Rent expense …………………………..……………..
Supplies expense ……………………………………
Insurance expense …………………………..
Interest expense ……………………………………..
Total expenses …………………………..
FLYNN DESIGN
Retained Earnings Statement
For the Year Ended December 31, 2019
€ 3,500
EXERCISE 3.12 (Continued)
(a) (Continued) FLYNN DESIGN
Statement of Financial Position
December 31, 2019
Assets
Equipment …………………………………………………………….
€60,000
Less: Accumulated depreciation—equipment …………
35,000
€25,000
Supplies ………………………………………………………………..
Accounts receivable ………………………………………………
Cash ……………………………………………………………………..
Equity and Liabilities
Equity
Share capital—ordinary ………………………………
€10,000
Retained earnings ………………………………………
33,950
€43,950
Liabilities
Notes payable ……………………………………………….
5,000
Accounts payable ………………………………………….
8,000
Unearned service revenue ……………………………..
5,600
Salaries and wages payable …………………………..
Interest payable …………………………………………….
Total liabilities ………………………………………..
(b) 1. Based on interest payable at December 31, 2019, interest is €25 per
month or .5% of the note payable. .5% X 12 = 6% interest per year.
EXERCISE 3.13 (10–15 Minutes)
(a)
Sales revenue ……………………………………………………….
£800,000
Less: Sales returns and allowances …………………………..
£24,000
Sales discount ……………………………………………………….
36,000
Net sales …………………………………………………………………………………
£764,000
(b)
Sales Revenue ……………………………………………………….
800,000
Income Summary ……………………………………………………….
800,000
Income Summary ……………………………………………………….
Sales Returns and Allowances …………………………..
Sales Discounts ……………………………………………………….
EXERCISE 3.14 (10–15 minutes)
Sales Revenue ……………………………………………………….
340,000
Income Summary ……………………………………………………….
340,000
Income Summary ……………………………………………………….
323,000
Cost of Goods Sold ……………………………………………………….
202,000
Sales Returns and Allowances …………………………..
13,000
Sales Discounts ……………………………………………………….
Delivery Expense …………………………..…………………………..
Insurance Expense ……………………………………………………….
12,000
Rent Expense ……………………………………………………….
20,000
Salaries and Wages Expense …………………………..
61,000
Income Summary ……………………………………………………….
Retained Earnings ……………………………………………………….
17,000
EXERCISE 3.15 (10–15 minutes)
(a) $5,000 ($90,000 – $85,000) (d) $95,000 ($5,000 + $90,000)
EXERCISE 3.16 (10–15 minutes)
Sales Revenue ……………………………………………………….
390,000
Cost of Goods Sold……………………………………………………….
235,700
Sales Returns and Allowances …………………………..
12,000
Sales Discounts ……………………………………………………….
15,000
Selling Expenses ……………………………………………………….
16,000
Administrative Expenses ………………………………………………….
38,000
Income Tax Expense ……………………………………………………….
30,000
Income Summary ……………………………………………………….
43,300
(or)
Sales Revenue ……………………………………………………….
390,000
Income Summary ……………………………………………………….
390,000
Income Summary ……………………………………………………….
346,700
Cost of Goods Sold……………………………………………………….
235,700
Sales Returns and Allowances …………………………..
12,000
Sales Discounts ……………………………………………………….
15,000
Selling Expenses ……………………………………………………….
16,000
Administrative Expenses ………………………………………………….
38,000
Income Summary ……………………………………………………….
43,300
Retained Earnings ……………………………………………………….
43,300
Retained Earnings ……………………………………………………….
18,000
Dividends ……………………………………………………….
18,000
EXERCISE 3.17 (10–15 minutes)
Mar.
1
Cash ……………………………………………………………………..
60,000
Share Capital—Ordinary …………………………..…..
60,000
(Investment of cash in business)
3
Land ……………………………………………………….…………….
10,000
Buildings ……………………………………………………….……..
22,000
Equipment ……………………………………………………….……
6,000
Cash …………………………………………………………….
38,000
(Purchased Michelle Wie’s Golf Land)
5
Advertising Expense ……………………………………………..
1,600
Cash …………………………………………………………….
1,600
(Paid for advertising)
6
Prepaid Insurance …………………………………………………
1,480
Cash …………………………………………………………….
