Chapter 03 – The Accounting Cycle: End of the Period
Chapter 3
The Accounting Cycle: End of the Period
EXERCISES
Exercise 3-1
1.
May 2.
3.
November 21.
4.
July 7.
Exercise 3-2
1.
May 2.
2.
November 21.
4.
Exercise 3-3
1.
May 7.
2.
September 6.
4.
July 7.
Exercise 3-4
1.
April 1.
3.
November 12.
4.
March 23.
Exercise 3-5
Net income (unadjusted)
$78,400
a. Record insurance expense of $1,600 per month
(4,800)
b. Reclassify service revenue as deferred revenue (liability)
c. Reclassify supplies expense as supplies (asset)
d. Record interest expense of $500 per month (1% of $50,000)
Exercise 3-6
(b)
Use source documents to identify accounts affected by external
transactions.
(g)
(f)
Assess whether the transaction results in a debit or a credit to
Record the transaction.
Analyze the impact of the transaction on the accounting
Exercise 3-7
(a)
Debit
Credit
Supplies Expense
2,900
Supplies
2,900
Debit
Credit
Insurance Expense
3,200
Prepaid Insurance
3,200
(c)
Debit
Credit
Salaries Expense
Salaries Payable
Debit
Credit
Service Revenue
1,600
Chapter 03 – The Accounting Cycle: End of the Period
Exercise 3-8
(a)
Debit
Credit
Depreciation Expense
9,100
Debit
Credit
Interest Receivable
(c)
Debit
Credit
Deferred Revenue
4,200
Exercise 3-9
If the adjusting entry is NOT made:
Revenues
−
Expenses
=
Net Income
(a)
$0
−
−$9,100
=
+$9,100
(b)
−
=
(c)
−
=
Exercise 3-10
(a)
Debit
Credit
Deferred Revenue
2,100
Service Revenue
2,100
(Adjust deferred revenue)
(b)
Debit
Credit
Advertising Expense
Prepaid Advertising
(Adjust prepaid advertising)
(c)
Debit
Credit
Salaries Expense
Salaries Payable
12,000
(Adjust salaries payable)
(d)
Debit
Credit
Interest Payable
(Adjust interest payable)
Exercise 3-11
If the adjusting entry is NOT made:
Assets
=
Liabilities
+
Stockholders’
Equity
(a)
$0
=
+$2,100
+
−$2,100
(c)
=
+
(d)
Exercise 3-12
(a)
Debit
Credit
Deferred Revenue
2,200
Service Revenue
2,200
(Adjust deferred revenue)
(b)
Debit
Credit
Insurance Expense
Prepaid Insurance
(Adjust prepaid insurance)
(c)
Debit
Credit
Salaries Expense
3,200
Salaries Payable
3,200
(Adjust salaries payable)
(d)
Debit
Credit
Interest Expense
Interest Payable
(Adjust interest payable)
(e)
Debit
Credit
Supplies Expense
Supplies
(Adjust office supplies)
Exercise 3-13
(a)
Debit
Credit
Interest Receivable
200
Interest Revenue
200
(Adjust interest receivable)
(b)
Debit
Credit
Rent Expense
Prepaid Rent
(Adjust prepaid rent)
(c)
Debit
Credit
Deferred Revenue
Service Revenue
(Adjust deferred revenue)
(d)
Debit
Credit
Accumulated Depreciation
(Adjust accumulated depreciation)
(e)
Debit
Credit
Salaries Expense
Salaries Payable
(Adjust salaries payable)
(f)
Debit
Credit
Supplies Expense
(Adjust supplies)
Chapter 03 – The Accounting Cycle: End of the Period
Exercise 3-14
Requirement 1
(a)
Debit
Credit
Rent Expense
2,400
Prepaid Rent
2,400
(Adjust prepaid rent)
(b)
Debit
Credit
Deferred Revenue
Service Revenue
(Adjust deferred revenue)
(c)
Debit
Credit
Salaries Expense
Salaries Payable
(Adjust salaries payable)
(d)
Debit
Credit
Supplies Expense
Supplies
(Adjust supplies)
Exercise 3-14 (concluded)
Requirement 2
Adjusted Trial Balance
Accounts
Debit
Credit
Cash
$12,000
Accounts Receivable
10,500
Supplies
1,000
Salaries Payable
1,200
Common Stock
15,000
Service Revenue
34,100
Salaries Expense
26,200
Rent Expense
2,400
Supplies Expense
1,700
$58,600
$58,600
Exercise 3-15
Volunteers Inc.
(in millions)
Raiders Inc.
(in millions)
Year
Net
Income (Loss)
Retained
Earnings
Net
Income (Loss)
Retained
Earnings
2009
___
$ 0
$ 32
$ 20
2010
$ 50
50
(48)
(28)
2011
36
2012
48
138
2015
80
(46)
2016
2017
2018
Exercise 3-16
Requirement 1
Blue Hens Corporation
Income Statement
For the year ended December 31, 2018
Service revenue
$420,000
Expenses:
Salaries
$310,000
Depreciation
Interest
Net income
Requirement 2
Blue Hens Corporation
Statement of Stockholders’ Equity
For the year ended December 31, 2018
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity