Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-38B (20 minutes)
CLAUDELL COMPANY
Work Sheet
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Prepaid Rent …………………
(a)
200
800
800
5,700
5,700
(c)
700
700
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-39C (5 minutes)
Quick Study 3-40C (10 minutes)
a.
Dec. 31 Accounts Receivable …………………………………………. 12,000
Consulting Revenue ……………………………………. 12,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
EXERCISES
Exercise 3-1 (20 minutes)
Balance Sheet: Prepaid Insurance
Income Statement: Insurance Expense
Accrual
Basis*
Cash
Basis
Accrual
Basis**
Cash
Basis
Dec. 31, Year 1 ……………
$13,000
$0
Year 1 ……………………….
$ 5,000
$18,000
Year 3 ……………………….
Explanations:
*Accrual asset balance equals months left in the policy x $500 per month (monthly
cost is computed as $18,000 / 36 months).
Months Left Balance
Dec. 31, Year 1 … 26 $13,000
**Accrual insurance expense equals months covered in the year x $500 per month.
Months Covered
Expense
Year 1 ………………………….
10
$ 5,000
Year 2 ………………………….
12
Year 3 ………………………….
12
Year 4 ………………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-2 (10 minutes)
a. $0
Explanation: Revenue is recognized when goods or services are delivered. In this
case, the game is not played until March, which is when revenue is recognized.
Exercise 3-3 (10 minutes)
a. $3,200
Explanation: Expenses are recorded in the same accounting period as the revenues
that are recognized as a result of those expenses. Chipotle had $3,200 worth of
wages expense in December that helped generate revenue.
Exercise 3-4 (10 minutes)
1. E 4. D
Exercise 3-5 (15 minutes)
a. Supplies expense for current year: $2,550
Explanations
(a)
(b)
(d)
Supplies available—prior year-end …………………….
$ 400
$1,200
$1,260
$2,288
Less: Supplies available—current year–end ………..
650
700
Exercise 3-6 (25 minutes)
a.
Depreciation Expense—Equipment …………………………..
18,000
Accumulated Depreciation—Equipment ……………..
18,000
Record depreciation expense for the year.
b.
Insurance Expense …………………………………………………..
4,900
Prepaid Insurance* …………………………………………….
4,900
c.
Supplies Expense …………………………………………………….
3,880
3,880
d.
Unearned Revenue ……………………………………………………
10,000
Services Revenue ………………………………………………
10,000
e.
Rent Expense …………………………………………………………..
5,800
Prepaid Rent ……………………………………………………..
5,800
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-6—concluded
f.
Wages Expense ……………………………………………………….
3,200
Wages Payable ………………………………………………….
3,200
Record wages accrued but not yet paid.
Beg. Bal.
Purch.
Used
Used
Exercise 3-7 (15 minutes)
a. Adjusting entry:
Dec. 31
Wages Expense……………………………………………………..
1,250
Wages Payable ………………………………………………
1,250
Jan. 4
Wages Expense……………………………………………………..
3,750
Wages Payable …………………………..………………………….
1,250
5,000
Cash paid out = 5 workers x 4 days x $250
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-8 (25 minutes)
a.
Apr. 30 Legal Services Expense ……………………………… 3,500
Legal Services Payable ………………………… 3,500
b.
Apr. 30 Interest Expense …………………………………………. 3,000
Interest Payable …………………………………… 3,000
Record accrued interest expense.
May 20 Interest Payable ………………………………………….. 3,000
Interest Expense* ……………………………………….. 6,000
Cash ……………………………………………………. 9,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-9 (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 …………………………………………………….
Record supplies used ($240 + $5,200 – $440).
d.
Insurance Expense …………………………………………………..
2,800
Prepaid Insurance† …………………………………………….
2,800
Record insurance coverage expired ($4,000 – $1,200).
1,050
1,050
f.
2,500
2,500
Notes:
Prepaid Insurance†
Supplies*
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-10 (15 minutes)
Assets
=
Liabilities
+
Equity
a.
Wages
Payable
+8,000
Wages
Expense
–8,000
=
+
Equity
=
Liabilities
+
–5,000
Expense
Assets
=
Liabilities
+
Equity
d.
Prepaid
Insurance
–2,800
Insurance
Expense
–2,800
=
Liabilities
+
Assets
+
Equity
Expense
–2,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-11 (20 minutes)
a.
Accounts Receivable ……………………………………………..
2,000
Services 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.
400
400
d.
Lawn Services Expense …………………………………………
500
Lawn Services Payable ……………………………………
500
Record lawn services incurred but not yet paid.
200
200
Salary Expense ……………………………………………………..
900
900
Record salary expense accrued but not yet paid.
Exercise 3-12 (15 minutes)
Assets
=
Liabilities
+
Equity
a.
Accounts
Receivable
+2,000
Services
Revenue
+2,000
Assets
=
Liabilities
+
Equity
Assets
=
Liabilities
+
Equity
Assets
=
Liabilities
+
Equity
d.
Lawn Services
Payable
+500
Lawn Services
Expense
–500
Assets
=
Liabilities
+
Equity
+200
Assets
=
Liabilities
+
Equity
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-13 (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
c.
Unearned Revenue ……………………………………………………
Services Revenue ……………………………………………….
d.
Wages Expense ……………………………………………………….
Wages Payable ……………………………………………………
e.
Exercise 3-14 (15 minutes)
Adjusting Entry
Net Income
Total Assets
Total Liabilities
Total Equity
a.
–$5,000
–$5,000
–$5,000
–$1,400
–$1,400
–$1,400
–$1,200
–$1,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-15 (25 minutes)
a. Dec. 31 Accounts Receivable …………………………………. 7,000
Services Revenue ……………………………….. 7,000
Record earned but unbilled revenue.
d. Dec. 31 Salaries Expense ……………………………………….. 2,250
Salaries Payable………………………………….. 2,250
Record accrued salaries.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-16 (20 minutes)
STARK COMPANY
Adjusted Trial Balance
December 31
Debit
Credit
Cash ………………………………………………………………..
$10,000
Accounts receivable …………………………………………
4,000
Supplies …………………………..……………………………..
800
Accounts payable …………………………………………….
Wages payable …………………………………………………
Unearned revenue…………………………………………….
Notes payable…………………………………………………..
11,000
Common stock …………………………………………………
Retained earnings …………………………………………….
14,800
Dividends …………………………………………………………
3,000
Services revenue ……………………………………………..
20,000
Depreciation expense—Buildings ……………………..
2,000
Wages expense ………………………………………………..
7,500
Insurance expense …………………………………………..
Supplies expense……………………………………………..
200
Utilities expense……………………………………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-17 (25 minutes)
1.
STARK COMPANY
Income Statement
For Year Ended December 31
Services revenue ……………………………………………… $20,000
Expenses
Depreciation expense—Buildings …………………. $2,000
2.
STARK COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year end …………. $14,800
Exercise 3-17 (concluded)
3.
STARK COMPANY
Balance Sheet
December 31
Assets
Cash …………………………..……………………………. $10,000
Accounts receivable ………………………………… 4,000
Liabilities
Accounts payable …………………………………….. $ 1,500
Interest payable …………………………..…………… 100
Wages payable …………………………..……………. 400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-18 (10 minutes)
1. Income Summary balance after closing revenues and expenses:
2. Retained Earnings balance after all closing entries:
Retained Earnings, Beginning balance …
$20,000
Plus net income ……………………………………
26,400
12,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-19 (35 minutes)
a. Closing entries
(1) Services Revenue ………………………………….. 403 76,000
(2) Income Summary ………………………………….. 901 47,800
Depreciation Expense …………………….. 603 15,000
(3) Income Summary ………………………………….. 901 28,200
Retained Earnings ………………………….. 318 28,200
b. Entries posted to ledger accounts
Retained Earnings No. 318
Salaries Expense No. 622
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
May31
40,000
May31
20,000
(3)
28,200
68,200
(2)
20,000
0
(4)
22,000
46,200
Insurance Expense No. 637
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
May31
22,000
May31
(4)
22,000
(2)
0
Services Revenue No. 403
Rent Expense No. 640
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
May31
76,000
May31
(1)
76,000
(2)
0
Depreciation Expense No. 603
Income Summary No. 901
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
May31
15,000
(1)
76,000
76,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-20 (30 minutes)
1.
Dec. 31 Services Revenue ………………………………….. 403 44,000
Income Summary ……………………………. 901 44,000
Close revenue account.
2.
CRUZ COMPANY
Post-Closing Trial Balance
December 31
Debit Credit
Cash ………………………………………………………. $19,000
Supplies ………………………………………………… 13,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-21 (20 minutes)
1.
WILSON TRUCKING COMPANY
Income Statement
For Year Ended December 31
Trucking revenue ……………………………………………… $130,000
Expenses
2.
WILSON TRUCKING COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year ……….. $140,000