EXERCISE 3-8
1. Jan. 31 Accounts Receivable …………………………….. 875
Service Revenue …………………………….. 875
EXERCISE 3-9
1. Oct. 31 Supplies Expense ………………………………….. 2,000
Supplies ($2,500 – $500) ………………….. 2,000
2. 31 Insurance Expense ………………………………… 120
Prepaid Insurance …………………………... 120
EXERCISE 3-9 (Continued)
6. Oct. 31 Interest Expense ………………………………. 95
Interest Payable…………………………. 95
EXERCISE 3-10
MONTEE CO.
Income Statement
For the Month Ended July 31, 2017
Revenues
Service revenue ($5,500 + $650) ……………………….. $6,150
EXERCISE 3-11
Answer Computation
(a) Supplies balance = $800 Supplies expense $ 950
Add: Supplies (1/31) 850
Less: Supplies purchased (1,000)
Supplies (1/1) $ 800
EXERCISE 3-11 (Continued)
(c) Salaries and wages
payable = $1,820 Cash paid $3,800
Salaries and wages
payable (1/31/17) 920
EXERCISE 3-12
(a) July 10 Supplies ……………………………………………….. 650
Cash …………………………..………………….. 650
14 Cash …………………………………………………….. 2,000
Service Revenue …………………………….. 2,000
(b) July 31 Supplies Expense ………………………………….. 800
Supplies …………………………..…………….. 800
31 Accounts Receivable …………………………….. 500
Service Revenue …………………………….. 500
EXERCISE 3-13
Aug. 31 Accounts Receivable ………………………………. 2,600
Service Revenue ……………………………… 2,600
31 Supplies Expense …………………………………… 1,400
Supplies ………………………………………….. 1,400
31 Insurance Expense …………………………………. 1,500
Prepaid Insurance ……………………………. 1,500
EXERCISE 3-14
TURNQUIST COMPANY
Income Statement
For the Year Ended August 31, 2017
Revenues
Service revenue ………………………………………………. $36,600
Rent revenue …………………………………………………… 12,100
Total revenues ………………………………………….. $48,700
Expenses
EXERCISE 3-14 (Continued)
TURNQUIST COMPANY
Owner’s Equity Statement
For the Year Ended August 31, 2017
Owner’s capital, September 1, 2016 ……………………………………….. $15,600
TURNQUIST COMPANY
Balance Sheet
August 31, 2017
Assets
Cash ……………………………………………………………………… $10,400
Accounts receivable ………………………………………………. 11,400
Liabilities and Owner’s Equity
Liabilities
Accounts payable ………………………………………………………….. $ 5,800
Salaries and wages payable …………………………………………… 1,100
EXERCISE 3-15
(a) 1. Cash …………………………………………………………. 8,000
Accounts Receivable ………………………….. 8,000
2. Unearned Service Revenue ………………………… 25,000
Service Revenue …………………………………. 25,000
4. Accounts Receivable …………………………………. 115,000
Service Revenue
($161,000 – $25,000 – $21,000) ………….. 115,000
5. Cash …………………………………………………………. 99,000
*EXERCISE 3-16
1. Prepaid Insurance ………………………………………….. 1,125
Insurance Expense
($2,700 X 5/12) …………………………..………….. 1,125
*EXERCISE 3-17
(a) Jan. 2 Insurance Expense ……………………………….. 1,920
Cash …………………………..…………………. 1,920
Cash
Service Revenue
1/15 6,100
1/2 1,920
1/10 1,700
1/15 6,100
Insurance Expense
Supplies Expense
1/2 1,920
1/10 1,700
(b) Jan. 31 Prepaid Insurance ($160 X 11 months) …… 1,760
Prepaid Insurance
Supplies
Unearned Service
Revenue
1/31 1,760
1/31 650
1/31 4,000
1/2 1,920
1/31 1,760
1/10 1,700
1/31 650
1/31 4,000
1/15 6,100
Bal. 160
Bal. 1,050
Bal. 2,100
(c) Prepaid insurance ……………………………………………………………. $1,760
Supplies …………………………………………………………………………. 650
*EXERCISE 3-18
(a) 2 Going concern assumption
(b) 6 Economic entity assumption
*EXERCISE 3-19
(a) This is a violation of the historical cost principle. The inventory was
written up to its fair value when it should have remained at cost.
(b) This is a violation of the economic entity assumption. The treatment of
the transaction treats Austin Weber and Weber Co. as one entity when
they are two separate entities. Salaries and Wages Expense should
have been debited for the purchase of the truck.
*EXERCISE 3-20
1. Comparability
2. Going concern assumption
3. Materiality
*EXERCISE 3-21
(a) The primary objective of financial reporting is to provide financial
information that is useful to investors and creditors for making
decisions about providing capital. Since Speyeware’s shares appear to
be actively traded, investors must be capable of using the information
made available by Speyeware to make decisions about the company.
*EXERCISE 3-22
(a) Accounting information is the compilation and presentation of
financial information for a company. It provides information in the form
of financial statements and additional disclosures that is useful for
decision making.
(b) Gina is correct in her understanding that the low success rate for new
biotech products will be a cause of concern for investors. Her
suggestion that detailed scientific findings be reported to prospective
investors might offset some of their concerns but it probably won’t
conform to the qualitative characteristics of accounting information.
SOLUTIONS TO PROBLEMS
PROBLEM 3-1A
(a)
J4
Date
Account Titles
Ref.
Debit
Credit
2017
May 31
Supplies Expense …………………………..
Supplies ………………………………..
631
126
900
900
31
Insurance Expense …………………………
722
150
31
Unearned Service Revenue …………….
Service Revenue
($2,000 – $400) ……………………
209
400
1,600
1,600
31
Depreciation Expense …………………….
Accumulated Depreciation—
Equipment ………………………….
717
150
190
190
31
Accounts Receivable ……………………..
Service Revenue …………………….
112
400
1,700
1,700
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Balance
4,500
PROBLEM 3-1A (Continued)
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Balance
6,000
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
2017
Prepaid Insurance No. 130
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
31
Balance
Adjusting
J4
150
3,600
3,450
Equipment No. 149
Date
Explanation
Ref.
Debit
Credit
Balance
Accumulated Depreciation—Equipment No. 150
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 3-1A (Continued)
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
31
Balance
Adjusting
J4
250
4,500
4,750
Unearned Service Revenue No. 209
Date
Explanation
Ref.
Debit
Credit
Balance
2017
Salaries and Wages Payable No. 212
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Adjusting
J4
1,104
1,104
Owner’s Capital No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
Service Revenue No. 400
Date
Explanation
Ref.
Debit
Credit
Balance
J4
2017
May 31
Balance
9,500
Supplies Expense No. 631
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Adjusting
J4
900
900
PROBLEM 3-1A (Continued)
Depreciation Expense No. 717
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Insurance Expense No. 722
Date
Explanation
Ref.
Debit
Credit
Balance
Salaries and Wages Expense 726
Date
Explanation
Ref.
Debit
Credit
Balance
Rent Expense No. 729
Date
Explanation
Ref.
Debit
Credit
Balance
2017
May 31
Balance
900
Utilities Expense No. 732
Date
Explanation
Ref.
Debit
Credit
Balance
2017
PROBLEM 3-1A (Continued)
(c) KRAUSE CONSULTING
Adjusted Trial Balance
May 31, 2017
Debit
Credit
Cash ……………………………………………………….….
Accounts Receivable …………………………………..
Salaries and Wages Payable…………………………
Owner’s Capital …………………………………………..
Service Revenue ………………………………………….
Salaries and Wages Expense ……………………….
Rent Expense ………………………………………………
Depreciation Expense ………………………………….
$ 4,500
7,700
7,504
900
190
1,104
18,700
12,800
PROBLEM 3-2A
(a)
J1
Date
Account Titles
Ref.
Debit
Credit
May 31
Insurance Expense…………………………
Prepaid Insurance
($2,400 X 1/12)…………………….
722
130
200
200
31
Interest Expense …………………………...
Interest Payable
[($40,000 X 12%) X 1/12] ………..
718
230
400
400
31
(2/3 X $3,300) …………………….
429
Unearned Rent Revenue …………………
208
2,200
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
3,500
PROBLEM 3-2A (Continued)
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
31
Balance
Adjusting
J1
1,330
2,080
750
Date
Explanation
Ref.
Debit
Credit
Balance
Land No. 140
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
12,000
Buildings No. 141
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
60,000
Date
Ref.
Debit
Credit
Balance
May 31
Equipment No. 149
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
15,000
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Adjusting
125
PROBLEM 3-2A (Continued)
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
4,800
Salaries and Wages Payable No. 212
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Adjusting
J1
750
750
May 31
Mortgage Payable No. 275
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
40,000
Owner’s Capital No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
41,380
12,500
PROBLEM 3-2A (Continued)
Advertising Expense No. 610
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Balance
600
Date
Ref.
Debit
Credit
Balance
Supplies Expense No. 631
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Adjusting
J1
1,330
1,330
Interest Expense No. 718
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
Adjusting
J1
400
400
Date
Explanation
Ref.
Debit
Credit
Balance
Salaries and Wages Expense No. 726
Date
Explanation
Ref.
Debit
Credit
Balance
May 31
31
Balance
Adjusting
J1
750
3,300
4,050
Date
Ref.
Credit
PROBLEM 3-2A (Continued)
(c) MAC’S MOTEL
Adjusted Trial Balance
May 31, 2017
Debit
Credit
Cash …………………………………………………………..
Supplies ……………………………………………………..
Accumulated Depreciation—Equipment ……….
Accounts Payable ……………………………………….
Unearned Rent Revenue ………………………………
Salaries and Wages Payable ………………………..
Interest Payable …………………………………………..
Mortgage Payable ………………………………………..
Owner’s Capital …………………………………………..
Rent Revenue ……………………………………………..
Advertising Expense ……………………………………
Depreciation Expense ………………………………….
Supplies Expense ………………………………………..
$ 3,500
750
600
375
1,330
125
4,800
1,100
750
400
40,000
41,380
12,500
PROBLEM 3-2A (Continued)
(d) MAC’S MOTEL
Income Statement
For the Month Ended May 31, 2017
Revenues
Rent revenue ………………………………………….. $12,500
Expenses
Salaries and wages expense ……………………. $4,050
Supplies expense ……………………………………. 1,330
MAC’S MOTEL
Owner’s Equity Statement
For the Month Ended May 31, 2017
Owner’s capital, May 1 …………………………………………………… $ 0
Investment by owner ……………………………………………………… 41,380