Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Chapter 3
Adjusting Accounts for
Financial Statements
QUICK STUDIES
Quick Study 3-2 (10 minutes)
Cash Accounting
Quick Study 3-3 (10 minutes)
a. Unearned revenue d. Prepaid expenses
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-4 (15 minutes)
Quick Study 3-5 (15 minutes)
a. Step 1: Prepaid Insurance equals $4,700
Step 2: Prepaid Insurance should equal $900 (the unexpired part)
Step 3: Adjusting entry to get from Step 1 to Step 2
Insurance Expense ...........................................................
3,800
Prepaid Insurance .........................................................
3,800
Record insurance coverage that expired ($4,700 - $900).
b. Step 1: Prepaid Insurance equals $5,890
Step 2: Prepaid Insurance should equal $4,850 (the unexpired part)*
Step 3: Adjusting entry to get from Step 1 to Step 2
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-6 (15 minutes)
a. Step 1: Supplies equal $300 ($300 beginning + $0 purchased)
Step 2: Supplies should equal $110 (what’s left)
Step 3: Adjusting entry to get from Step 1 to Step 2 *
Supplies Expense .............................................................
190
Supplies .........................................................................
190
Record supplies used
*$300 + $0 purchased – Supplies used = $110
b. Step 1: Supplies equal $2,900 ($800 beginning + $2,100 purchased)
Step 2: Supplies should equal $650 (what’s left)
Quick Study 3-7 (10 minutes)
a. Insurance Expense ....................................................... 1,200
Prepaid Insurance ................................................. 1,200
Record 6-month insurance coverage expired.
b. Supplies Expense ......................................................... 6,200
Supplies .................................................................. 6,200
Record supplies used during the year.
($5,000 + $2,000 – [?] = $800)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-8 (15 minutes)
a. Step 1: Accumulated Depreciation equals $13,500
Step 2: Accumulated Depreciation should equal $28,100; adding current
period depreciation of $14,600*
Step 3: Adjusting entry to get from Step 1 to Step 2
Depreciation Expense ......................................................
14,600
Accumulated Depreciation .........................................
14,600
Record depreciation expense for the period
*$13,500 + $14,600 depreciation = $28,100
b. Step 1: Accumulated Depreciation equals $0
Step 2: Accumulated Depreciation should equal $8,800; adding current
period depreciation of $8,800*
Step 3: Adjusting entry to get from Step 1 to Step 2
Depreciation Expense—Truck ........................................
8,800
Accumulated Depreciation—Truck ...........................
8,800
Record depreciation expense for the period
*($44,000 - $0) / 5 years
c. Step 1: Accumulated Depreciation equals $0
Step 2: Accumulated Depreciation should equal $4,000; adding current
period depreciation of $4,000*
Step 3: Adjusting entry to get from Step 1 to Step 2
Depreciation Expense—Equipment ................................
4,000
Accumulated Depreciation—Equipment ..................
4,000
Record depreciation expense for the period
*($32,000 - $4,000) / 7 years
Study 3-9 (10 minutes)
a. Depreciation Expense—Equipment ............................ 3,600
Accumulated Depreciation—Equipment ............. 3,600
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-11 (15 minutes)
a. Unearned Revenue ........................................................ 7,500
Legal Revenue ....................................................... 7,500
Recognize legal revenue earned (10,000 x 3/4).
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-12 (15 minutes)
a. Instructor note: 4 months of 6 months contracted were provided of the $3,000 service.
Dec. 31 Unearned Revenue ............................................... 2,000
Quick Study 3-13 (15 minutes)
a. Step 1: Salaries Payable equals $0
Step 2: Salaries Payable should equal $15,500 (not yet recorded)
Step 3: Adjusting entry to get from Step 1 to Step 2
Salaries Expense ..............................................................
15,500
Salaries Payable ...........................................................
15,500
Record employee salaries earned but not yet paid.
b. Step 1: Interest Payable equals $0
Quick Study 3-14 (10 minutes)
Salaries Expense ........................................................... 400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-15 (15 minutes)
a. Step 1: Accounts Receivable equals $0
Step 2: Accounts Receivable should equal $19,000 (not yet recorded)
Step 3: Adjusting entry to get from Step 1 to Step 2
Accounts Receivable .......................................................
19,000
Services Revenue ........................................................
19,000
Record services revenue earned but not yet received.
b. Step 1: Interest Receivable equals $0
Quick Study 3-16 (15 minutes)
Accounts Debited and Credited
Financial Statement
a.
Debit
Unearned Revenue
Balance Sheet
Credit
Services Revenue
Income Statement
b.
Debit
Wages Expense
Income Statement
Credit
Wages Payable
Balance Sheet
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-17 (15 minutes)
1. Forgot to
Insur.→ Asset overstated.
2. Forgot to
record
$0
=
Understated
+
Overstated
Payable→ Liab. understated.
• Forgot to record Sal.
Quick Study 3-18 (15 minutes)
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
No.
Account
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash......................................
$8,000
$8,000
106
Accounts receivable ...........
2,000
$4,000
6,000
126
Supplies ...............................
4,500
$2,500
2,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-19 (20 minutes)
a. HAPP COMPANY
Income Statement
For Year Ended December 31
Plumbing revenue ..................................................... $84,000
Expenses
Depreciation expense—Trucks ........................... $6,500
Salaries expense .................................................. 46,700
Rent expense ........................................................ 13,000
Total expenses ..................................................... 66,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-19 (concluded)
c. HAPP COMPANY
Balance Sheet
December 31
Assets
Cash .................................................................. $ 7,000
Accounts receivable ....................................... 27,200
Trucks ............................................................... $ 42,000
Accumulated depreciation-Trucks ................ (17,500) 24,500
Land .................................................................. 32,000
Total assets ...................................................... $ 90,700
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-20 (15 minutes)
Dec. 31 Services Revenue ......................................... 13,000
Income Summary .................................. 13,000
Close revenue account.
31 Income Summary ......................................... 10,000
(1)
33,000
(2)
25,000
(2)
3,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-22 (10 minutes)
Dec. 31 Consulting Revenue ..................................... 9,500
Income Summary .................................. 9,500
Close revenue account.
31 Income Summary ......................................... 7,000
Quick Study 3-23 (5 minutes)
Quick Study 3-24 (5 minutes)
a.
Included
c.
Included
e.
Excluded
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
8. Cash Current assets
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-27 (15 minutes)
BUILDEX CO.
Income Statement
For Year Ended December 31
Revenues
Services revenue ...................................... $60,000
Interest revenue ........................................ 5,000
Quick Study 3-28 (15 minutes)
CLANCY CONSULTING
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year .............. $20,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-29 (20 minutes)
JUAN CO.
Balance Sheet
December 31
Assets
Current assets
Cash ................................................................ $ 18,000
Accounts receivable ..................................... 7,000
Total current assets ...................................... 25,000
Long-term investments
Notes receivable† .......................................... 20,000
Plant assets
Building .......................................................... $100,000
Accumulated depreciation-Building ............ (30,000) 70,000
Total assets ...................................................... $115,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1. SIERRA COMPANY
Income Statement
For Year Ended December 31
Consulting revenue ..................................................... $9,500
2. SIERRA COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year ............. $4,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-31 (15 minutes)
SIERRA COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ................................................................ $ 5,000
Prepaid insurance ......................................... 500
Total current assets ...................................... 5,500
Long-term investments
Notes receivable† .......................................... 4,000
Plant assets
Buildings ........................................................ $20,000
Less accumulated depreciation ................... (12,000) 8,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-32 (10 minutes)
a. Profit margin = $48,025 / $425,000 = 11.3%
Quick Study 3-33 (5 minutes)
Current assets
Cash ............................................................
$ 7,000
Accounts receivable ..................................
18,000
Office supplies ...........................................
2,600
Prepaid insurance .....................................
3,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-34A (20 minutes)
a. Recording prepayment of an expense in an asset account and recording
prepayment of revenue received in a liability account
Jan. 1 Prepaid Insurance .................................................. 6,000
Cash ................................................................. 6,000
Record advance cash payment of insurance.
Aug. 1 Cash ......................................................................... 2,400
Unearned Revenue ......................................... 2,400
Record cash received in advance of services.
Dec. 31 Insurance Expense ................................................. 6,000
Prepaid Insurance ........................................... 6,000
Record expiration of insurance.
Dec. 31 Unearned Revenue ................................................. 2,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Quick Study 3-36B (5 minutes)
Quick Study 3-37B (10 minutes)
Computation of Retained Earnings for the December 31 current year-end
balance sheet:
Retained earnings (beginning) .........................
$ 72,000
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
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
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
Record accrued revenue.
b.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-1 (20 minutes)
0
0
Year 4 ............................
1,000
0
Total...............................
$18,000
$18,000
Explanations:
*Accrual asset balance equals months left in the policy x $500 per month (monthly
cost is computed as $18,000 / 36 months).
Year 4 ...............................
2
1,000
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.
b. $58,000
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.
3. F 6. B
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-5 (15 minutes)
a. Supplies expense for current year: $2,550
b. Supplies available – current year-end: $6,500
c. Supplies purchased in current year: $8,490
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
Record insurance coverage that expired
($6,000 - $1,100).
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.
Exercise 3-7 (15 minutes)
a. Adjusting entry:
Dec. 31
Wages Expense..............................................................
1,250
Wages Payable ......................................................
1,250
Record accrued wages for one day.
(5 workers x $250)
b. Payday entry:
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
Record accrued legal fees.
May 12 Legal Services Payable ...................................... 3,500
Cash ............................................................. 3,500
Pay accrued legal fees.
b.
Apr. 30 Interest Expense ................................................. 3,000
Interest Payable .......................................... 3,000
Record accrued interest expense.
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 ................................
18,000
Accumulated Depreciation—Equipment .................
18,000
Record depreciation expense for the year.
c.
Supplies Expense .............................................................
5,000
Supplies* .....................................................................
5,000
Record supplies used ($240 + $5,200 - $440).
d.
Insurance Expense ...........................................................
2,800
Prepaid Insurance† ....................................................
2,800
Record insurance coverage expired ($4,000 - $1,200).
e.
Interest Receivable .........................................................
1,050
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
d.
Prepaid
Insurance
-2,800
Insurance
Expense
-2,800
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.
Interest Expense ..........................................................
400
Interest Payable .......................................................
400
Record interest expense incurred but not yet paid.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-12 (15 minutes)
d.
Lawn Services
Payable
+500
Lawn Services
Expense
-500
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
Record insurance coverage expired ($2,000 - $600).
