CHAPTER 3
Adjusting the Accounts
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
*1. Explain the accrual basis of
accounting and the
reasons for adjusting
entries.
1, 2, 3, 4, 5, 6,
7, 8, 18
1, 2, 8
1
12, 13, 18, 19,
20, 23
10, 11, 12, 13,
4A, 5A, 6A
5A, 6A
*6. Discuss financial reporting
23, 24, 25, 26,
27, 28
12, 13, 14, 15
18, 19, 20, 21,
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Prepare adjusting entries, post to ledger accounts,
and prepare an adjusted trial balance.
Simple
40–50
2A
Prepare adjusting entries, post, and prepare adjusted
trial balance, and financial statements.
Simple
50–60
Prepare adjusting entries and financial statements.
Prepare adjusting entries.
cycle to preparation of financial statements.
Prepare adjusting entries, adjusted trial balance,
and financial statements using appendix.
40–50
WEYGANDT FINANCIAL AND MANAGERIAL ACCOUNTING 2E
CHAPTER 3
ADJUSTING THE ACCOUNTS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
C
Simple
4–6
BE2
1–3
AN
Moderate
6–8
BE3
2
AN
Simple
3–5
BE4
2
AN
Simple
3–5
DI1
1
K
Simple
2–4
DI2
2
AN
Simple
6–8
DI3
3
AN
Simple
4–6
DI4
4
AN
Moderate
20–30
EX1
1
C
Simple
3–5
EX2
1
E
Moderate
10–15
EX3
1
AP
Simple
6–8
EX4
1–3
AN
Simple
5–6
EX5
2, 3
AN
Moderate
10–15
EX6
1–3
AN
Moderate
10–12
EX7
2, 3
AN
Moderate
8–10
EX8
2, 3
AN
Moderate
8–10
EX9
2, 3
AN
Simple
8–10
EX10
1–4
AN
Moderate
8–10
EX11
1–4
AN
Moderate
12–15
EX12
2–4
AN
Moderate
8–10
EX13
2–4
AN
Simple
8–10
BE5
2
AN
Simple
2–4
BE6
2
AN
Simple
2–4
BE7
3
AN
Simple
4–6
BE8
1–3
AN
Simple
5–7
BE9
4
AP
Simple
4–6
BE10
4
AP
Simple
2–4
BE11*
5
Moderate
3–5
BE12*
6
C
Simple
3–5
BE13*
6
C
Simple
2–4
BE14*
6
C
Simple
2–4
BE15*
6
C
Simple
1–2
ADJUSTING THE ACCOUNTS (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX15
2, 3
AN, S
Moderate
8–10
EX16*
5
AN
Moderate
6–8
EX17*
5
AN
Moderate
10–12
EX18*
6
C
Simple
3–5
EX19*
6
C
Simple
3–5
EX20*
6
C
Simple
6–8
EX21*
6
Simple
EX22*
6
AN
Simple
10–20
P1A
AN
Simple
40–50
P2A
2–4
P3A
AN
Moderate
40–50
P4A
AN
Moderate
30–40
P5A
2–4
Moderate
P6A
AN
Moderate
40–50
AN
Simple
10–15
Simple
AN
Simple
10–15
AN
Simple
10–15
Moderate
S
Moderate
15–20
C
Simple
10–15
1–4
E
Moderate
E
Moderate
10–15
BYP10
E
Moderate
10–15
BYP11
K
Simple
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
*1. Explain the accrual basis of accounting and
the reasons for adjusting entries.
DI3-1
Q3-1
Q3-2
Q3-3
Q3-4
Q3-6
Q3-7
Q3-8
BE3-1
E3-1
Q3-5
E3-3
Q3–18
BE3-2
BE3-8
E3-4
E3-6
E3–10
E3–11
*2. Prepare adjusting entries for deferrals.
Q3-8
Q3-9
Q3–10
Q3–11
Q3–12
Q3–13
Q3–19
Q3–20
Q3–18
BE3-2
BE3-3
BE3-4
BE3-5
BE3-6
BE3-8
DI3-2
E3-5
E3-6
E3-7
E3-8
E3-9
E3–10
E3–11
E3–12
E3–13
E3–15
P3–1A
P3–2A
P3–3A
P3–4A
P3–5A
P3–6A
E3–15
Q3–21
E3–14
E3–10
E3–11
E3–12
E3–13
P3–2A
P3–3A
P3–5A
P3–6A
E3–16
P3–6A
E3-18 Q3–27
Broadening Your Perspective
Communication
ANSWERS TO QUESTIONS
4. Information presented on an accrual basis is more useful than on a cash basis because it reveals
Questions Chapter 3 (Continued)
*17. The entry is:
**23. (a) The primary objective of financial reporting is to provide financial information that is useful to
Questions Chapter 3 (Continued)
*25. Comparability results when different companies use the same accounting principles.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 3-1
payable.
BRIEF EXERCISE 3-2
Item
(a)
Type of Adjustment
(b)
Account Balances before Adjustment
Prepaid Expenses
Assets Overstated
Expenses Understated
Revenues Understated
Accrued Expenses
Expenses Understated
Liabilities Understated
Unearned Revenues
Liabilities Overstated
Revenues Understated
12/31 Bal. 2,500
BRIEF EXERCISE 3-3
BRIEF EXERCISE 3-4
BRIEF EXERCISE 3-5
BRIEF EXERCISE 3-6
BRIEF EXERCISE 3-7
BRIEF EXERCISE 3-8
Account
(a)
Type of Adjustment
(b)
Related Account
BRIEF EXERCISE 3-9
PARSONS COMPANY
Income Statement
For the Year Ended December 31, 2017
BRIEF EXERCISE 3-10
PARSONS COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
*BRIEF EXERCISE 3-11
BRIEF EXERCISE 3-12
BRIEF EXERCISE 3-13
BRIEF EXERCISE 3-14
BRIEF EXERCISE 3-15
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 3-1
DO IT! 3-2
DO IT! 3-3
DO IT! 3-4
(b) Total assets and liabilities are computed as follows:
SOLUTIONS TO EXERCISES
EXERCISE 3-1
EXERCISE 3-2
(a) Accrual-basis accounting records the transactions that change a
EXERCISE 3-2 (Continued)
(c) Dear Senator,
EXERCISE 3-3
EXERCISE 3-4
EXERCISE 3-5
EXERCISE 3-6
Item
(a)
Type of Adjustment
(b)
Accounts before Adjustment
EXERCISE 3-7
Revenues Understated
Expenses Understated
Liabilities Understated
Revenues Understated
Liabilities Understated
EXERCISE 3-8
EXERCISE 3-9
EXERCISE 3-9 (Continued)
EXERCISE 3-10
GOPITKUMAR CO.
Income Statement
For the Month Ended July 31, 2017
EXERCISE 3-11
Answer Computation
EXERCISE 3-11 (Continued)
EXERCISE 3-12
EXERCISE 3-13
EXERCISE 3-14
FRINZI COMPANY
Income Statement
For the Year Ended August 31, 2017
EXERCISE 3-14 (Continued)
FRINZI COMPANY
Retained Earnings Statement
For the Year Ended August 31, 2017
EXERCISE 3-15
*EXERCISE 3-16
*EXERCISE 3-17
(b) Jan. 31 Prepaid Insurance ($160 X 11 months) …… 1,760
Insurance Expense ………………………… 1,760
*EXERCISE 3-18
*EXERCISE 3-19
(a) This is a violation of the historical cost principle. The inventory was
*EXERCISE 3-20
*EXERCISE 3-21
(a) The primary objective of financial reporting is to provide financial
*EXERCISE 3-22
(a) Accounting information is the compilation and presentation of
SOLUTIONS TO PROBLEMS
PROBLEM 3-1A
(a) J4
Date
Account Titles
Ref.
Debit
Credit
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 3-1A (Continued)
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
Prepaid Insurance No. 130
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 3-1A (Continued)
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
Common Stock No. 311
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Date
Explanation
Ref.
Debit
Credit
Balance
Depreciation Expense No. 717
Rent Expense No. 729
PROBLEM 3-1A (Continued)
(c) NARDELLI CONSULTING
Adjusted Trial Balance
May 31, 2017
PROBLEM 3-2A
(a) J1
Date
Account Titles
Ref.
