CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-41
PROBLEM 3-13 (Continued)
2. NEVERANERROR INC.
TRIAL BALANCE
JUNE 30
Debits Credits
Cash ……………………………………………………………………… $44,580
Accounts Receivable ……………………………………………….. 18,400
Computer ……………………………………………………………….. 12,000
Accounts Payable ……………………………………………………. $ 9,500
3. a. NEVERANERROR INC.
INCOME STATEMENT
FOR THE MONTH OF JUNE
Service revenue ………………………………………………….. $30,750
Expenses:
3-42 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
PROBLEM 3-13 (Concluded)
3. b. NEVERANERROR INC.
STATEMENT OF RETAINED EARNINGS
FOR THE MONTH OF JUNE
Beginning balance, June 1 ………………………………………………………. $ 0
3. c. NEVERANERROR INC.
BALANCE SHEET
JUNE 30
Assets
Current assets:
Cash …………………………………………………………….. $44,580
Accounts receivable ……………………………………….. 18,400
Total current assets …………………………………………….. $62,980
Property, plant, and equipment:
Computer ……………………………………………………… 12,000
Total assets ……………………………………………………….. $74,980
4. Yes, the outlook for the company looks relatively appealing. The company operated
profitably during the month of June and was able to generate significant revenues
and control its costs. The profit margin for the month was in excess of 60%. In addi-
tion, it appears to be relatively liquid, with a current ratio of over 5 to 1.
CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-43
ALTERNATE PROBLEMS
LO 1 PROBLEM 3-1A EVENTS TO BE RECORDED IN ACCOUNTS
1. E Not recorded
2. E Recorded: Supplies, Accounts Payable
3. E Not recorded
3-44 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
LO 3 PROBLEM 3-2A TRANSACTION ANALYSIS AND FINANCIAL STATEMENTS
1. BEACHWAY ENTERPRISES
TRANSACTIONS FOR THE MONTH OF JUNE
Assets = Liabilities + Stockholders’ Equity
Accounts Accounts Capital Retained
Date Cash Receivable Equipment Supplies Payable Stock Earnings
6/1 $4,000 $4,000
6/1 $6,250 $6,250
Bal. $4,000 $6,250 $6,250 $4,000
6/5 –35 $ –35
Bal. $3,965 $6,250 $6,250 $4,000 $ (35)
6/10 $50 50
Bal. $3,965 $6,250 $50 $6,300 $4,000 $ (35)
6/15 –70 –70
CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-45
PROBLEM 3-2A (Concluded)
2. BEACHWAY ENTERPRISES
INCOME STATEMENT
FOR THE MONTH OF JUNE
Rental fee revenue …………………………………………………… $4,500*
Expenses:
3. BEACHWAY ENTERPRISES
BALANCE SHEET
JUNE 30
Assets
Current assets:
Cash …………………………………………………………………. $1,055
Accounts receivable ……………………………………………. 1,000
Supplies …………………………………………………………….. 50
3-46 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
LO 3 PROBLEM 3-3A TRANSACTION ANALYSIS AND FINANCIAL STATEMENTS
1. DYNAMIC SERVICES INC.
TRANSACTIONS FOR THE MONTH OF MARCH
Assets = Liabilities + Stockholders’ Equity
Accounts Accounts Notes Capital Retained
Date Cash Receivable Computer Supplies Payable Payable Stock Earnings
3/2 $20,000 $20,000
3/7 7,500 $7,500
Bal. $27,500 $7,500 $20,000
3/12 $350 $350
Bal. $27,500 $350 $350 $7,500 $20,000
3/19 $2,000 $2,000
2. DYNAMIC SERVICES INC.
INCOME STATEMENT
FOR THE MONTH OF MARCH
Tax preparation revenue …………………………………………… $3,400*
Expenses:
Advertising …………………………………………………………. $ 650
CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-47
PROBLEM 3-3A (Concluded)
3. DYNAMIC SERVICES INC.
BALANCE SHEET
MARCH 31
Assets
Current assets:
Cash …………………………………………………………………. $22,400
Accounts receivable ……………………………………………. 1,500
Supplies …………………………………………………………………. 350
Total current assets …………………………………………………. $24,250
4. Trade accounts often have a 30-day collection or payment period. For example,
cash should be received from the accounts receivable and cash paid for the ac-
counts payable during the month of April.
LO 3 PROBLEM 3-4A TRANSACTIONS RECONSTRUCTED FROM FINANCIAL
STATEMENTS
• Issued capital stock.
• Recorded sales on credit.
• Collected cash from customers.
• Purchased equipment, furniture, and land.
3-48 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
ALTERNATE MULTI-CONCEPT PROBLEMS
LO 1,2 PROBLEM 3-5A IDENTIFICATION OF EVENTS WITH SOURCE DOCUMENTS
a. The check paid for the security deposit and rent as well as a deposit receipt would
be generated from this event. The deposit receipt would be used to record the
amount involved.
b. This event would not be recorded.