1,480
(Paid for one-year insurance policy)
10
Equipment ……………………………………………………….……
2,500
Accounts Payable …………………………………………
2,500
(Purchased equipment on account)
18
Cash ……………………………………………………………………..
1,200
Service Revenue …………………………………………..
1,200
(Received cash for services performed)
25
Dividends ……………………………………………………….…….
1,000
Cash …………………………………………………………….
1,000
(Declared and paid a £1,000 cash dividend)
30
Salaries and Wages Expense …………………………………
900
Cash …………………………………………………………….
900
(Paid salaries and wages expense)
30
Accounts Payable ………………………………………………….
2,500
Cash …………………………………………………………….
2,500
(Paid creditor on account)
31
Cash ……………………………………………………………………..
750
Service Revenue …………………………………………..
750
(Received cash for services performed)
LO: 2, Bloom: AP, Difficulty: Moderate, Time: 10–15, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
*EXERCISE 3.18 (15–20 minutes)
CORINNE DUNBAR, M.D.
Conversion of Cash Basis to Accrual Basis
For the Year 2019
Excess of cash collected over cash disbursed
(€142,600 – €60,470) …………………………………………………………….
€82,130
Alternate solution:
CORINNE DUNBAR, M.D.
Conversion of Income Statement Data
from Cash Basis to Accrual Basis
For the Year 2019
Cash
Adjustments
Accrual
Basis
Add
Deduct
Basis
Collections from customers:
€142,600
–Accounts receivable, Jan. 1
€11,250
+Accounts receivable, Dec. 31
€15,927
+Unearned service revenue, Jan. 1
–Unearned service revenue, Dec. 31
Disbursements for expenses:
+Accrued liabilities, Dec. 31
+Prepaid expenses, Jan. 1
–Prepaid expenses, Dec. 31
Operating expenses
Net income—cash basis
€ 82,130
Net income—accrual basis
*EXERCISE 3.19 (10–15 minutes)
(a) BUTLER CORP.
Income Statement (Cash Basis)
For the Year Ended December 31,
2018
2019
Cash receipts* ………………………………………
$290,000
$515,000
Cash payments** …………………………..………
Net income ……………………………………………
$ 65,000
$233,000
(b) BUTLER CORP.
Income Statement (Accrual Basis)
For the Year Ended December 31,
2018
2019
Revenues* …………………………………………….
$480,000
$445,000
Expenses** ……………………………………………
277,000
265,000
Net income ……………………………………………
$203,000
$180,000
*EXERCISE 3.20 (20–25 minutes)
(a)
Adjusting Entries:
1.
Insurance Expense (₺6,000 X 5/24) …………………………..
1,250
Prepaid Insurance ……………………………………………………….
1,250
2.
Rent Revenue (₺2,400 X 1/3) …………………………………………………….
Unearned Rent Revenue …………………………..
3.
Supplies …………………………………………………………………………………
Supplies Expense ……………………………………………………….
4.
Interest Expense ……………………………………………………….
Interest Payable ……………………………………………………….
(b)
Reversing Entries:
1.
No reversing entry required.
2.
Unearned Rent Revenue ……………………………………………………….
Rent Revenue ……………………………………………………….
3.
Supplies Expense ……………………………………………………….
Supplies ……………………………………………………….
4.
Interest Payable ……………………………………………………….
Interest Expense ……………………………………………………….
*EXERCISE 3.21 (10–15 minutes)
Accounts
Adjusted Trial
Balance
Income
Statement
Statement of
Financial
Position
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
15,000
15,000
Inventory
80,000
80,000
Sales Revenue
Sales Discounts
5,000
5,000
Cost of Goods Sold
*EXERCISE 3.22 (20–25 minutes)
MADRASAH SE
Worksheet (Partial)
For the Month Ended April 30, 2019
Adjusted Trial
Balance
Income
Statement
Statement of
Financial
Position
Account Titles
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
18,972
18,972
Accounts Receivable
6,920
6,920
Prepaid Rent
2,280
2,280
Equipment
18,050
18,050
Accum. Depr. –
Equipment
Notes Payable
Accounts Payable
Share, Capital-
Ordinary
Retained Earnings
Dividends
6,650
6,650
Service Revenue
12,590
12,590
Salaries and Wages
Expense
6,840
6,840
Rent Expense
2,760
2,760
Interest Expense
Interest Payable
83
Net Income
*EXERCISE 3.22 (Continued)
MADRASAH SE
Statement of Financial Position
April 30, 2019
Assets
Noncurrent Assets
Property, plant, and equipment
Equipment …………………………………………………..