Exercise 3-14 (15 minutes)
Adjusting Entry
Net Income
Total Assets
Total Liabilities
Total Equity
a.
-$5,000
-$5,000
-$5,000
b.
-$1,400
-$1,400
-$1,400
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.
b. Dec.31 Depreciation Expense—Computers ................ 1,600
Accumulated Depreciation-Computers ... 1,600
Record depreciation on computers.
c. Dec.31 Depreciation Expense—Office Furniture ........ . 1,850
Accumulated Depreciation—Office Furniture 1,850
Record depreciation on office furniture.
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
Prepaid insurance ....................................................
2,500
Buildings ...................................................................
40,000
Accumulated depreciation—Building ......................
$15,000
Accounts payable ....................................................
1,500
Interest payable........................................................
100
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1. STARK COMPANY
Income Statement
For Year Ended December 31
Services revenue ...................................................... $20,000
Expenses
2. STARK COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year end ............. $14,800
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
3. STARK COMPANY
Balance Sheet
December 31
Assets
Cash .................................................................. $10,000
Accounts receivable ....................................... 4,000
Supplies ........................................................... 800
Prepaid insurance ........................................... 2,500
Buildings .......................................................... $40,000
Accumulated depreciation-Buildings ............ (15,000) 25,000
Total assets ...................................................... $42,300
Liabilities
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
2. Retained Earnings balance after all closing entries:
Retained Earnings, Beginning balance ...
$20,000
Plus net income ..........................................
26,400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
(2) Income Summary ......................................... 901 47,800
(4) Retained Earnings ........................................ 318 22,000
Dividends ............................................... 319 22,000
Close Dividends account.
(4)
22,000
46,200
(4)
22,000
0
(2)
4,400
0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1.
Dec. 31 Services Revenue ......................................... 403 44,000
Income Summary .................................. 901 44,000
Close revenue account.
31 Income Summary ......................................... 901 33,100
Depreciation Expense—Equipment .... 612 3,000
2. CRUZ COMPANY
Post-Closing Trial Balance
December 31
Debit Credit
Cash ................................................................ $19,000
Supplies ......................................................... 13,000
Prepaid insurance ......................................... 3,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1. WILSON TRUCKING COMPANY
Income Statement
For Year Ended December 31
Trucking revenue ...................................................... $130,000
2. WILSON TRUCKING COMPANY
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year ........... $140,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-22 (20 minutes)
WILSON TRUCKING COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ................................................................ $ 8,000
Accounts receivable ..................................... 17,500
Office supplies ............................................... 3,000
Total current assets ...................................... 28,500
Plant assets
Trucks ............................................................. $172,000
Accumulated depreciation-Trucks .............. (36,000) 136,000
Land ................................................................ 85,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-23 (10 minutes)
Dec. 31 Trucking Revenue ........................................ 130,000
Income Summary .................................. 130,000
Close revenue account.
Dec. 31 Income Summary ......................................... 104,500
Depreciation Expense—Trucks ........... 23,500
Salaries Expense .................................. 61,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-24 (20 minutes) ANDREA CO.
Balance Sheet
December 31
Assets
Current assets
Cash ................................................................ $13,000
Accounts receivable ..................................... 4,000
Merchandise inventory ................................. 5,000
Prepaid insurance ......................................... 2,000
Total current assets ...................................... 24,000
Long-term investments
Notes receivable ............................................ 15,000
Long-term investments in bonds................. 7,000
Total long-term investments assets ............ 22,000
Plant assets
Machinery ....................................................... $20,000
Accumulated depreciation-Machinery ........ (16,000) 4,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-25 (10 minutes)
a. $ 4,361 / $ 44,500 = 9.8%
b. $ 97,706 / $ 398,800 = 24.5%
Exercise 3-26 (15 minutes)
a.
Current assets:
Cash ................................................................................. $ 8,000
Accounts receivable ...................................................... 17,500
Office supplies ................................................................ 3,000
Total current assets ....................................................... $28,500
Current liabilities:
Accounts payable ........................................................... $12,000
Interest payable .............................................................. 4,000
Total current liabilities ................................................... $16,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-27 (15 minutes)
Gleeson
61,000
/
100,000
=
0.61
b. Edison
Analysis: Edison is in the strongest position to pay its short-term
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-28A (30 minutes)
a.
Dec. 1 Supplies Expense ................................................... 2,000
Cash ................................................................. 2,000
Purchased supplies.
b.
Dec. 2 Insurance Expense ................................................. 1,540
Cash ................................................................. 1,540
Paid insurance premiums.
c.
Dec. 15 Cash ......................................................................... 13,000
Remodeling Revenue ..................................... 13,000
Received cash in advance of work.
d.
Dec. 28 Cash ......................................................................... 3,700
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-29A (25 minutes)
a. Initial credit recorded in the Unearned Revenue account
July 1 Cash ....................................................................... 3,000
Unearned Revenue ....................................... 3,000
Received cash for work to be done for Solana.
6 Cash ....................................................................... 7,500
Unearned Revenue ....................................... 7,500
Received cash for work to be done for Haru.
12 Unearned Revenue ............................................... 3,000
Services Revenue ......................................... 3,000
Completed work for Solana.
18 Cash ....................................................................... 8,500
Unearned Revenue ....................................... 8,500
Received cash for work to be done for Jordan.
31a Unearned Revenue ............................................... 7,500
Services Revenue ......................................... 7,500
Completed work for customer Haru.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-29A –concluded
c. Under the first method (and using entries from a)
Services Revenue = $3,000 + $7,500 = $10,500
8.
A Interest Expense
16.
D Wages Payable
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-31B (20 minutes)
Planta Company
Work Sheet
Adjusted
Trial Balance
Income
Statement
Balance Sheet
No.
Account
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
101
Cash......................................
7,000
7,000
106
Accounts receivable ...........
27,200
27,200
153
Trucks ..................................
42,000
42,000
154
Accumulated
depreciation—Trucks ......
17,500
17,500
183
Land ......................................
32,000
32,000
201
Accounts payable ...............
15,000
15,000
209
Salaries payable ..................
4,200
4,200
236
Unearned revenue ..............
3,600
3,600
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-32B (20 minutes)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Insurance Expense .................................................... 900
Prepaid Insurance .............................................. 900
Record expired insurance.
(b) Office Supplies Expense .......................................... 1,750
Office Supplies ................................................... 1,750
Record consumed supplies.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-33B (25 minutes)
WESTCOTT COMPANY
December 31
Unadjusted
Trial Balance
Dr. Cr.
Adjustments
Dr. Cr.
Adjusted
Trial Balance
Dr. Cr.
Income
Statement
Dr. Cr.
Balance Sheet
Dr. Cr.
Cash ......................................................................
21
21
21
Accounts receivable ............................................
12
12
12
Supplies ................................................................
24
(d)
9
15
15
Prepaid insurance ................................................
18
(e)
15
3
3
Equipment ............................................................
39
39
39
Accum. depreciation–Equip ...............................
15
(a)
3
18
18
Accounts payable ................................................
6
6
6
Salaries payable ...................................................
0
(b)
6
6
6
Unearned revenue ...............................................
12
(c)
12
0
0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1.
Work Sheet—Income Statement Columns Only
Account Title
Debit
Credit
Rental Revenue ..................................... $120,000
Salaries expense ................................... $ 46,300
(2) Income Summary ......................................... 94,400
(3) Income Summary ......................................... 25,600
Retained Earnings ............................... 25,600
Close Income Summary.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-35B Part 1 (30 minutes)
DYLAN DELIVERY COMPANY
Work Sheet
For Year Ended December 31
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash ..................................................
16,000
16,000
16,000
Accounts receivable ......................
34,000
34,000
34,000
Supplies ...........................................
5,000
(c)
3,000
2,000
2,000
Trucks ...............................................
350,000
350,000
350,000
Accum. Depreciation—Trucks .....
80,000
(a)
40,000
120,000
120,000
Land ..................................................
160,000
160,000
160,000
Accounts payable...........................
24,000
24,000
24,000
Interest payable ..............................
5,000
(b)
1,000
6,000
6,000
Long-term notes payable ..............
100,000
100,000
100,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
2. a. Closing entries
Delivery Revenue ......................................... 263,000
Income Summary .................................. 263,000
Close revenue account.
Income Summary ......................................... 224,000
Depreciation Expense—Trucks ........... 80,000
Salaries Expense .................................. 110,000
Supplies Expense ................................. 18,000
Interest Expense ................................... 6,000
Repairs Expense ................................... 10,000
Close expense accounts.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Exercise 3-36C (10 minutes)
Reversing entries are appropriate for accounting adjustments (a) and (e)
Jan. 1 Service Revenues ......................................... 6,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
1. Adjusting entries
2. Subsequent entries without reversing
Jan. 2 Rent Payable ................................................. 2,800
3. Reversing entries on January 1 and subsequent entries
Jan. 1 Rent Payable ................................................. 2,800
Rent Expense ........................................ 2,800
Reverse accrued rent expense.
1 Rent Revenue ............................................... 850
Rent Receivable .................................... 850
Reverse accrued rent revenue.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
PROBLEM SET A
Problem 3-2A (35 minutes)
Part 1 Adjustment (a)
Dec. 31 Office Supplies Expense ................................ 14,846
Office Supplies ......................................... 14,846
Record cost of supplies used
($4,000 + $13,400 - $2,554).
Adjustment (b)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-2A (Concluded)
Adjustment (d)
Dec. 31 Depreciation Expense—Building ................... 30,500
Accumulated Depreciation—Building ... 30,500
Record annual depreciation expense
[($960,000 - $45,000) / 30 years = $30,500]
Adjustment (e)
31 Accounts Receivable ................................... 3,000
Rent Revenue ........................................ 3,000
Record earned but unpaid Dec. rent.
Adjustment (f)
31 Unearned Revenue ....................................... 5,600
Rent Revenue ........................................ 5,600
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (90 minutes)
Parts 1 and 2
Cash
Equipment
Unadj. Bal.
34,000
Unadj. Bal.
80,000
Accounts Receivable
Accumulated Depreciation—
Equipment
Unadj. Bal.
0
Unadj. Bal.
15,000
(f)
7,500
(c)
13,200
Adj. Bal.
7,500
Adj. Bal.
28,200
Teaching Supplies
Accounts Payable
Unadj. Bal.
8,000
Bal.
26,000
(b)
5,200
Adj. Bal.
2,800
Salaries Payable
Unadj. Bal.
0
Prepaid Insurance
(g)
400
Unadj. Bal.
12,000
Adj. Bal.
400
(a)
2,400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (Continued)
Tuition Revenue
Rent Expense
Unadj. Bal.
123,900
Unadj. Bal.
33,000
(f)
7,500
(h)
3,000
Adj. Bal.
131,400
Adj. Bal.
36,000
Training Revenue
Teaching Supplies Expense
Unadj. Bal.
40,000
Unadj. Bal.
0
(e)
5,000
(b)
5,200
Adj. Bal.
45,000
Adj. Bal.
5,200
Depreciation Expense—
Professional Library
Advertising Expense
Unadj. Bal.
0
Bal.
6,000
(d)
7,200
Adj. Bal.
7,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (Continued)
Part 2
Adjustment (a)
Dec. 31
Insurance Expense ......................................................
2,400
Prepaid Insurance ..................................................
2,400
Record the insurance expired.
Adjustment (b)
31
Teaching Supplies Expense .......................................
5,200
Teaching Supplies .................................................
5,200
Record supplies used ($8,000 - $2,800).
Adjustment (c)
31
Depreciation Expense—Equipment ...........................
13,200
Accumulated Depreciation—Equipment ....................
13,200
Record equipment depreciation.
Adjustment (d)
31
Depreciation Expense—Profess. Library ..................
7,200
Accumulated Depreciation–Profess. Library .................
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (Continued)
Part 3
WELLS TECHNICAL INSTITUTE
Adjusted Trial Balance
December 31
Debit
Credit
Cash ..........................................................................
$ 34,000
Accounts receivable ................................................
7,500
Teaching supplies ...................................................
2,800
Prepaid insurance ....................................................
9,600
Prepaid rent ..............................................................
0
Professional library .................................................
35,000
Accumulated depreciation—Professional library ...
$ 17,200
Equipment ................................................................
80,000
Accumulated depreciation—Equipment ................
28,200
Accounts payable ....................................................
26,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (Continued)
Part 4
WELLS TECHNICAL INSTITUTE
Income Statement
For Year Ended December 31
Revenues
Tuition revenue ................................................... $131,400
Training revenue ................................................ 45,000
Total revenues .................................................... $176,400
Expenses
Depreciation expense—Professional library ... 7,200
Depreciation expense—Equipment .................. 13,200
Salaries expense ................................................ 50,400
Insurance expense ............................................. 2,400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3A (Concluded)
WELLS TECHNICAL INSTITUTE
Balance Sheet
December 31
Assets
Cash ................................................................................. $ 34,000
Accounts receivable ...................................................... 7,500
Teaching supplies .......................................................... 2,800
Prepaid insurance .......................................................... 9,600
Professional library ........................................................ $35,000
Accumulated depreciation—Professional library ....... (17,200) 17,800
Equipment ....................................................................... 80,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-4A (50 minutes)
CHIARA COMPANY
Income Statement
For Year Ended December 31
Revenues
Services revenue ...................................... $484,000
Interest revenue ........................................ 24,000
Total revenues .......................................... $508,000
Expenses
Depreciation expense—Automobiles ..... 26,000
Depreciation expense—Equipment ........ 18,000
Salaries expense ...................................... 188,000
Wages expense ........................................ 40,000
Interest expense ....................................... 32,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-4A (Concluded)
CHIARA COMPANY
Balance Sheet
December 31
Assets
Cash ........................................................................
$ 30,000
Accounts receivable ..............................................
52,000
Interest receivable..................................................
18,000
Notes receivable (due in 90 days) ........................
168,000
Office supplies .......................................................
16,000
Automobiles ...........................................................
$168,000
Accumulated depreciation—Automobiles ...........
(50,000)
118,000
Equipment ...............................................................
138,000
Accumulated depreciation—Equipment ..............
(18,000)
120,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (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 2 Cash ............................................................... 101 30,000
Computer Equipment ................................... 167 20,000
Common Stock...................................... 307 50,000
Owner invested in the business.
3 Rent Expense ................................................ 640 1,800
Cash ....................................................... 101 1,800
Paid one month’s rent.
4 Office Supplies .............................................. 124 1,000
Cash ....................................................... 101 1,000
Acquired office supplies.
10 Prepaid Insurance ......................................... 128 2,400
Cash ....................................................... 101 2,400
Paid 12 months’ insurance in advance.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 3
ADVENTURE TRAVEL
Unadjusted Trial Balance
April 30
No. Account Title Debit Credit
101 Cash .......................................................... $27,000
106 Accounts receivable ................................ 0
124 Office supplies ......................................... 1,000
128 Prepaid insurance .................................... 2,400
167 Computer equipment ............................... 20,000
168 Accumulated depreciation—
Computer equipment ............................. $ 0
209 Salaries payable ....................................... 0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 4
Adjusting entries
(a) Apr 30 Insurance Expense ............................................... 637 133
Prepaid Insurance ........................................... 128 133
Record expired insurance ($2,400/12 x2/3).
(b) Apr 30 Office Supplies Expense ...................................... 650 400
Office Supplies ................................................ 124 400
Record cost of supplies used ($1,000 - $600).
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 4
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30
No. Account Title Debit Credit
101 Cash .......................................................... $27,000
106 Accounts receivable ................................ 1,750
124 Office supplies ......................................... 600
128 Prepaid insurance .................................... 2,267
167 Computer equipment ............................... 20,000
168 Accumulated depreciation—
Computer equipment ............................. $ 500
209 Salaries payable ....................................... 420
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30
Commissions revenue ................................................ $9,750
Expenses
Depreciation expense—Computer equipment ....... $ 500
Salaries expense ....................................................... 3,620
Insurance expense .................................................... 133
Rent expense ............................................................. 1,800
Office supplies expense ........................................... 400
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 5—continued
ADVENTURE TRAVEL
Balance Sheet
April 30
Assets
Cash .................................................................................. $27,000
Accounts receivable ....................................................... 1,750
Office supplies ................................................................. 600
Prepaid insurance ........................................................... 2,267
Computer equipment ...................................................... $20,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 6
Closing entries
April 30 Commissions Revenue ................................ 403 9,750
Income Summary .................................. 901 9,750
Close revenue account.
30 Income Summary ......................................... 901 7,553
Depreciation Exp–Computer Equip .... 612 500
Salaries Expense .................................. 622 3,620
Insurance Expense ............................... 637 133
Rent Expense ........................................ 640 1,800
Office Supplies Expense ...................... 650 400
Repairs Expense ................................... 684 350
Telephone Expense .............................. 688 750
Close expense accounts.
30 Income Summary ......................................... 901 2,197
Retained Earnings ................................ 318 2,197
Close Income Summary account.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Part 7—continued
Ledger as of April 30
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
April 2 30,000 30,000
3 1,800 28,200
4 1,000 27,200
10 2,400 24,800
14 1,600 23,200
24 8,000 31,200
28 1,600 29,600
29 350 29,250
30 750 28,500
30 1,500 27,000
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
April 30 Adjusting 1,750 1,750
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Continued)
Common Stock Acct. No. 307
Date Explanation PR Debit Credit Balance
April 2 50,000 50,000
Retained Earnings Acct. No. 318
Date Explanation PR Debit Credit Balance
April 30 Closing 2,197 2,197
30 Closing 1,500 697
Dividends Acct. No. 319
Date Explanation PR Debit Credit Balance
April 30 1,500 1,500
30 Closing 1,500 0
Commissions Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
April 24 8,000 8,000
30 Adjusting 1,750 9,750
30 Closing 9,750 0
Depreciation Expense–Computer Equipment Acct. No. 612
Date Explanation PR Debit Credit Balance
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5A (Concluded)
Repairs Expense Acct. No. 684
Date Explanation PR Debit Credit Balance
April 29 350 350
30 Closing 350 0
Telephone Expense Acct. No. 688
Date Explanation PR Debit Credit Balance
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-6A (15 minutes)
20.
Current liabilities
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7A (75 minutes)
Part 1 TYBALT CONSTRUCTION
Income Statement
For Year Ended December 31
Revenues
Services revenue ................................................ $97,000
Rent revenue ....................................................... 14,000
Interest revenue .................................................. 4,100
Total revenues .................................................... $115,100
Expenses
Depreciation expense—Building ...................... 11,000
Depreciation expense—Equipment .................. 6,000
Wages expense .................................................. 52,900
Interest expense ................................................. 5,100
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7A (Continued)
TYBALT CONSTRUCTION
Balance Sheet
December 31
Assets
Current assets
Cash ..................................................................... $ 5,000
Supplies .............................................................. 31,100
Prepaid insurance .............................................. 7,000
Total current assets ........................................... $ 43,100
Plant assets
Equipment ........................................................... 40,000
Accumulated depreciation—Equipment .......... (20,000) 20,000
Building ............................................................... 150,000
Accumulated depreciation—Building .............. (50,000) 100,000
Land ..................................................................... 55,000
Total plant assets ............................................... 175,000
Total assets ........................................................... $218,100
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7A (Continued)
(2) Income Summary ......................................... 110,800
Depreciation Expense—Building ........ 11,000
Depreciation Expense—Equipment .... 6,000
(4) Retained Earnings ....................................... 13,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-8AB (90 minutes) Part 1
ACE CONSTRUCTION CO.
Work Sheet
For Year Ended June 30
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
128
Prepaid insurance .........................
7,200
(b)
3,800
3,400
3,400
167
Equipment .......................................
132,000
132,000
132,000
168
Accumulated depreciation—
Equipment ........................................
26,250
(c)
8,400
34,650
34,650
201
Accounts payable ..........................
6,800
(d)
650
7,450
7,450
203
Interest payable ..............................
0
(h)
250
250
250
208
Rent payable ...................................
0
(f)
500
500
500
210
Wages payable ...............................
0
(e)
1,800
1,800
1,800
213
Property taxes payable ................
0
(g)
1,000
1,000
1,000
251
Long-term notes payable .............
25,000
25,000
25,000
307
Common stock ...............................
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-8AB (Continued)
Part 2 Adjusting entries (all dated June 30)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Supplies Expense .............................................. 6,600
Supplies ...................................................... 6,600
Record consumption of supplies.
(b) Insurance Expense ............................................ 3,800
Prepaid Insurance ...................................... 3,800
Record expiration of insurance.
(c) Depreciation Expense—Equipment................. 8,400
Accumulated Depreciation—Equipment ...... 8,400
Record depreciation.
(d) Utilities Expense ................................................ 650
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
(2) Income Summary ......................................... 101,210
Depreciation Expense–Equipment ...... 8,400
Wages Expense..................................... 48,660
(4) Retained Earnings ........................................ 33,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-8AB (Continued)
Part 3
ACE CONSTRUCTION CO.
