Exercise 3-3 (25 minutes)
a.
Apr. 30 Legal Services Expense ……………………………… 3,500
Legal Services Payable ………………………… 3,500
Record accrued legal fees.
May 12 Legal Services Payable ……………………………….. 3,500
Cash ……………………………………………………. 3,500
Pay accrued legal fees.
c.
Apr. 30 Salaries Expense ………………………………………… 4,000
Salaries Payable…………………………………… 4,000
Record accrued salaries ($10,000 x 2/5 week).
May 3 Salaries Payable …………………………………………. 4,000
Salaries Expense* ………………………………………. 6,000
Cash ……………………………………………………. 10,000
Record payment of accrued and current salaries.
*($10,000 weekly salaries x 3/5 week)
Exercise 3-4 (30 minutes)
a.
Wages Expense ……………………………………………………….
8,000
Wages Payable ………………………………………………….
8,000
Record wages accrued but not yet paid.
b.
Depreciation Expense—Equipment …………………………..
Accumulated Depreciation—Equipment ……………..
Record depreciation expense for the year.
c.
Supplies Expense …………………………………………………….
5,000
Supplies* ……………………………………………………………
5,000
Record supplies used ($240 + $5,200 – $440).
d.
Insurance Expense …………………………………………………..
2,800
2,800
Interest Receivable …………………………………………………
1,050
Interest Revenue ………………………………………………
1,050
f.
Interest Expense …………………………………………………….
2,500
Interest Payable ……………………………………………….
2,500
Record interest incurred but not yet paid.
Notes:
Prepaid Insurance†
Supplies*
Beg. Bal.
Beg. Bal.
240
Purch.
5,200
?
Expired
?
Used
End. Bal.
End. Bal.
440
Exercise 3-5 (20 minutes)
a.
Accounts Receivable ……………………………………………..
2,000
Revenue …………………………………………………………..
2,000
Record services provided but payment not yet received.
b.
Wages Expense …………………………………………………..
1,000
Wages Payable ………………………………………………..
1,000
Record wages expense accrued but not yet paid.
c.
Interest Expense ………………………………………………….
400
400
Record interest expense incurred but not yet paid.
d.
Lawn Services Expense …………………………………………
500
Lawn Services Payable ……………………………………
500
Record lawn services incurred but not yet paid.
e.
Interest Receivable ………………………………………………
200
Interest Revenue ……………………………………………..
200
Record interest revenue earned but not yet received.
Salary Expense ……………………………………………………..
900
Salary Payable………………………………………………….
900
Record salary expense accrued but not yet paid.
Exercise 3-6 (30 minutes)
a.
Depreciation Expense—Equipment …………………………..
5,000
Accumulated Depreciation—Equipment……………….
5,000
Record depreciation expense for the year.
b.
Insurance Expense …………………………………………………..
1,400
Prepaid Insurance ……………………………………………….
1,400
Record insurance coverage expired ($2,000 – $600).
c.
Unearned Revenue ……………………………………………………
1,000
Consulting Revenue ……………………………………………
1,000
Record earned portion of payment received in advance
($3,000 x 1/3).
d.
Wages Expense ……………………………………………………….
1,200
Wages Payable ……………………………………………………
e.
Exercise 3-7 (25 minutes)
a. Dec. 31 Accounts Receivable …………………………………. 7,000
Fees Earned ………………………………………… 7,000
Record earned but unbilled fees.
d. Dec. 31 Salaries Expense ……………………………………….. 2,250
Salaries Payable………………………………….. 2,250
Record accrued salaries.
e. Dec. 31 Insurance Expense …………………………………….. 1,400
Prepaid Insurance ……………………………….. 1,400
Record expired prepaid insurance.
Exercise 3-8 (25 minutes)
STARK COMPANY
Income Statement
For Year Ended December 31
Services revenue ……………………………………………… $20,000
Expenses
Depreciation expense—Buildings …………………. $2,000
Wages expense ……………………………………………. 7,500
Interest expense …………………………………………… 500
Utilities expense …………………………………………… 1,300
STARK COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year end …………. $14,800
Add: Net income ……………………………………………… 6,700
21,500
Exercise 3-8 (concluded)
STARK COMPANY
Balance Sheet
December 31
Assets
Cash ………………………………………………………… $10,000
Accounts receivable ………………………………… 4,000
Supplies ………………………………………………….. 800
Buildings …………………………………………………. $40,000
Accumulated depreciation-Buildings ………… (15,000) 25,000
Prepaid insurance ……………………………………. 2,500
Total assets ……………………………………………… $42,300
Liabilities
Equity
Common stock ………………………………………… 10,000
Retained earnings ……………………………………. 18,500
Total equity ……………………………………………… 28,500
Total liabilities and equity ………………………… $42,300
Exercise 3-9 (10 minutes)
(Yen in millions)
Mar. 31 Net Sales ………………………………………………. 504,459
Income Summary ……………………………. 504,459
Close revenue account.
Exercise 3-10 (30 minutes)
1.
Dec. 31 Services Revenue ………………………………….. 404 44,000
Income Summary ……………………………. 901 44,000
Close revenue account.
31 Income Summary ………………………………….. 901 33,100
Depreciation Expense—Equipment …. 612 3,000
Salaries Expense ……………………………. 622 22,000
Insurance Expense …………………………. 637 2,500
Rent Expense …………………………………. 640 3,400
Supplies Expense …………………………... 652 2,200
Close expense accounts.
2.
CRUZ COMPANY
Post-Closing Trial Balance
December 31
Debit Credit
Cash ………………………………………………………. $19,000
Supplies ………………………………………………… 13,000
Prepaid insurance ………………………………….. 3,000
Equipment ……………………………………………… 24,000
Exercise 3-11 (20 minutes)
WILSON TRUCKING COMPANY
Income Statement
For Year Ended December 31
Trucking fees earned ………………………………………… $130,000
Expenses
Depreciation expense—Trucks ……………………… $23,500
Salaries expense ………………………………………….. 61,000
WILSON TRUCKING COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year ……….. $155,000
Add: Net income ……………………………………………… 25,500
Exercise 3-12 (20 minutes)
WILSON TRUCKING COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $ 8,000
Accounts receivable ………………………………. 17,500
Office supplies ……………………………………….. 3,000
Total current assets ……………………………….. 28,500
Plant assets
Trucks ……………………………………………………. $172,000
Accumulated depreciation-Trucks ………….. (36,000) 136,000
Land ………………………………………………………. 85,000
Total plant assets …………………………………… 221,000
Total assets ……………………………………………… $249,500
Liabilities
Current liabilities
Equity
Common stock ………………………………………… 15,000
Retained earnings* …………………………………… 160,500
Total equity ……………………………………………… 175,500
Total liabilities and equity ………………………… $249,500
Exercise 3-13 (10 minutes)
a. $ 4,361 / $ 44,500 = 9.8%
b. $ 97,706 / $ 398,800 = 24.5%
c. $111,281 / $ 257,000 = 43.3%
Exercise 3-14 (15 minutes)
Current
Assets
Current
Liabilities
Current
Ratio
Edison
$ 79,040
/
$ 32,000
=
2.47
MAXT
104,880
/
76,000
=
1.38
Chatter
45,080
/
49,000
=
0.92
TRU
85,680
/
81,600
=
1.05
Gleeson
61,000
/
100,000
=
0.61
Exercise 3-15A (30 minutes)
a.
Dec. 1 Supplies Expense …………………………………………… 2,000
Cash ……………………………………………………….. 2,000
d.
Dec. 28 Cash ………………………………………………………………. 3,700
Remodeling Fees Earned …………………………. 3,700
Received fees for work to be done.
e.
Dec. 31 Supplies ………………………………………………………… 1,840
Supplies Expense ……………………………………. 1,840
Adjust expenses for unused supplies.
Exercise 3-16B (25 minutes)
WESTCOTT COMPANY
December 31
Unadjusted
Trial Balance
Dr. Cr.
Adjustments
Dr. Cr.
Adjusted
Trial Balance
Dr. Cr.
Income
Statement
Dr. Cr.
Balance
Sheet
Dr. Cr.
Cash ……………………………………………………….
21
21
21
Accounts receivable …………………………..
12
12
12
Supplies ……………………………………………………….
24
(d)
9
15
15
Prepaid insurance …………………………..
18
(e)
15
3
3
Equipment …………………………..
39
39
39
Accum. depreciation–Equip ………………………….
18
18
Accounts payable …………………………..
6
6
6
Salaries payable …………………………..
0
(b)
6
6
6
Unearned revenue …………………………..
12
(c)
12
0
0
Common stock …………………………..
10
10
10
Retained earnings …………………………..
32
32
32
Dividends …………………………..…………………………
6
6
6
Revenue ……………………………………………………….
75
(c)
12
87
87
Depreciation expense–Equip…………………………
0
(a)
3
3
3
Salaries expense …………………………..
18
(b)
6
24
24
Insurance expense …………………………..
0
(e)
15
15
15
Supplies expense …………………………..
0
9
9
9
Utilities expense …………………………..
12
__
__
__
Totals ……………………………………………………….
150
45
45
1. Adjusting entries
Oct. 31 Rent Expense ………………………………………… 2,800
Rent Payable ………………………………….. 2,800
Record accrued rent expense.
31 Rent Receivable …………………………………….. 850
Rent Earned ……………………………………. 850
Record accrued rent income.
2. Subsequent entries without reversing
3. Reversing entries and subsequent entries
Nov. 1 Rent Payable …………………………………………. 2,800
Rent Expense …………………………………. 2,800
Reverse accrual of rent expense.
1 Rent Earned ………………………………………….. 850
Rent Receivable ……………………………… 850
Reverse accrual of rent income.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 3
PROBLEM SET A
Problem 3-1A (10 minutes)
1. E 5. C 9. D
2. I 6. H 10. A
Problem 3-2A (35 minutes)
Part 1
Adjustment (a)
Dec. 31 Office Supplies Expense ………………………….. 14,846
Office Supplies ………………………………….. 14,846
Record cost of supplies used
($4,000 + $13,400 – $2,554).
Adjustment (b)
Adjustment (c)
31 Salaries Expense ……………………………………… 3,920
Salaries Payable………………………………… 3,920
Record accrued but unpaid wages
(2 days x $1,960).
Problem 3-2A (Concluded)
Adjustment (d)
Dec. 31 Depreciation Expense—Building ………………. 30,500
Accumulated Depreciation—Building … 30,500
Record annual depreciation expense
[($960,000 – $45,000) / 30 years = $30,500]
Adjustment (e)
31 Rent Receivable …………………………………….. 3,000
Rent Earned ……………………………………. 3,000
Record earned but unpaid Dec. rent.
Adjustment (f)
Part 2
Cash Payment for (c)
Cash Payment for (e)
15 Cash ……………………………………………………… 6,000
Rent Receivable ……………………………… 3,000
Rent Earned …………………………..……….. 3,000
Record past due rent for two months.
Problem 3-3A (90 minutes)
Parts 1 and 2
Cash
Equipment
Unadj. Bal.
34,000
Unadj. Bal.
80,000
Accounts Receivable
Accumulated Depreciation—
Equipment
Unadj. Bal.
Unadj. Bal.
15,000
7,500
(c)
13,200
Adj. Bal.
7,500
Adj. Bal.
28,200
Teaching Supplies
Accounts Payable
Unadj. Bal.
8,000
Bal.
26,000
(b)
5,200
Adj. Bal.
2,800
Salaries Payable
Unadj. Bal.
0
Prepaid Insurance
(g)
400
Unadj. Bal.
12,000
Adj. Bal.
400
(a)
2,400
Adj. Bal.
9,600
Unadj. Bal.
12,500
(e)
5,000
Unadj. Bal.
3,000
Adj. Bal.
(h)
3,000
Adj. Bal.
Bal.
10,000
Professional Library
Bal.
35,000
Retained Earnings
Bal.
80,000
Accumulated Depreciation—
Professional Library
Dividends
Unadj. Bal.
10,000
Bal.
50,000
(d)
7,200
Adj. Bal.
17,200
Problem 3-3A (Continued)
Tuition Fees Earned
Rent Expense
Unadj. Bal.
123,900
Unadj. Bal.
33,000
(f)
7,500
(h)
3,000
Adj. Bal.
131,400
Adj. Bal.
36,000
Training Fees Earned
Teaching Supplies Expense
Unadj. Bal.
40,000
Unadj. Bal.
(e)
(b)
5,200
45,000
5,200
Depreciation Expense—
Professional Library
Advertising Expense
Unadj. Bal.
0
Bal.
6,000
(d)
7,200
Adj. Bal.
7,200
Depreciation Expense—
Equipment
Utilities Expense
Unadj. Bal.
0
Bal.
6,400
(c)
13,200
Adj. Bal.
13,200
Salaries Expense
Unadj. Bal.
50,000
(g)
Adj. Bal.
50,400
Unadj. Bal.
0
(a)
2,400
Adj. Bal.
2,400
Problem 3-3A (Continued)
Part 2
Adjustment (a)
Dec. 31
Insurance Expense ………………………………………………
2,400
Prepaid Insurance …………………………………………..
2,400
Record the insurance expired.
Adjustment (b)
31
Teaching Supplies Expense …………………………..
5,200
Teaching Supplies ………………………………………….
5,200
Record supplies used ($8,000 – $2,800).
Adjustment (c)
31
Depreciation Expense—Equipment ………………………
13,200
Accumulated Depreciation—Equipment ………………..
13,200
Record equipment depreciation.
Adjustment (d)
31
Depreciation Expense—Profess. Library ………………
7,200
Accumul. Depreciation—Profess. Library …………….
7,200
Record professional library depreciation.
Adjustment (e)
31
Unearned Training Fees ……………………………………….
5,000
Training Fees Earned ……………………………………..
5,000
Adjustment (f)
31
Accounts Receivable ……………………………………………
7,500
Tuition Fees Earned………………………………………..
7,500
Record tuition earned.
Adjustment (g)
31
Salaries Expense …………………………………………………
400
Salaries Payable……………………………………………..
400
Record accrued salaries
(2 days x $100 x 2 employees).
Adjustment (h)
31
Rent Expense ………………………………………………………
3,000
Prepaid Rent …………………………………………………..
3,000
Record expiration of prepaid rent.
Problem 3-3A (Continued)
Part 3
WELLS TECHNICAL INSTITUTE
Adjusted Trial Balance
December 31
Debit
Credit
Cash ………………………………………………………………..
$ 34,000
Accounts receivable …………………………………………
7,500
Teaching supplies ……………………………………………
2,800
Prepaid insurance …………………………………………….
9,600
Prepaid rent ……………………………………………………..
Professional library ………………………………………….
35,000
Equipment ……………………………………………………….
80,000
Accumulated depreciation—Equipment …………….
28,200
Accounts payable …………………………………………….
26,000
Salaries payable ……………………………………………….
400
Unearned training fees ……………………………………..
7,500
Common stock …………………………………………………
10,000
Retained earnings …………………………………………….
80,000
Dividends …………………………………………………………
50,000
Tuition fees earned …………………………………………..
131,400
Training fees earned …………………………………………
45,000
Depreciation expense—Professional library ……..
7,200
Depreciation expense—Equipment …………………..
13,200
Salaries expense ……………………………………………..
50,400
Insurance expense …………………………………………..
2,400
Rent expense ……………………………………………………
36,000
Teaching supplies expense ………………………………
5,200
Advertising expense …………………………………………
6,000