LO 3,5 PROBLEM 3-6A ACCOUNTS USED TO RECORD TRANSACTIONS
Accounts
Accounts
Debited Credited Debited Credited
a. 1 10 g. 7 1
b. 5 9 h. 14 7
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CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-49
LO 3,4,5 PROBLEM 3-7A TRANSACTION ANALYSIS AND JOURNAL ENTRIES RECORDED DIRECTLY IN T ACCOUNTS
1. RAPID CITY ROLLER RINK
TRANSACTIONS FOR THE MONTH OF OCTOBER
Assets = Liabilities + Owners’ Equity
Accounts Concession Accounts Notes Capital Retained
Date Cash Receivable Supplies Land Building Equipment Payable Payable Stock Earnings
10/12 $2,500 2,500
Bal. $48,500 $2,500 $15,000 $75,000 $28,500 $22,500 $81,000 $66,000
10/13 1,150 $ 400
750
Bal. $49,650 $2,500 $15,000 $75,000 $28,500 $22,500 $81,000 $66,000 $1,150
10/17 $750 750
Bal. $49,650 $750 $2,500 $15,000 $75,000 $28,500 $22,500 $81,000 $66,000 $1,900
10/23 375 –375
Bal. $50,025 $375 $2,500 $15,000 $75,000 $28,500 $22,500 $81,000 $66,000 $1,900
3-50 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
PROBLEM 3-7A (Concluded)
2. Cash Accounts Receivable
(10/1) 66,000 9,000 (10/2) (10/17) 750 375 (10/23)
(10/13) 1,150 5,000 (10/3)
(10/23) 375 3,500 (10/9)
Building Equipment
(10/2) 75,000 (10/3) 25,000
(10/9) 3,500
Bal. 28,500
CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-51
LO 4,7 PROBLEM 3-8A TRIAL BALANCE AND FINANCIAL STATEMENTS
1. RAPID CITY ROLLER RINK
TRIAL BALANCE
OCTOBER 31
Debits Credits
Cash ……………………………………………………………………… $ 49,450
Accounts Receivable ……………………………………………….. 375
2. RAPID CITY ROLLER RINK
INCOME STATEMENT
FOR THE MONTH OF OCTOBER
Revenues:
Ticket sales………………………………………………………… $1,600*
Concession sales ……………………………………………….. 3,250**
3. RAPID CITY ROLLER RINK
STATEMENT OF RETAINED EARNINGS
FOR THE MONTH OF OCTOBER
Beginning balance, October 1 ……………………………………………………….. $ 0
Net income …………………………………………………………………………………. 2,075
3-52 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
PROBLEM 3-8A (Concluded)
4. RAPID CITY ROLLER RINK
BALANCE SHEET
OCTOBER 31
Assets
Current assets:
Cash …………………………………………………………………. $49,450
Accounts receivable ……………………………………………. 375
Concession supplies ……………………………………………. 2,500
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable ……………………………………………….. $22,500
Long-term debt:
LO 3,5,6 PROBLEM 3-9A JOURNAL ENTRIES
a.
Journal Cash …………………………………………………………. 150,000
Entry Capital Stock ………………………………………… 150,000
Analysis Issued 10,000 shares of capital stock for cash.
Balance Sheet Income Statement
PROBLEM 3-9A (Continued)
b.
Journal Rent Expense …………………………………………….. 400
Entry Cash ……………………………………………………. 400
Analysis Paid February rent.
c.
Journal Cash …………………………………………………………. 100,000
Entry Notes Payable ………………………………………. 100,000
Analysis Signed five-year promissory note.
Balance Sheet Income Statement
ASSETS = LIABILITIES +
STOCKHOLDERS’
EQUITY REVENUES – EXPENSES =
NET
INCOME
Cash 100,000 Notes Payable 100,000
d.
Journal Computer Software ……………………………………… 950
Entry Cash* ………………………………………………….. 950
Analysis Purchased software to be used over next
two years.
*Assuming cash was paid; if not, Accounts Payable would be credited.
PROBLEM 3-9A (Concluded)
e.
Journal Accounts Receivable …………………………………… 12,500
Entry Consulting Revenue ………………………………. 12,500
Analysis Billed customers for work performed during month.
f.
Journal Wage and Salary Expense …………………………… 3,000
Entry Cash ……………………………………………………. 3,000
Analysis Paid office personnel for work performed
during month.
Balance Sheet Income Statement
ASSETS = LIABILITIES +
STOCKHOLDERS’
EQUITY REVENUES – EXPENSES =
NET
INCOME
Cash (3,000
)
(3,000)
Wage and Salary
Expense 3,000
(3,000)
g.
CHAPTER 3 • PROCESSING ACCOUNTING INFORMATION 3-55
LO 3,4,5,7 PROBLEM 3-10A JOURNAL ENTRIES RECORDED DIRECTLY IN T ACCOUNTS
1. T Accounts
Cash Accounts Receivable
(a) 150,000 400 (b) (e) 12,500
(c) 100,000 950 (d)
3,000 (f)
250,000 4,350
Bal. 245,650
Rent Expense Utilities Expense
(b) 400 (g) 100
3-56 FINANCIAL ACCOUNTING SOLUTIONS MANUAL
PROBLEM 3-10A (Concluded)
2. CASTLE CONSULTING AGENCY
TRIAL BALANCE
FEBRUARY 28
Debits Credits
Cash ……………………………………………………………………… $245,650
Accounts Receivable ……………………………………………….. 12,500
Computer Software ………………………………………………….. 950
LO 3,4,5,7 PROBLEM 3-11A ENTRIES PREPARED FROM A TRIAL BALANCE AND PROOF
OF THE CASH BALANCE
1. Cash + All other debits = Total credits
Cash + $122,800 = $240,500*
Cash = $240,500 – $122,800 = $117,700
*Total debits must equal total credits. Total credits equal $240,500.
2. All transactions involving cash during the month: