Problem 3-3A (Continued)
Part 4
WELLS TECHNICAL INSTITUTE
Income Statement
For Year Ended December 31
Revenues
Tuition fees earned …………………………………….. $131,400
Training fees earned …………………………………… 45,000
Total revenues ……………………………………………. $176,400
Expenses
Advertising expense …………………………………… 6,000
Utilities expense …………………………………………. 6,400
Total expenses …………………………………………… 126,800
Net income …………………………………………………… $ 49,600
WELLS TECHNICAL INSTITUTE
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year end …………… $ 80,000
Plus: Net income ………………………………………………………… 49,600
129,600
Problem 3-3A (Concluded)
WELLS TECHNICAL INSTITUTE
Balance Sheet
December 31
Assets
Cash ……………………………………………………………………… $ 34,000
Accounts receivable ……………………………………………… 7,500
Teaching supplies …………………………………………………. 2,800
Prepaid insurance …………………………………………………. 9,600
Liabilities
Accounts payable ………………………………………………….. $ 26,000
Salaries payable ……………………………………………………. 400
Unearned training fees ………………………………………….. 7,500
Total liabilities ………………………………………………………. 33,900
Equity
Problem 3-4A (50 minutes)
CHIARA COMPANY
Income Statement
For Year Ended December 31
Revenues
Fees earned ………………………………………. $484,000
Interest earned …………………………………… 24,000
Total revenues …………………………………… $508,000
Expenses
Office supplies expense …………………….. 34,000
Advertising expense ………………………….. 58,000
Repairs expense—Automobiles …………. 24,800
Total expenses ………………………………….. 420,800
Net income ………………………………………….. $ 87,200
CHIARA COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year end …… $235,800
Plus: Net income ……………………………………….. 87,200
323,000
Problem 3-4A (Concluded)
CHIARA COMPANY
Balance Sheet
December 31
Assets
Cash ………………………………………………………………
$ 30,000
Accounts receivable ……………………………………….
52,000
Interest receivable…………………………………………..
18,000
Notes receivable (due in 90 days) ……………………
168,000
Office supplies ……………………………………………….
16,000
Automobiles …………………………………………………..
Accumulated depreciation—Automobiles ………..
118,000
Equipment ………………………………………………………
Accumulated depreciation—Equipment …………..
120,000
Land ……………………………………………………………….
Total assets ……………………………………………………
$600,000
Liabilities
Accounts payable …………………………………………..
$ 96,000
Interest payable ………………………………………………
20,000
Salaries payable ……………………………………………..
19,000
Unearned fees ………………………………………………..
30,000
Long-term notes payable ………………………………..
138,000
Total liabilities ………………………………………………..
303,000
Equity
Retained earnings …………………………………………..
Total equity …………………………………………………….
Problem 3-5A (90 minutes)
INSTRUCTOR: Ledger accounts are shown after Part 7 as they would appear after all entries are posted.
Part 2 — Transactions for April
April 1 Cash ……………………………………………………… 101 30,000
Computer Equipment …………………………….. 167 20,000
Common Stock……………………………….. 307 50,000
Owner investment in exchange for stock.
10 Prepaid Insurance ………………………………….. 128 2,400
Cash ………………………………………………. 101 2,400
Paid 12 months’ premium in advance.
14 Salaries Expense ……………………………………. 622 1,600
Cash ………………………………………………. 101 1,600
Paid two weeks’ salaries.
30 Telephone Expense ……………………………….. 688 750
Cash ………………………………………………. 101 750
Paid the telephone bill.
30 Dividends ……………………………………………… 319 1,500
Cash ………………………………………………. 101 1,500
Paid cash dividends.
Problem 3-5A (Continued)
Part 3
ADVENTURE TRAVEL
Unadjusted Trial Balance
April 30
No. Account Title Debit Credit
101 Cash …………………………………………………. $27,000
106 Accounts receivable ………………………….. 0
124 Office supplies ………………………………….. 1,000
209 Salaries payable ………………………………… 0
307 Common stock ………………………………….. 50,000
318 Retained earnings ……………………………… 0
319 Dividends ………………………………………….. 1,500
405 Commissions earned…………………………. 8,000
612 Depreciation expense—
Computer equipment ……………………….. 0
622 Salaries expense ……………………………….. 3,200
637 Insurance expense ……………………………. 0
Problem 3-5A (Continued)
Part 4
Adjusting entries
(a) Apr 30 Insurance Expense ……………………………………….. 637 133
Prepaid Insurance ……………………………………. 128 133
Record expired insurance ($2,400/12 x2/3).
(d) Apr 30 Salaries Expense …………………………………………… 622 420
Salaries Payable………………………………………. 209 420
Record accrued salaries.
(e) Apr 30 Accounts Receivable …………………………………….. 106 1,750
Commissions Earned ………………………………. 405 1,750
Record accrued commissions.
Problem 3-5A (Continued)
Part 4
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30
No. Account Title Debit Credit
101 Cash …………………………………………………. $27,000
106 Accounts receivable ………………………….. 1,750
124 Office supplies ………………………………….. 600
128 Prepaid insurance ……………………………… 2,267
307 Common stock ………………………………….. 50,000
318 Retained earnings ……………………………… 0
319 Dividends ………………………………………….. 1,500
405 Commissions earned…………………………. 9,750
612 Depreciation expense—
Computer equipment ……………………….. 500
622 Salaries expense ……………………………….. 3,620
Problem 3-5A (Continued)
Part 5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30
Commissions earned ………………………………………….. $9,750
Expenses
Depreciation expense—Computer equipment ……. $ 500
Salaries expense ………………………………………………. 3,620
Insurance expense ……………………………………………. 133
ADVENTURE TRAVEL
Statement of Retained Earnings
For Month Ended April 30
Retained earnings, April 1 ………………………… $ 0
Add: Net Income ……………………………………… 2,197
2,197
Problem 3-5A (Continued)
Part 5—continued
ADVENTURE TRAVEL
Balance Sheet
April 30
Assets
Cash ………………………………………………………………………. $27,000
Accounts receivable ………………………………………………. 1,750
Office supplies ……………………………………………………….. 600
Liabilities
Salaries payable …………………………………………………….. $ 420
Equity
Common stock ………………………………………………………. 50,000
Retained earnings ………………………………………………….. 697
Problem 3-5A (Continued)
Part 6
Closing entries
April 30 Commissions Earned ……………………………. 405 9,750
Income Summary ……………………………. 901 9,750
Close revenue account.
30 Income Summary ………………………………….. 901 7,553
Depreciation Exp–Computer Equip …. 612 500
Salaries Expense ……………………………. 622 3,620
Insurance Expense …………………………. 637 133
30 Income Summary ………………………………….. 901 2,197
Retained Earnings ………………………….. 318 2,197
Close Income Summary account.
30 Retained Earnings …………………………………. 318 1,500
Dividends ……………………………………….. 319 1,500
Close the dividends account.
Part 7
ADVENTURE TRAVEL
Post-Closing Trial Balance
April 30
Debit Credit
Cash …………………………………………………. $27,000
Accounts receivable ………………………….. 1,750
Office supplies ………………………………….. 600
Prepaid insurance ……………………………… 2,267
Problem 3-5A (Continued)
Part 7—continued
Ledger as of April 30
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
April 1 30,000 30,000
2 1,800 28,200
3 1,000 27,200
10 2,400 24,800
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
April 30 Adjusting 1,750 1,750
Office Supplies Acct. No. 124
Date Explanation PR Debit Credit Balance
April 3 1,000 1,000
30 Adjusting 400 600
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Computer Equipment Acct. No. 167
Date Explanation PR Debit Credit Balance
April 1 20,000 20,000
Accumulated Depreciation–Computer Equipment Acct. No. 168
Date Explanation PR Debit Credit Balance
Problem 3-5A (Continued)
Common Stock Acct. No. 307
Date Explanation PR Debit Credit Balance
April 1 50,000 50,000
Retained Earnings Acct. No. 318
Dividends Acct. No. 319
Date Explanation PR Debit Credit Balance
April 30 1,500 1,500
30 Closing 1,500 0
Commissions Earned Acct. No. 405
Date Explanation PR Debit Credit Balance
April 24 8,000 8,000
30 Adjusting 1,750 9,750
30 Closing 9,750 0
Depreciation Expense–Computer Equipment Acct. No. 612
Salaries Expense Acct. No. 622
Date Explanation PR Debit Credit Balance
April 14 1,600 1,600
28 1,600 3,200
30 Adjusting 420 3,620
30 Closing 3,620 0
Insurance Expense Acct. No. 637
Date Explanation PR Debit Credit Balance
Rent Expense Acct. No. 640
Date Explanation PR Debit Credit Balance
April 2 1,800 1,800
30 Closing 1,800 0
Office Supplies Expense Acct. No. 650
Problem 3-5A (Concluded)
Repairs Expense Acct. No. 684
Date Explanation PR Debit Credit Balance
April 29 350 350
30 Closing 350 0
Telephone Expense Acct. No. 688
Income Summary Acct. No. 901
Date Explanation PR Debit Credit Balance
Problem 3-6A (75 minutes)
Part 1
TYBALT CONSTRUCTION
Income Statement
For Year Ended December 31, 2019
Revenues
Professional fees earned …………………………….. $97,000
Expenses
Depreciation expense—Building …………………. 11,000
Depreciation expense—Equipment ……………… 6,000
Wages expense ………………………………………….. 32,000
Interest expense …………………………………………. 5,100
Insurance expense ……………………………………… 10,000
Rent expense ……………………………………………… 13,400
Supplies expense ……………………………………….. 7,400
TYBALT CONSTRUCTION
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, December 31, 2018 ………….. $121,400
Add: Net income …………………………………………. 4,300
125,700
Problem 3-6A (Continued)
TYBALT CONSTRUCTION
Balance Sheet
December 31, 2019
Assets
Current assets
Cash …………………………………………………………… $ 5,000
Short-term investments ………………………………. 23,000
Supplies …………………………………………………….. 8,100
Prepaid insurance ………………………………………. 7,000
Total current assets ……………………………………. $ 43,100
Plant assets
Liabilities
Current liabilities
Accounts payable ……………………………………….. $ 16,500
Interest payable ………………………………………….. 2,500
Rent payable ………………………………………………. 3,500
Wages payable …………………………………………… 2,500
Property taxes payable ……………………………….. 900
Equity
Common stock …………………………………………….. 5,000
Retained earnings ……………………………………….. 112,700
Total equity …………………………………………………. 117,700
Total liabilities and equity …………………………….. $218,100
Problem 3-6A (Continued)
Part 2
Closing entries (all dated December 31)
Instructor note: Entries are shown without an account reference column because no posting is required.
(1) Professional Fees Earned ……………………… 97,000
Rent Earned ………………………………………….. 14,000
(2) Income Summary ………………………………….. 110,800
Depreciation Expense—Building …….. 11,000
Depreciation Expense—Equipment …. 6,000
Wages Expense………………………………. 32,000
Interest Expense …………………………….. 5,100
(3) Income Summary ………………………………….. 4,300
Retained Earnings ………………………….. 4,300
Close income summary account.
(4) Retained Earnings …………………………………. 13,000
Dividends ……………………………………….. 13,000
Close the dividends account.
Problem 3-7A (15 minutes)
1.
B
6.
C
11.
E
16.
C
2.
Z
7.
F
12.
C
17.
C
3.
A
8.
E
13.
A
18.
Z
4.
A
9.
A
14.
C
19.
A
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 3
PROBLEM SET B
Problem 3-1B (15 minutes)
3. C 7. I 11. B
Problem 3-2B (30 minutes)
Part 1
Adjustment (a)
Oct. 31 Office Supplies Expense ………………………………… 4,370
Office Supplies ………………………………………… 4,370
Record cost of supplies used
($600 + $4,570 – $800).
Adjustment (b)
31 Insurance Expense …………………………………………. 4,730
Adjustment (c)
31 Salaries Expense ……………………………………………. 1,000
Salaries Payable………………………………………. 1,000
Record accrued but unpaid wages
(1 day x $1,000).
Problem 3-2B (Concluded)
Adjustment (d)
Oct. 31 Depreciation Expense—Building …………………….. 5,400
Accumulated Depreciation—Building ………. 5,400
Record annual depreciation
[($175,000 – $40,000) / 25 years = $5,400].
Adjustment (e)
31 Rent Receivable ……………………………………………… 1,000
Rent Earned …………………………………………….. 1,000
Record earned but unpaid Oct. rent.
Part 2
Cash Payment for (c)
Nov. 7 Salaries Payable …………………………………………….. 1,000
Salaries Expense* ………………………………………….. 4,000
Cash ……………………………………………………….. 5,000
Record payment of accrued and current
salaries. *(4 days x $1,000)