CHAPTER 3
SOLUTIONS TO B EXERCISES
E3-1B (15–20 minutes)
Apr.
2
Cash ……………………………………………………….
73,600
Equipment……………………………………………………….
32,200
Owner’s Capital ……………………………………………………….
105,800
2
No entry—not a transaction.
3
Supplies ……………………………………………………….
1,610
Accounts Payable ……………………………………………………….
1,610
7
Rent Expense ……………………………………………………….
1,380
Cash ……………………………………………………….
1,380
11
Accounts Receivable ……………………………………………………….
2,530
Service Revenue ……………………………………………………….
2,530
12
Cash ……………………………………………………….
7,360
Unearned Service Revenue …………………………..
7,360
17
Cash ……………………………………………………….
5,290
Service Revenue ……………………………………………………….
5,290
21
Insurance Expense ……………………………………………………….
253
Cash ……………………………………………………….
253
30
Salaries and Wages Expense …………………………..
2,668
Cash ……………………………………………………….
2,668
30
Supplies Expense……………………………………………………….
276
Supplies ……………………………………………………….
276
30
Equipment……………………………………………………….
14,030
Owner’s Capital ……………………………………………………….
14,030
E3-2B (10–15 minutes)
VISTA COMPANY
Trial Balance
April 30, 2014
Debit
Credit
Cash ………………………………………………………………
$ 5,600
Accounts Receivable ………………………………………
1,840
Prepaid Insurance ($900 – $500) ………………………
400
Equipment ………………………………………………………
9,600
Accounts Payable ($6,000 + $500) …………………….
Property Tax Payable …………………………..………….
Owner’s Capital ($4,900 + $2,000) …………………….
Owner’s Drawing …………………………………………….
2,000
Service Revenue ……………………………………………..
Salaries and Wages Expense …………………………..
6,150
Advertising Expense ($600 – $500) …………………..
100
Property Tax Expense ($1,350 – $380) ………………
970
E3-3B (15–20 minutes)
The ledger accounts are reproduced below, and corrections are shown in the
accounts.
Cash
Accounts Payable
Bal.
(4)
Bal.
(1)
Bal.
Supplies
Retained Earnings
Bal.
5,934
Bal.
4,000
Bal.
(3)
(5)
(2)
E3-3B (Continued)
CERVANTES CORPORATION
Trial Balance (corrected)
April 30, 2014
Debit
Credit
Cash ……………………………………………………..
$12,344
Accounts Receivable ……………………………..
9,580
Supplies ………………………………………………..
5,934
Accounts Payable…………………………………..
Common Stock ………………………………………
Service Revenue …………………………………….
Office Expense ………………………………………
E3-4B (15–20 minutes)
VAIL CO.
Trial Balance
June 30, 2014
Debit
Credit
Cash ($1,650 + $450 + $540) …………………………..
$ 2,640
Accounts Receivable ($8,618 – $450 + $400) …………………….
8,568
Supplies ($1,200 – $850) …………………………………………………
Equipment ($7,800 + $850) …………………………..………………….
8,650
Accounts Payable ($5,600 + $350 + $350) …………………………
Unearned Service Revenue ($600 – $200) ………………………..
Common Stock ……………………………………………………….
Dividends ……………………………………………………….
Retained Earnings ……………………………………………………….
Service Revenue ($7,950 + $200) …………………………..
($2,100 + $ 1,200 – $600) ……………………………………………..
2,700
Office Expense ($1,380 + $300) …………………………..
1,680
E3-5B (10–15 minutes)
1.
Depreciation Expense ($188 X 3) …………………………..
564
Accumulated Depreciation—Equipment …………………………..
564
2.
Unearned Rent Revenue ($6,975 X 1/3) …………………………..
Rent Revenue……………………………………………………….
3.
Interest Expense ……………………………………………………….
375
Interest Payable ……………………………………………………….
375
4.
Supplies Expense ……………………………………………………….
Supplies ($2,100 – $637) ……………………………………………………
5.
Insurance Expense ($225 X 3) …………………………………………………..
675
Prepaid Insurance ……………………………………………………….
675
E3-6B (10–15 minutes)
1.
Accounts Receivable ……………………………………………………….
375
Service Revenue ……………………………………………………….
375
2.
Utility Expense ………………………………………………………………………..
260
Utilities Payable ……………………………………………………….
260
3.
Depreciation Expense ……………………………………………………….
200
Accumulated Depreciation—Equipment …………………………..
200
Interest Expense ……………………………………………………….
250
Interest Payable ……………………………………………………….
250
4.
Insurance Expense ($6,000 X 1/12) ……………………………………………
500
Prepaid Insurance ……………………………………………………….
500
5.
Supplies Expense ($800 – $250) ……………………………………………….
550
Supplies …………………………………………………………………………..
550
E3-7B (15–20 minutes)
(a)
Ending balance of supplies ……………..
$1,120
Add: Adjusting entry ………………………
Deduct: Purchases …………………………
Beginning balance of supplies …………
(b)
Total prepaid insurance …………………..
$7,680
($640 X 12)
Amount used (6 X $640) …………………..
3,840
Present balance ………………………………
$3,840
(c)
The entry in January to record salary expense was:
Salaries and Wages Expense ……………………
Salaries and Wages Payable …………………….
The “T” account for salaries payable is:
Salaries and Wages Payable
Beg. Bal.
?
Paid in
January
End Bal.
1,280
The beginning balance is therefore:
Ending balance of salaries and wages payable ………
$1,280
Plus: Reduction of salaries and wages payable ……..
(d)
Service revenue ………………………………………………….
$3,200
Cash received …………………………………………………….
2,560
Unearned revenue reduced …………………………………
$ 640
Ending unearned revenue January 31, 2014 …………….
$1,200
Plus: Unearned revenue reduced …………………………….
640
E3-8B (10–15 minutes)
1.
August 31, 2014
Salaries and Wages Expense ……………………………………………………
Salaries and Wages Payable …………………………..
(To record salaries and wages pay. at 8/31)
2.
August 31, 2014
Utilities Expense ……………………………………………………….
720
Utilities Payable ……………………………………………………….
720
(To record utility expense for August)
3.
August 31, 2014
Interest Expense ($30,000 X 6% X 1/12) …………………………..
Interest Payable ……………………………………………………….
180
(To record interest expense for August)
4.
August 31, 2014
Utilities Expense ……………………………………………………….
140
Utilities Payable ……………………………………………………….
(To record telephone expense for August)
E3-9B (15–20 minutes)
(a)
8/15
Salaries and Wages Expense …………………………..
2,600
Cash ……………………………………………………….
2,600
(To record payment of August 15
payroll)
8/17
Accounts Receivable ……………………………………………………….
Service Revenue ……………………………………………………….
8/20
Cash ……………………………………………………………………………………
3,200
Unearned Service Revenue …………………………..
3,200
services not yet performed)
E3-9B (Continued)
(b)
8/31
Supplies Expense …………………………..…………………………..
712
Supplies ……………………………………………………….
712
(To record the use of supplies during
August)
8/31
Accounts Receivable ……………………………………………………….
3,600
Service Revenue ……………………………………………………….
3,600
performed for which payment
has not yet been received)
8/31
Salaries and Wages Expense …………………………..
2,100
Salaries and Wages Payable …………………………..
2,100
(To record liability for accrued payroll)
8/31
Unearned Service Revenue …………………………..
2,000
Service Revenue ……………………………………………………….
2,000
E3-10B (25–30 minutes)
(a)
1.
Aug. 31
Insurance Expense ($440 X 3/12)…………………………..
110
Prepaid Insurance …………………………..
110
2.
Aug. 31
Supplies Expense ($260 – $45) …………………………..
215
Supplies ……………………………………………………….
215
3.
Aug. 31
Depreciation Expense—Buildings …………………………..
270
Accumulated Depreciation—
Buildings ……………………………………………………….
270
$1,080 X 1/4 = $270)
Aug. 31
Depreciation Expense—Equipment …………………………..
Accumulated Depreciation—
4.
Aug. 31
Unearned Rent Revenue …………………………..
380
Rent Revenue ……………………………………………………….
380
5.
Aug. 31
Salaries and Wages Expense …………………………..
38
Salaries and Wages Payable …………………………..
38
6.
Aug. 31
Accounts Receivable ……………………………………………………….
80
Rent Revenue ……………………………………………………….
80
7.
Aug. 31
Interest Expense ……………………………………………………….
90
Interest Payable
[($6,000 X 6%) X 1/4] …………………………..
90
E3-10B (Continued)
(b)
GONZALEZ RESORT
Adjusted Trial Balance
August 31, 2014
Debit
Credit
Cash …………………………………………………………..
$ 1,960
Accounts Receivable …………………………………..
80
Prepaid Insurance ($440 – $110) ………………….
330
Supplies ($260 – $215) ………………………………..
45
Buildings ……………………………………………………
Accumulated Depreciation—Buildings ………..
Equipment ………………………………………………….
Accumulated Depreciation—Equipment ………
54
Accounts Payable ……………………………………….
Unearned Rent Revenue ($460 – $380) …………
80
Salaries and Wages Payable ……………………….
38
Interest Payable ………………………………………….
90
Mortgage Payable ……………………………………….
6,000
Common Stock …………………………..………………
9,100
Retained Earnings ………………………………………
Dividends ……………………………………………………
500
Rent Revenue ($7,620 + $380 + $80) …………….
8,080
Salaries and Wages Expense ($4,480 + $38) ..
920
Maintenance and Repairs Expense ……………..
360
Insurance Expense ……………………………………..
110
Supplies Expense ……………………………………….
215
Depreciation Expense—Buildings ……………….
270
Depreciation Expense—Equipment ……………..
54
Interest Expense …………………………………………
E3-11B (20–25 Minutes)
(a) DECIMAL CO.
Income Statement
For the Year Ended December 31, 2014
Revenues
Service revenue ……………………………………….
$27,600
Expenses
Salaries and wages expense …………………….
$15,600
Rent expense …………………………………………..
Depreciation expense …………………………..
Interest expense …………………………..
Net Income ……………………………………………………….
(b) DECIMAL CO.
Statement of Retained Earnings
For the Year Ended December 31, 2014
Retained earnings, January 1 …………………………………………….
$3,619
Less: Dividends ……………………………………………………….………
E3-11B (Continued)
(c) DECIMAL CO.
Balance Sheet
December 31, 2014
Assets
Current Assets
Cash …………………………………………………….
$ 6,590
Accounts receivable …………………………..
15,618
Prepaid rent ………………………………………….
Total current assets …………………………
$23,408
Property, plant, and equipment
Equipment …………………………………………….
31,800
Less: Accumulated depreciation ……………
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable ……………………………………….
$12,500
Accounts payable ………………………………….
Interest payable …………………………………….
211
Total current liabilities ……………………..
Common Stock ……………………………………..
Retained Earnings* ………………………………..
*From part (b) above.