Debit
Credit
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 3-2A (Continued)
Supplies No. 126
Accumulated Depreciation—Buildings No. 142
PROBLEM 3-2A (Continued)
Accounts Payable No. 201
Interest Payable No. 230
PROBLEM 3-2A (Continued)
Advertising Expense No. 610
Insurance Expense No. 722
PROBLEM 3-2A (Continued)
(c) SKYLINE MOTEL
Adjusted Trial Balance
May 31, 2017
PROBLEM 3-2A (Continued)
(d) SKYLINE MOTEL
Income Statement
For the Month Ended May 31, 2017
SKYLINE MOTEL
Retained Earnings Statement
For the Month Ended May 31, 2017
PROBLEM 3-2A (Continued)
SKYLINE MOTEL
Balance Sheet
May 31, 2017
PROBLEM 3-3A
(b) EVERETT CO.
Income Statement
For the Quarter Ended September 30, 2017
PROBLEM 3-3A (Continued)
EVERETT CO.
Retained Earnings Statement
For the Quarter Ended September 30, 2017
EVERETT CO.
Balance Sheet
September 30, 2017
PROBLEM 3-4A
PROBLEM 3-5A
(a), (c) & (e)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
PROBLEM 3-5A (Continued)
Accumulated Depreciation—Equipment No. 154
Unearned Service Revenue No. 209
PROBLEM 3-5A (Continued)
Service Revenue No. 407
Date
Explanation
Ref.
Debit
Credit
Balance
Salaries and Wages Expense No. 726
Date
Explanation
Ref.
Debit
Credit
Date
Explanation
Ref.
Debit
Credit
Date
Explanation
Ref.
Debit
Credit
PROBLEM 3-5A (Continued)
(b) General Journal
J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
PROBLEM 3-5A (Continued)
(d) & (f) SCHILLING EQUIPMENT REPAIR
Trial Balances
November 30, 2017
PROBLEM 3-5A (Continued)
(g) SCHILLING EQUIPMENT REPAIR
Income Statement
For the Month Ended November 30, 2017
SCHILLING EQUIPMENT REPAIR
Retained Earnings Statement
For the Month Ended November 30, 2017
PROBLEM 3-5A (Continued)
SCHILLING EQUIPMENT REPAIR
Balance Sheet
November 30, 2017
*PROBLEM 3-6A
*PROBLEM 3-6A (Continued)
(b) SOMMER GRAPHICS COMPANY
Adjusted Trial Balance
June 30, 2017
*PROBLEM 3-6A (Continued)
(c) SOMMER GRAPHICS COMPANY
Income Statement
For the Six Months Ended June 30, 2017
SOMMER GRAPHICS COMPANY
Retained Earnings Statement
For the Six Months Ended June 30, 2017
*PROBLEM 3-6A (Continued)
SOMMER GRAPHICS COMPANY
Balance Sheet
June 30, 2017
BYP 3-1 FINANCIAL REPORTING PROBLEM
(a) Items that may result in adjusting entries for prepayments are:
BYP 3-2 COMPARATIVE ANALYSIS PROBLEM
BYP 3-3 COMPARATIVE ANALYSIS PROBLEM
1.
2. Cash flow from operations is the difference between cash receipts
BYP 3-4 REAL–WORLD FOCUS
BYP 3-5 REAL-WORLD FOCUS
(a) Many large companies, big accounting firms, and accounting standard
(d) Condorsement (a word invented by the SEC) represents a
BYP 3-6 DECISION MAKING ACROSS THE ORGANIZATION
(a) HAPPY CAMPER PARK
Income Statement
For the Quarter Ended March 31, 2017
(b) The generally accepted accounting principles pertaining to the income
BYP 3-7 COMMUNICATION ACTIVITY
Dear Ms. Hall:
Adjusting entries are needed because the trial balance may not contain an
up–to-date and complete record of transactions and events for the
following reasons:
There are four types of adjusting entries:
BYP 3-7 (Continued)
Signature
BYP 3-8 ETHICS CASE
(a) The stakeholders in this situation are:
(b) 1. It is unethical for the president to place pressure on Melissa to
BYP 3-9 ALL ABOUT YOU
We address the issue of contingent liabilities in greater detail in Chapter
10. Our primary interest in this exercise is to engage students in a
discussion regarding the general nature of the financial statement
elements (assets, liabilities, equity, revenues and expenses).
BYP 3-10 CONSIDERING PEOPLE, PLANET, AND PROFIT
The balance sheet should provide a fair representation of what a company
BYP 3-11 FASB CODIFICATION ACTIVITY
(a) Revenue earned by an entity from its direct distribution, exploitation,
IFRS 3-1 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) Note 3.7 indicates that revenue is measured as the fair value of