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Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-4 (LO 3-2)
1.
September 2.
Exercise 3-5 (LO 3-1)
Net income (unadjusted)
$100,000
1. Record insurance expense of $2,000 per month
(6,000)
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-6 (LO 3-3, 3-4, 3-5, 3-6, 3-7)
(i)
Use source documents to identify accounts affected by external
transactions.
(g)
Analyze the impact of the transaction on the accounting
equation.
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-7 (LO 3-3)
(1)
Debit
Credit
Supplies Expense
3,000
Supplies
3,000
(Supplies used during December)
(2)
Debit
Credit
(3)
Debit
Credit
Salaries Expense
16,000
Salaries Payable
16,000
(Record salaries owed at December 31)
(4)
Debit
Credit
Deferred Revenue
1,500
Chapter 3 - The Accounting Cycle: End of the Period
3-24 Financial Accounting, 5e
Exercise 3-8 (LO 3-3)
(1)
Debit
Credit
Depreciation Expense
7,000
(2)
Debit
Credit
(3)
Debit
Credit
Deferred Revenue
4,000
Exercise 3-9 (LO 3-3)
If the adjusting entry is NOT made:
Revenues
−
Expenses
=
Net Income
(1)
$0
−
−$7,000
=
+$7,000
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-10 (LO 3-3)
(1)
Debit
Credit
Deferred Revenue
1,500
(2)
Debit
Credit
Advertising Expense
900
(3)
Debit
Credit
Salaries Expense
8,000
Salaries Payable
8,000
(Record salaries payable)
(4)
Debit
Credit
Exercise 3-11 (LO 3-3, 3-4)
If the adjusting entry is NOT made:
Assets
=
Liabilities
+
Stockholders’
Equity
(1)
$0
=
+$1,500
+
−$1,500
Chapter 3 - The Accounting Cycle: End of the Period
3-26 Financial Accounting, 5e
Exercise 3-12 (LO 3-3)
(1)
Debit
Credit
Deferred Revenue
2,000
(2)
Debit
Credit
Insurance Expense
6,600
(3)
Debit
Credit
Salaries Expense
3,000
(4)
Debit
Credit
Interest Expense
250
(5)
Debit
Credit
Supplies Expense
3,900
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-13 (LO 3-3)
(1)
Debit
Credit
Interest Receivable
270
(2)
Debit
Credit
Rent Expense
3,000
(3)
Debit
Credit
Deferred Revenue
5,500
)
(4)
Debit
Credit
Depreciation Expense
5,500
Accumulated Depreciation
5,500
(Depreciation expense = $5,500 for year)
(5
Debit
Credit
Salaries Expense
5,000
Salaries Payable
5,000
(Record salaries owed at December 31)
(6)
Debit
Credit
Supplies Expense
3,500
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-14 (LO 3-3, 3-4)
Requirement 1
(1)
Debit
Credit
Rent Expense
2,400
(2)
Debit
Credit
Deferred Revenue
750
Service Revenue
750
(Adjust deferred revenue for service
provided)
(3)
Debit
Credit
(4)
Debit
Credit
Supplies Expense
3,200
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-14 (concluded)
Requirement 2
Demon Deacons Corporation
Adjusted Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$ 10,000
Accounts Receivable
15,000
Prepaid Rent
4,800
Chapter 3 - The Accounting Cycle: End of the Period
3-30 Financial Accounting, 5e
Exercise 3-15 (LO 3-5)
Volunteers Inc.
(in millions)
Raiders Inc.
(in millions)
Year
Net
Income (Loss)
Retained
Earnings
Net
Income (Loss)
Retained
Earnings
2012
—
$ 0
$ 35
$ 11
2013
$ 30
30
(43)
(32)
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-16 (LO 3-5)
Requirement 1
Fightin’ Blue Hens Corporation
Income Statement
For the year ended December 31, 2021
Service revenue
$500,000
Expenses:
Requirement 2
Fightin’ Blue Hens Corporation
Statement of Stockholders’ Equity
For the period ended December 31, 2021
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balance at July 1
$300,000
$60,000
$360,000
Exercise 3-16 (concluded)
Requirement 3
Fightin’ Blue Hens Corporation
Balance Sheet
December 31, 2021
Assets
Liabilities
Current assets:
Current liabilities:
Cash
$ 12,000
Accounts payable
$ 12,000
Stockholders’ Equity
Long-term assets:
Common stock
300,000
Equipment
400,000
Retained earnings
95,000
*
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-17 (LO 3-6)
Requirement 1
December 31, 2021
Debit
Credit
Service Revenue
50,000
Interest Revenue
6,000
Retained Earnings
56,000
(Close revenue accounts)
Retained Earnings
3,000
Dividends
3,000
(Close dividends account)
Requirement 2
Retained Earnings
3-34 Financial Accounting, 5e
Exercise 3-18 (LO 3-6)
Requirement 1
December 31, 2021
Debit
Credit
Service Revenue
54,000
Retained Earnings
54,000
(Close revenue accounts)
Retained Earnings
4,000
Dividends
4,000
(Close dividends account)
Requirement 2
Retained Earnings
9000
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-18 (concluded)
Requirement 3
Laker Incorporated
Post-Closing Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$12,000
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-19 (LO 3-6, 3-7)
Requirement 1
December 31, 2021
Debit
Credit
Service Revenue
500,000
Retained Earnings
500,000
Requirement 2
Fightin’ Blue Hens Corporation
Post-Closing Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$ 12,000
Accounts Receivable
150,000
Prepaid Rent
6,000
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-20 (LO 3-3, 3-4, 3-5, 3-6, 3-7)
Requirement 1
February 15
Debit
Credit
1. Cash
20,000
August 31
3. Salaries Expense
23,000
Cash
23,000
(Pay salaries to employees)
October 1
4. Prepaid Rent
12,000
Cash
12,000
Chapter 3 - The Accounting Cycle: End of the Period
3-38 Financial Accounting, 5e
Exercise 3-20 (continued)
Requirement 2
December 31
Debit
Credit
1. Salaries Expense
4,000
Salaries Payable
4,000
(Record salaries owed at December 31)
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-20 (continued)
Requirement 3
Red Flash Photography
Adjusted Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$ 30,000
Accounts Receivable
30,000
Supplies
5,000
Chapter 3 - The Accounting Cycle: End of the Period
Exercise 3-20 (continued)
Requirement 4
Red Flash Photography
Income Statement
For the year ended December 31, 2021
Service revenue
$70,000
Expenses:
Red Flash Photography
Statement of Stockholders’ Equity
For the period ended December 31, 2021
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balance at January 1
$50,000
$25,000
$ 75,000