Income Statement
For Year Ended June 30
Construction revenue ........................................ $132,100
Expenses
Depreciation expense—Equipment ............... $ 8,400
Wages expense ................................................ 48,660
Interest expense............................................... 3,000
Insurance expense........................................... 3,800
Rent expense.................................................... 12,500
Supplies expense............................................. 6,600
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-8AB (Concluded)
ACE CONSTRUCTION CO.
Balance Sheet
June 30
Assets
Current assets
Cash ....................................................................... $ 18,500
Supplies ................................................................. 3,300
Prepaid insurance ................................................. 3,400
Total current assets .............................................. $ 25,200
Plant assets
Equipment ............................................................. 132,000
Accumulated depreciation—Equipment............. (34,650) 97,350
Total assets ............................................................. $122,550
Liabilities
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-9A (30 minutes)
Part 1
KARISE REPAIRS
Income Statement
For Year Ended December 31
Services revenue ........................................ $90,950
Expenses
Depreciation expense—Equipment ........ $ 5,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-9A (Continued)
KARISE REPAIRS
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, Dec. 31 prior year ............. $23,000
Add: Net income ............................................. 30,750
53,750
Less: Dividends ................................................ (16,000)
Retained earnings, Dec. 31 current year ......... $37,750
KARISE REPAIRS
Balance Sheet
December 31
Assets
Current assets
Cash .............................................................. $14,000
Office supplies ............................................. 1,300
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-9A (Concluded)
(2) Income Summary ............................................ 60,200
Depreciation Expense—Equipment ....... 5,000
(4) Retained Earnings ........................................... 16,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-10AA (40 minutes)
Part 1
Assume prepaid expenses are recorded as assets and unearned revenues as liabilities.
Nov. 1 Prepaid Advertising ....................................... 1,800
Cash .......................................................... 1,800
Paid for future advertising.
1 Prepaid Insurance ........................................... 2,460
Cash .......................................................... 2,460
Paid insurance for one year.
30 Cash .................................................................. 3,600
Unearned Revenue .................................. 3,600
Received cash in advance.
Dec. 1 Prepaid Consulting ......................................... 3,000
Cash .......................................................... 3,000
Paid for future consulting.
15 Cash .................................................................. 7,950
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-10AA (Continued)
Part 2
Assume prepaid expenses are recorded as expenses and unearned revenues as revenues.
Nov. 1 Advertising Expense ....................................... 1,800
Cash .......................................................... 1,800
Paid for future advertising.
1 Insurance Expense .......................................... 2,460
Cash .......................................................... 2,460
Paid insurance for one year.
30 Cash .................................................................. 3,600
Services Revenue .................................... 3,600
Received cash in advance.
Dec. 1 Consulting Expense ........................................ 3,000
Cash .......................................................... 3,000
Paid for future consulting.
15 Cash .................................................................. 7,950
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-11AC (40 minutes)
Part 1
HAWKEYE RANGES
Work Sheet
For Year Ended December 31
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash ................................
14,000
14,000
Accounts receivable .....
0
(e)
9,300
9,300
Supplies ..........................
6,500
(b)
3,500
3,000
Equipment ......................
135,000
135,000
Accumulated depre-
ciation--Equipment ......
30,000
(f)
15,000
45,000
Interest payable .............
0
(c)
1,875
1,875
Salaries payable ............
0
(a)
1,200
1,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-11AC (Continued)
Part 2 (all adjusting entries dated December 31)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Salaries Expense .......................................... 1,200
Salaries Payable.................................... 1,200
Record accrued salaries.
(b) Supplies Expense ......................................... 3,500
Supplies ................................................. 3,500
Record cost of used supplies.
(c) Interest Expense ........................................... 1,875
Interest Payable .................................... 1,875
Record accrued interest expense.
(d) Unearned Revenue ....................................... 9,200
Services Revenue ................................. 9,200
Record revenue earned.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-11AC (Concluded)
Part 4
Instructor note: Entries are shown without an account reference column because no posting is required.
Jan. 4 Salaries Expense ......................................... 1,500
Cash ....................................................... 1,500
Record payroll payment.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-2B (30 minutes)
Part 1
Adjustment (a)
Oct. 31 Office Supplies Expense ....................................... 4,370
Office Supplies ................................................ 4,370
Record cost of supplies used
($600 + $4,570 - $800).
Adjustment (b)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-2B (Concluded)
Adjustment (d)
Oct. 31 Depreciation Expense—Building .......................... 5,400
Accumulated Depreciation—Building .......... 5,400
Record annual depreciation
[($175,000 - $40,000) / 25 years = $5,400].
Adjustment (e)
31 Accounts Receivable ............................................. 1,000
Rent Revenue .................................................. 1,000
Record earned but unpaid Oct. rent.
Adjustment (f)
31 Unearned Revenue ................................................. 1,450
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (90 minutes)
Parts 1 and 2
Cash
Accounts Payable
Bal.
60,000
Bal.
11,200
Accounts Receivable
Salaries Payable
Unadj. Bal.
0
Unadj. Bal.
0
(f)
5,750
(g)
450
Adj. Bal.
5,750
Adj. Bal.
450
Teaching Supplies
Unearned Revenue
Unadj. Bal.
70,000
Unadj. Bal.
28,600
(b)
50,000
(e)
28,600
Adj. Bal.
20,000
Adj. Bal.