€18,050
Less Accumulated depreciation–equipment ….
4,895
€13,155
Current Assets
Prepaid rent ……………………………………………………….
Accounts receivable …………………………………………….
Cash ……………………………………………………………………
18,972
Total current assets ……………………………………..
Equity and Liabilities
Equity
Share capital-ordinary ………………………………………….
€33,960
Retained earnings………………………………………
Current liabilities
(2,888)
€31,072
Notes payable ………………………………………………………
€ 5,700
Accounts payable ………………………………………………..
Interest payable ……………………………………………………
83
*EXERCISE 3.23 (10–15 minutes)
LETTERMAN AG
Worksheet (Partial)
For Month Ended February 28, 2019
Trial
Balance
Adjustments
Adjusted
Trial
Balance
Income
Statement
Statement
of Financial
Position
Account Titles
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Supplies
1,756
(a)
1,241
515
515
Accumulated
The following accounts and amounts would be shown in the February
income statement:
Supplies expense ………………………….. €2,741
TIME AND PURPOSE OF PROBLEMS
Problem 3.1 (Time 25–35 minutes)
Purpose—to provide an opportunity for the student to post daily transactions to a “T” account ledger,
Problem 3.2 (Time 35–40 minutes)
Purpose—to provide an opportunity for the student to prepare adjusting entries, and prepare financial
statements (income statement, statement of financial position, and statement of retained earnings). The
student also is asked to analyze two transactions to find missing amounts.
Problem 3.3 (Time 25–30 minutes)
Problem 3.4 (Time 40–50 minutes)
Problem 3.5 (Time 15–20 minutes)
Problem 3.6 (Time 25–35 minutes)
Purpose—to provide the student with an opportunity to prepare year-end adjusting entries from a trial
Problem 3.7 (Time 25–35 minutes)
Purpose—to provide an opportunity for the student to figure out the year-end adjusting entries that were
Problem 3.8 (Time 30–40 minutes)
Problem 3.9 (Time 30–35 minutes)
Purpose—to provide an opportunity for the student to prepare adjusting and closing entries from a trial
balance and related information. The student is also required to post the entries to “T” accounts.
*Problem 3.10 (Time 35–40 minutes)
Purpose—to provide an opportunity for the student to prepare and compare (a) cash basis and accrual
SOLUTIONS TO PROBLEMS
PROBLEM 3.1
(a) (Explanations are omitted.) and (d)
Cash
Equipment
Sept.
1
20,000
Sept.
4
680
Sept.
2
17,280
8
1,690
5
942
10
430
18
Sept.
3,000
Sept.
1
30
30
6,007
Bal.
30
Bal.
12,133
Accounts Receivable
Sept.
14
5,820
Sept.
20
980
25
2,110
Accounts Payable
Bal.
30
6,950
Sept.
18
3,600
Sept.
2
17,280
Bal.
30
13,680
Rent Expense
Sept.
4
Sept.
30
Sept.
5
942
Sept.
330
Sept.
9,620
Sept.
Bal.
30
5,820
25
2,110
9,620
9,620
Office Expense
Accumulated Depreciation–Equipment
Sept.
10
430
Sept.
30
515
Sept.
30
288
30
85
515
515
Sept.
1,800
Sept.
PROBLEM 3.1 (Continued)
Depreciation Expense
Income Summary
Sept.
30
288
Sept.
30
288
Sept.
30
680
Sept.
30
9,620
30
515
30
330
30
288
Inc.
(b) YASUNARI KAWABATA, D.D.S.
Trial Balance
September 30
Debit
Credit
Cash …………………………………………………………………………….
¥12,133
Accounts Receivable …………………………………………………….
6,950
Supplies ……………………………………………………….
Equipment ……………………………………………………….
Accumulated Depreciation–Equipment …………………………..
¥ 288
Accounts Payable……………………………………………………….
Yasunari Kawabata, Capital …………………………..
Service Revenue ……………………………………………………….
Rent Expense ……………………………………………………….
Office Expense ……………………………………………………….
Salaries and Wages Expense …………………………..
1,800
Supplies Expense ……………………………………………………….
Depreciation Expense …………………………..……………………….
288