Exercise 3-20 (continued)
Requirement 4 (continued)
Red Flash Photography
Balance Sheet
December 31, 2018
Assets
Liabilities
Current assets:
Current liabilities:
Cash
$ 30,000
Accounts payable
Long-term assets:
Retained earnings
Total assets
Exercise 3-20 (concluded)
Requirement 5
December 31, 2018
Debit
Credit
Service Revenue
70,000
Retained Earnings
70,000
(Close revenue accounts)
Retained Earnings
(Close expense accounts)
Retained Earnings
(Close dividends account)
Chapter 3 – The Accounting Cycle: End of the Period
Exercise 3-21
Requirement 1
January 2
Debit
Credit
Prepaid Rent
6,000
Cash
6,000
(Pay for one year of rent in advance)
January 9
Debit
Credit
Supplies
3,500
Accounts Payable
3,500
January 13
Debit
Credit
Service Revenue
Deferred Revenue
3,700
Cash
January 22
Debit
Credit
Accounts Receivable
January 29
Credit
Exercise 3-21 (continued)
Requirement 2
(a) January 31
Debit
Credit
Rent Expense
500
(b) January 31
Debit
Credit
Supplies Expense
3,800
(c) January 31
Debit
Credit
Deferred Revenue
3,200
(d) January 31
Debit
Credit
Salaries Expense
5,800
Exercise 3-21 (continued)
Requirement 3
Dynamite Fireworks
Adjusted Trial Balance
January 31, 2018
Accounts
Debit
Credit
Cash
$ 30,100
Accounts Receivable
6,600
Supplies
2,800
Prepaid Rent
5,500
Accounts Payable
Deferred Revenue
Salaries Payable
Common Stock
Service Revenue
Salaries Expense
Rent Expense
Supplies Expense
3,800
$116,600
Chapter 3 – The Accounting Cycle: End of the Period
Exercise 3-21 (continued)
Requirement 3 (continued)
Accounts
Ending
Balance
Beginning balance in bold, entries during
January in blue, and adjusting entries in red.
Cash
30,100
=
23,800−6,000+3,700−11,500+24,100−4,000
Accounts Receivable
6,600
=
5,200+25,500−24,100
Supplies
=
3,100+3,500−3,800
Prepaid Rent
=
Land
50,000
=
Accounts Payable
=
3,200+3,500−4,000
Deferred Revenue
=
Salaries Payable
=
Common Stock
65,000
=
Retained Earnings
13,900
=
Service Revenue
28,700
=
Salaries Expense
=
Rent Expense
=
Supplies Expense
=
Chapter 3 – The Accounting Cycle: End of the Period
Exercise 3-21 (continued)
Requirement 4
Dynamite Fireworks
Income Statement
For the year ended January 31, 2018
Revenues:
Service revenue
$28,700
Expenses:
Salaries Expense
Rent Expense
Supplies Expense
Net income
$ 7,100
Requirement 5
Dynamite Fireworks
Balance Sheet
January 31, 2018
Assets
Liabilities
Current assets:
Current liabilities
Cash
$30,100
Accounts payable
$ 2,700
Accounts Receivable
Deferred revenue
Supplies
Prepaid Rent
9,000
45,000
Stockholders’ Equity
Common stock
65,000
Long-term assets:
Retained earnings
21,000
*
Land
50,000
86,000
Total assets
$95,000
$95,000
Exercise 3-21 (concluded)
Requirement 6
January 31, 2018
Debit
Credit
Service Revenue
28,700
Requirement 7
(a) Profit is the amount of net income reported in the income statement = $7,100.
Chapter 3 – The Accounting Cycle: End of the Period
PROBLEMS: SET A
Problem 3-1A (LO 3-1, 3-2)
