Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
263
Problem 3-8BB (Continued)
Part 3
POWER DEMOLITION COMPANY
Income Statement
For Year Ended April 30
Demolition revenue ………………………………………. $187,000
Expenses
Depreciation expense–Equipment……………….. $ 7,000
POWER DEMOLITION COMPANY
Statement of Retained Earnings
For Year Ended April 30
Retained earnings, April 30 prior year …………… $ 76,900
Add: Net income ………………………………………… 77,550
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
264
Problem 3-8BB (Concluded)
POWER DEMOLITION COMPANY
Balance Sheet
April 30
Assets
Current assets
Cash …………………………………………………………… $ 7,000
Supplies …………………………………………………….. 7,900
Liabilities
Current liabilities
Accounts payable ……………………………………….. $ 7,600
Interest payable ………………………………………….. 300
Equity
Common stock …………………………………………….. 10,000
Retained earnings ………………………………………… 142,450
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
265
Problem 3-9B (30 minutes)
Part 1
SANTO COMPANY
Income Statement
For Year Ended December 31
Services revenue …………………………………. $54,700
Expenses
Depreciation expense—Equipment …….. $ 2,000
SANTO COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year ……….. $25,650
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
266
Problem 3-9B (Continued)
SANTO COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………….. $14,450
Store supplies ……………………………………. 5,140
Liabilities
Current liabilities
Accounts payable ………………………………. $ 1,500
Equity
Common stock ……………………………………. 10,000
Retained earnings ……………………………….. 29,590
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-9B (Concluded)
Part 2
Closing entries (all dated December 31)
Instructor note: Entries are shown without an account reference column because no posting is required.
(1) Services Revenue …………………………..………… 54,700
(2) Income Summary …………………………………….. 35,760
Depreciation Expense, Equipment ……… 2,000
(3) Income Summary …………………………………….. 18,940
(4) Retained Earnings ……………………………………. 15,000
Dividends ………………………………………….. 15,000
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
268
Problem 3-10BA (40 minutes)
Part 1
Method that records prepaid expenses and unearned revenues in balance sheet accounts
Apr. 1 Prepaid Consulting ………………………………………. 2,450
Cash ……………………………………………………… 2,450
Paid for future consulting.
May 1 Prepaid Advertising ……………………………………… 4,450
Cash ……………………………………………………… 4,450
Paid for future advertising.
31 Unearned Revenue ………………………………………. 3,900
Services Revenue ………………………………….. 3,900
Adjust unearned revenue ($8,500 – $4,600).
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
269
Problem 3-10BA (Continued)
Part 2
Method that records prepaid expenses and unearned revenues in income statement accounts
Apr. 1 Consulting Expense ……………………………………. 2,450
Cash ……………………………………………………. 2,450
Paid for future consulting services.
May 1 Advertising Expense …………………………………… 4,450
Cash ……………………………………………………. 4,450
Paid for future advertising.
31 Services Revenue ……………………………………….. 4,600
Unearned Revenue ………………………………. 4,600
Adjust for unearned revenue.
31 Prepaid Advertising …………………………..……….. 2,050
Advertising Expense ……………………………. 2,050
Adjust for prepaid advertising.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
270
Problem 3-10BA (Concluded)
Part 3
There are no differences between the two methods in terms of the amounts
that appear on the financial statements. In both cases, the financial
statements reflect the following identical balances.
Prepaid consulting as of May 31 ………………………………………….. $ 450
When prepaid expenses and unearned revenues are recorded in balance
sheet accounts, the related adjusting entries are designed to generate the
correct asset, expense, liability, and revenue account balances. When
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
271
Problem 3-11BC (40 minutes)
Part 1
SOLUTIONS CO.
Work Sheet
For Year Ended December 31
Unadjusted
Trial Balance
Adjustments
Dr. Cr.
Dr. Cr.
Cash ……………………………………….
10,000
10,000
Accounts receivable ………………
0
(e)
2,450
2,450
Supplies …………………………………
7,600
3,450
Machinery ………………………………
50,000
50,000
Accumulated depreciation—
20,000
23,800
Interest payable ……………………..
Salaries payable ……………………
Notes payable ………………………..
30,000
30,000
Common stock ………………………
5,000
5,000
Retained earnings ………………….
9,200
9,200
Dividends ……………………………….
9,500
9,500
Services revenue ……………………
32,450
(d)
(e)
4,000
2,450
38,900
Depreciation expense—
Salaries expense ……………………
24,500
(a)
24,900
Interest expense …………………….
2,250
(c)
3,050
Supplies expense …………………..
4,150
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
272
Problem 3-11BC (Continued)
Part 2 (all adjusting entries dated December 31)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Salaries Expense …………………………………… 400
Salaries Payable……………………………… 400
Record accrued wages.
(e) Accounts Receivable …………………………….. 2,450
Services Revenue …………………………... 2,450
Record accrued revenues.
Part 3 (all reversing entries dated January 1)
(a) Salaries Payable ……………………………………. 400
Salaries Expense ……………………………. 400
Reverse accrued wages.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
273
Problem 3-11BC (Concluded)
Part 4
Instructor note: Entries are shown without an account reference column because no posting is required.
Jan. 4 Salaries Expense …………………………………… 1,200
Cash ………………………………………………. 1,200
Record payroll payment.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
274
SERIAL PROBLEM – SP 3
Serial Problem, Business Solutions (150 minutes) — Part 1
<Note: The general ledger is shown at the end of this assignment>
Journal entries
Dec. 2 Advertising Expense ……………………………. 655 1,025
Cash ……………………………………………..101 1,025
Paid share of mall advertising costs.
Unearned Computer Services Revenue …236 1,500
Received advance on work to be performed.
15 Computer Supplies …………………………..…. 126 1,100
Accounts Payable ………………………….201 1,100
Purchased supplies on credit.
16 No entry recorded in the journal.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
275
Serial Problem (Continued)
Part 2
Adjusting entries
Dec. 31 Computer Supplies Expense …………………….652 3,065
Computer Supplies …………………………...126 3,065
Adjustment for supplies used (supplies
balance less cost of supplies available).
31 Depreciation Expense–Computer Equip …….613 1,250
Accumulated Depreciation—
Computer Equipment ………………………168 1,250
Adjustment for computer equipment depreciation:
Cost …………………………..……………………. $20,000
Predicted life ……………………………………. 4 years
Annual depreciation (cost/life) …………… $5,000
Expense for three months …………………. $1,250
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 3
BUSINESS SOLUTIONS
Adjusted Trial Balance
December 31, 2021
Debit Credit
Cash ………………………………………………………………… $ 48,372
Accounts receivable …………………………………………. 5,668
Computer supplies …………………………………………… 580
Retained earnings ……………………………………………… 0
Dividends …………………………..……………………………… 7,100
Computer services revenue ………………………………. 31,284
Depreciation expense—Office equipment ………….. 400
Depreciation expense—Computer equipment …….. 1,250
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
277
Serial Problem (Continued)
Part 4
BUSINESS SOLUTIONS
Income Statement
For Three Months Ended December 31, 2021
Revenue
Computer services revenue ………………………………… $31,284
Expenses
Depreciation expense—Office equipment …………… $ 400
Part 5
BUSINESS SOLUTIONS
Statement of Retained Earnings
For Three Months Ended December 31, 2021
Retained earnings, October 1, 2021 ………………………. $ 0
Add: Net income ……………………………………………….. 14,460
14,460
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
278
Serial Problem (Continued)
Part 6
BUSINESS SOLUTIONS
Balance Sheet
December 31, 2021
Assets
Current assets
Cash ………………………………………………………. $48,372
Accounts receivable ………………………………. 5,668
Computer equipment ……………………………… 20,000
Accumulated depreciation–Computer equip . (1,250) 18,750
Total plant assets …………………………………… 26,350
Total assets …………………………..…………………. $83,460
Liabilities
Current liabilities
Accounts payable …………………………………… $ 1,100