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CHAPTER 3
SOLUTIONS TO EXERCISES—SET B
EXERCISE 3-1B
2. Decrease in assets and decrease in stockholders’ equity.
4. Increase in assets and increase in stockholders’ equity.
6. Increase in liabilities and decrease in stockholders’ equity.
8. Increase in assets and decrease in assets.
EXERCISE 3-2B
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
Common
Stock
+
Retained Earnings
Revenues
–
Expenses
(1)
+$25,000
+$25,000
(2)
–$ 4,000
–$4,000
Rent Expense
(5)
–11,000
–11,000
Utilities Expense
(6)
+50,000
+$50,000
Issued Stock
(7)
–25,000
–25,000
Stockholders’ Equity
Service Revenue
Salaries and
Wages expense
Retained Earnings
Revenues - Expenses - Dividends
–$11,000
$11,000
–28,000
+$16,000
+$26,000
+
Common
Stock
+
+
Liabilities
Bonds
Payable
+
Accounts
Payable
+$4,700
=
=
Assets
Equipment
+$60,000
$60,000
+
Supplies
+$4,700
$4,700
+
Accounts
Receivable
+
Cash
–60,000
+16,000
–28,000
–11,000
(3)
(4)
(5)
(8)
EXERCISE 3-3B
EXERCISE 3-4B
(a) 1. Stockholders invested $20,000 cash in the business.
2. Purchased office equipment for $5,000, paying $1,000 in cash
and the balance of $4,000 on account.
4. Earned $9,500 in revenue, receiving $4,100 cash and $5,400 on
account.
6. Paid $2,000 cash dividends to stockholders.
8. Collected $450 cash from customers on account.
10. Incurred $300 of utilities expense on account.
(b) Issued common stock ............................................................. $20,000
Service revenue ....................................................................... 9,500
Dividends .................................................................................. (2,000)
(c) Service revenue ....................................................................... $ 9,500
Rent expense ........................................................................... (800)
EXERCISE 3-5B
WEIGEL COMPANY
Income Statement
For the Month Ended August 31, 2014
Revenues
Service revenue ........................................................ $9,500
Expenses
Salaries and wages expense ................................... $5,000
WEIGEL COMPANY
Retained Earnings Statement
For the Month Ended August 31, 2014
Retained earnings, August 1 ............................................................. $ 0
Add: Net income ............................................................................... 3,400
WEIGEL COMPANY
Balance Sheet
August 31, 2014
Assets
Current Assets:
Cash ............................................................................... $13,500
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ................................................. $ 2,800
Stockholders’ equity
EXERCISE 3-6B
Account Credited
(d)
Normal
Balance
Credit
Credit
Debit
Debit
(c)
Effect
Increase
Increase
Decrease
Decrease
(b)
Specific
Account
Common
Stock
Accounts
Payable
Cash
Cash
(a)
Basic
Type
Stockholders’
Equity
Liability
Asset
Asset
Account Debited
(d)
Normal
Balance
Debit
Debit
Debit
Credit
(c)
Effect
Increase
Increase
Increase
Decrease
(b)
Specific
Account
Cash
Supplies
Advertising
Expense
Accounts
Payable
(a)
Basic
Type
Asset
Asset
Stockholder’ s
Equity
Liability
(a)
Trans
action
1.
3.
5.
7.
EXERCISE 3-6B (Continued)
(b)
General Journal
Trans.
Account Titles
Debit
Credit
1.
Cash ....................................................................
Common Stock ...........................................
30,000
30,000
3.
Supplies ..............................................................
Accounts Payable .......................................
3,000
3,000
5.
Advertising Expense ..........................................
Cash .............................................................
200
200
7.
Accounts Payable ..............................................
Cash .............................................................
300
300
EXERCISE 3-7B
Oct. 1 Debits increase assets: debit Cash $50,000.
2 No accounting transaction.
EXERCISE 3-7B (Continued)
Oct. 6 Debits increase assets: debit Accounts Receivable $10,800.
Credits increase revenues: credit Service Revenue $10,800.
EXERCISE 3-8B
General Journal
Date
Account Titles
Debit
Credit
Oct. 1
Cash ....................................................................
Common Stock ..........................................
50,000
50,000
2
No entry.
EXERCISE 3-9B
General Journal
Date
Account Titles
Debit
Credit
May 4
Accounts Payable .............................................
1,700
EXERCISE 3-10B
(a)
Cash
Accounts Payable
Oct. 1
50,000
Oct. 27
700
Oct. 27
700
Oct. 3
5,400
10
140
30
3,000
Bal.
4,700
Bal.
46,440
(b) MEYER REAL ESTATE AGENCY
Trial Balance
October 31, 2014
Debit
Credit
Cash .....................................................................
Accounts Receivable ..........................................
$46,440
10,800
EXERCISE 3-11B
(a)
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
Sept. 1
+$40,000
+$40,000
Issued stock
(b)
General Journal J1
Date
Account Titles
Debit
Credit
Sept. 1
Cash .................................................................
Common Stock ........................................
40,000
40,000
5
Equipment .......................................................
Accounts Payable ...................................
9,000
3,000
EXERCISE 3-11B (Continued)
(c)
Cash
9/1 40,000
9/5 6,000
9/25 2,000
Common Stock
9/1 40,000
Bal. 40,000
