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Exercise 4-13 (15 minutes)
Current assets:
Cash ................................................................................. $ 8,000
Accounts receivable ...................................................... 17,500
Interpretation: Wilson Trucking Company’s current ratio of 1.78 exceeds the
industry average of 1.5. This implies the company is in a slightly better
liquidity position than its competitors. Moreover, if we review the makeup of
Exercise 4-14 (10 minutes)
Mar. 31 Net Sales ....................................................... 549,780
Income Summary .................................. 549,780
Exercise 4-15 (15 minutes)
Current
Assets
Current
Liabilities
Current
Ratio
Edison
$ 79,040
/
$ 32,000
=
2.47
Exercise 4-16A (10 minutes)
Reversing entries are appropriate for accounting adjustments (a) and (e)
Sept. 1 Service Fees Earned .................................... 6,000
Exercise 4-17A (30 minutes)
1. Adjusting entries
Oct. 31 Rent Expense ................................................ 2,800
2. Subsequent entries without reversing
Nov. 5 Rent Payable ................................................. 2,800
Rent Expense ................................................ 2,800
3. Reversing entries and subsequent entries
Nov. 1 Rent Payable ................................................. 2,800
Rent Expense ........................................ 2,800
Reverse accrual of rent expense.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 4
PROBLEM SET A
Problem 4-1A (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
Paid 12 months’ premium in advance.
14 Salaries Expense ........................................... 622 1,600
Cash ....................................................... 101 1,600
Paid two weeks’ salaries.
24 Cash ............................................................... 101 8,000
223
Problem 4-1A (Continued)
Part 3
ADVENTURE TRAVEL
Unadjusted Trial Balance
April 30, 2017
No. Account Title Debit Credit
101 Cash .......................................................... $27,000
106 Accounts receivable ................................ 0
224
Problem 4-1A (Continued)
Part 4
Adjusting entries
(a) Apr 30 Insurance Expense ............................................... 637 133
Prepaid Insurance ........................................... 128 133
225
Problem 4-1A (Continued)
Part 4
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30, 2017
No. Account Title Debit Credit
101 Cash .......................................................... $27,000
106 Accounts receivable ................................ 1,750
226
Problem 4-1A (Continued)
Part 5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30, 2017
Commissions earned .................................................. $9,750
ADVENTURE TRAVEL
Statement of Owner’s Equity
For Month Ended April 30, 2017
J. Nozomi, Capital, April 1, 2017 .................... $ 0
227
Problem 4-1A (Continued)
Part 5—continued
ADVENTURE TRAVEL
Balance Sheet
April 30, 2017
Assets
Cash .................................................................................. $27,000
Accounts receivable ....................................................... 1,750
228
Problem 4-1A (Continued)
Part 6
Closing entries
April 30 Commissions Earned .................................. 405 9,750
30 Income Summary ......................................... 901 2,197
Part 7
ADVENTURE TRAVEL
Post-Closing Trial Balance
April 30, 2017
Debit Credit
Cash .......................................................... $27,000
Problem 4-1A (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
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
April 30 Adjusting 1,750 1,750
Office Supplies Acct. No. 124
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
230
Problem 4-1A (Continued)
J. Nozomi, Capital Acct. No. 301
Date Explanation PR Debit Credit Balance
April 1 50,000 50,000
Salaries Expense Acct. No. 622
Date Explanation PR Debit Credit Balance
April 14 1,600 1,600
28 1,600 3,200
231
Problem 4-1A (Concluded)
Repairs Expense Acct. No. 684
Date Explanation PR Debit Credit Balance
April 29 350 350
30 Closing 350 0
232
Problem 4-2A (90 minutes) Part 1
ACE CONSTRUCTION CO.
Work Sheet
For Year Ended June 30, 2017
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
No.
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash ..................................................
18,500
18,500
18,500
126
Supplies ...........................................
9,900
(a)
6,600
3,300
3,300
213
Property taxes payable ................
(g)
1,000
1,000
1,000
Problem 4-2A (Continued)
Part 2 Adjusting entries (all dated June 30, 2017)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Supplies Expense .............................................. 6,600
Supplies ...................................................... 6,600
Problem 4-2A (Continued)
Closing entries (all dated June 30, 2017)
Instructor note: Entries are shown without an account reference column because no posting is required.
(1) Construction Fees Earned ........................... 132,100
(2) Income Summary ......................................... 101,210
Depreciation Expense–Equipment ...... 8,400
(3) Income Summary ......................................... 30,890
(4) V. Ace, Capital .............................................. 33,000
235
Problem 4-2A (Continued)
Part 3
ACE CONSTRUCTION CO.
Income Statement
For Year Ended June 30, 2017
Construction fees earned ................................. $132,100
Expenses
ACE CONSTRUCTION CO.
Statement of Owner’s Equity
For Year Ended June 30, 2017
V. Ace, Capital, June 30, 2016 .......................... $ 53,660
236
Problem 4-2A (Continued)
ACE CONSTRUCTION CO.
Balance Sheet
June 30, 2017
Assets
Current assets
Cash ....................................................................... $ 18,500
Liabilities
Current liabilities
Accounts payable ................................................. $ 7,450
Interest payable .................................................... 250
237
Problem 4-2A (Concluded)
Part 4
(a) This error enters the wrong amount in the correct accounts. The
ending balance of the Supplies account should be $3,300, but the entry
(b) This error inserts a credit in the adjusted trial balance when a debit
should have been inserted. As a result, the trial balance will not
financial statements, the statements will not be affected.
Problem 4-3A (15 minutes)
Problem 4-4A (75 minutes)
Part 1
TYBALT CONSTRUCTION
Income Statement
For Year Ended December 31, 2017
Revenues
Professional fees earned ................................... $97,000
Rent earned ......................................................... 14,000
TYBALT CONSTRUCTION
Statement of Owner's Equity
For Year Ended December 31, 2017
O. Tybalt, Capital, December 31, 2016 ............... $121,400