Accrual-Basis
Cash-Basis
Transaction
Expense
Revenue
Expense
1. Receive cash from customers in
advance, $600
$0
$0
$600
$0
3. Pay for insurance one year in
advance, $2,000
$0
$0
$0
$0
$0
$800
$0
$0
$0
6. Receive cash from customers at the
time of service, $1,700
$0
$0
$0
$0
$0
$0
8. Borrow cash from the bank, $4,000.
$0
$0
$0
$0
$0
$0
$750
$0
$0
$0
$450
Problem 3-2A (LO 3-1, 3-2)
Minutemen Law Services
Income Statement
For the year ended December 31, 2018
Service revenue
$73,000a
Expenses:
Salaries
37,700b
Utilities
Net income
Chapter 3 – The Accounting Cycle: End of the Period
Problem 3-3A (LO 3-3)
(a)
Debit
Credit
Deferred Revenue
3,600
Service Revenue
3,600
(Adjust deferred revenue)
Debit
Credit
Depreciation Expense
Accumulated Depreciation
(Adjust accumulated depreciation)
(c)
Debit
Credit
Insurance Expense
Prepaid Insurance
(Adjust prepaid insurance)
Debit
Credit
Interest Expense
(e)
Supplies Expense
1,700
Supplies
1,700
Problem 3-4A (LO 3-3)
(a)
Debit
Credit
Depreciation Expense
6,000
Accumulated Depreciation
6,000
(Adjust accumulated depreciation)
Debit
Credit
Salaries Expense
Salaries Payable
(Adjust salaries payable)
(c)
Debit
Credit
Interest Expense
Interest Payable
(Adjust interest payable)
Debit
Credit
Supplies Expense
Rent Expense
Prepaid Rent
Utilities Expense
Utilities Payable
Problem 3-5A (LO 3-5)
Boilermaker Unlimited
Income Statement
For the year ended December 31, 2018
Service revenues:
New construction
$450,000
Remodel
280,000
Net income
Problem 3-5A (concluded)
Boilermaker Unlimited
Statement of Stockholders’ Equity
For the year ended December 31, 2018
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balance at January 1
Add: Net income for 2018
Balance at December 31
Boilermaker Unlimited
Balance Sheet
December 31, 2018
Assets
Liabilities
Current assets:
Current liabilities:
Cash
$ 16,000
Accounts payable
$ 31,000
Accounts receivable
25,000
Salaries payable
28,000
Prepaid insurance
64,000
Notes payable
Long-term assets:
Equipment
Common stock
Accumulated depr.
Retained earnings
equity
Total assets
Chapter 3 – The Accounting Cycle: End of the Period
Problem 3-6A (LO 3-6, 3-7)
Requirement 1
December 31
Debit
Credit
Service Revenue
77,500
Retained Earnings
77,500
(Close revenue accounts)
Retained Earnings
Utilities Expense
(Close expense accounts)
(Close dividends account)
Requirement 2
Rattlers Tax Services
Post-Closing Trial Balance
Accounts
Debit
Credit
Cash
$ 4,700
Accounts Receivable
7,200
Land
Accounts Payable
Common Stock
Retained Earnings
Problem 3-7A (LO 3-4, 3-5, 3-6, 3-7)
Requirements 1 and 2 (adjusting entries posted in red)
Cash
Accounts Receivable
Supplies
10,300
9,500
2,000
1,300
Accumulated Depr.
18,000
Interest Payable
0
800
Utilities Payable
Notes Payable
Common Stock
0
200
20,000
45,000
200
20,000
45,000
Retained Earnings
Service Revenue
19,000
0
0
Problem 3-7A (continued)
Requirement 3
Crimson Tide Music Academy
Adjusted Trial Balance
December 31, 2018
Accounts
Debit
Credit
Cash
$ 10,300
Accounts Receivable
9,500
Supplies
700
Prepaid Rent
1,800
Equipment
Accounts Payable
7,700
Salaries Payable
Interest Payable
Utilities Payable
200
Notes Payable
Common Stock
Retained Earnings
Service Revenue
Salaries Expense
Interest Expense
Rent Expense
Supplies Expense
1,300
Utilities Expense
Depreciation Expense
6,000
Problem 3-7A (continued)
Requirement 4
Crimson Tide Music Academy
Income Statement
For the year ended December 31, 2018
Service revenue
$42,200
Expenses:
Crimson Tide Music Academy
Statement of Stockholders’ Equity
For the year ended December 31, 2018
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balance at January 1
$45,000
$19,000
$64,000
Issuance of common stock
0
0
Less: Dividends
Balance at December 31
$45,000
$63,500
Chapter 3 – The Accounting Cycle: End of the Period
Problem 3-7A (continued)
Crimson Tide Music Academy
Balance Sheet
December 31, 2018
Assets
Liabilities
Current assets:
Current liabilities:
Cash
$ 10,300
Accounts payable
$ 7,700
Accounts receivable
9,500
Salaries payable
2,100
Supplies
Interest payable
Prepaid rent
Utilities payable
Long-term assets:
Equipment
Accumulated depr.
(18,000)
Common stock
$94,300
Problem 3-7A (continued)
Requirement 5
December 31, 2018
Debit
Credit
Service Revenue
42,200
Retained Earnings
42,200
(Close revenue accounts)
(Close expense accounts)