0
Prepaid Insurance
Common Stock
Unadj. Bal.
19,000
Bal.
11,000
(a)
9,500
Adj. Bal.
9,500
Retained Earnings
Prepaid Rent
Bal.
60,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (Continued)
Parts 1 and 2
Tuition Revenue
Advertising Expense
Unadj. Bal.
129,200
Bal.
19,000
(f)
5,750
Adj. Bal.
134,950
Training Revenue
Utilities Expense
Unadj. Bal.
68,000
Bal.
13,400
(e)
28,600
Adj. Bal.
96,600
Depreciation Expense—
Professional Library
Unadj. Bal.
0
(d)
2,400
Adj. Bal.
2,400
Depreciation Expense—
Equipment
Unadj. Bal.
0
(c)
5,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (Continued)
Part 2 Adjustment (a)
Dec. 31 Insurance Expense ................................................ 9,500
Prepaid Insurance .......................................... 9,500
Record the insurance expired.
Adjustment (b)
31 Teaching Supplies Expense ................................. 50,000
Teaching Supplies ......................................... 50,000
Record the cost of supplies used
($70,000 - $20,000).
Adjustment (c)
31 Depreciation Expense—Equipment..................... 5,000
Accumulated Depreciation—Equipment ..... 5,000
Record equipment depreciation.
Adjustment (d)
31 Depreciation Expense—Professional Library .... 2,400
Accumulated Depreciation—Professional
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (Continued)
Part 3
ALONZO INSTITUTE
Adjusted Trial Balance
December 31
Debit
Credit
Cash ...........................................................................................
$ 60,000
Accounts receivable ...............................................................
5,750
Teaching supplies ...................................................................
20,000
Prepaid insurance ...................................................................
9,500
Prepaid rent ..............................................................................
0
Professional library .................................................................
12,000
Accumulated depreciation—Professional library ............
$ 4,900
Equipment ................................................................................
40,000
Accumulated depreciation—Equipment ............................
25,000
Accounts payable ...................................................................
11,200
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (Continued)
Part 4
ALONZO INSTITUTE
Income Statement
For Year Ended December 31
Revenues
Tuition revenue .......................................................... $134,950
Training revenue ....................................................... 96,600
Total revenues ........................................................... $231,550
Expenses
Depreciation expense—Professional library .......... 2,400
Depreciation expense—Equipment ......................... 5,000
Salaries expense ....................................................... 44,650
Insurance expense .................................................... 9,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-3B (Concluded)
ALONZO INSTITUTE
Balance Sheet
December 31
Assets
Cash .............................................................................. $ 60,000
Accounts receivable ................................................... 5,750
Teaching supplies ....................................................... 20,000
Prepaid insurance ....................................................... 9,500
Professional library ..................................................... $12,000
Accumulated depreciation—Professional library .... (4,900) 7,100
Equipment .................................................................... 40,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-4B (50 minutes)
SPEEDY COURIER
Income Statement
For Year Ended December 31
Revenues
Services revenue ........................................... $611,800
Interest revenue ............................................. 34,000
Total revenues ............................................... $645,800
Expenses
Depreciation expense—Trucks .................... 29,000
Depreciation expense—Equipment ............. 48,000
Salaries expense ........................................... 74,000
Wages expense ............................................. 300,000
Interest expense ............................................ 15,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-4B (Concluded)
SPEEDY COURIER
Balance Sheet
December 31
Assets
Cash ......................................................................
$ 58,000
Accounts receivable ............................................
120,000
Interest receivable ................................................
7,000
Notes receivable (due in 90 days).........................
210,000
Office supplies .....................................................
22,000
Trucks ...................................................................
$134,000
Accumulated depreciation—Trucks ...................
(58,000)
76,000
Equipment .............................................................
270,000
Accumulated depreciation—Equipment ............
(200,000)
70,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (90 minutes)
INSTRUCTOR NOTE: Ledger accounts are shown after Part 7 as they would appear after
all entries are posted.
Part 2
Transactions for July
July 2 Cash ............................................................... 101 30,000
Buildings ....................................................... 173 150,000
Common Stock...................................... 307 180,000
Owner invested in the business.
3 Rent Expense ................................................ 640 2,000
Cash ....................................................... 101 2,000
Paid one month’s rent.
5 Office Supplies ............................................. 124 2,400
Cash ....................................................... 101 2,400
Acquired office supplies.
10 Prepaid Insurance ........................................ 128 7,200
Cash ....................................................... 101 7,200
Paid insurance in advance.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 3
SAFE STORAGE CO.
Unadjusted Trial Balance
July 31
No. Account Title Debit Credit
101 Cash ..................................................................... $ 22,850
106 Accounts receivable .......................................... 0
124 Office supplies .................................................... 2,400
128 Prepaid insurance .............................................. 7,200
173 Buildings ............................................................. 150,000
174 Accumulated depreciation–Buildings .............. $ 0
209 Salaries payable ................................................. 0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 4
Adjusting entries
July 31 Insurance Expense ................................................637 400
Prepaid Insurance .........................................128 400
Expired insurance.
(2/3 x $7,200/12 per month)
July 31 Office Supplies Expense .......................................650 875
Office Supplies ..............................................124 875
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 4
SAFE STORAGE CO.
Adjusted Trial Balance
July 31
No. Account Title Debit Credit
101 Cash ..................................................................... $ 22,850
106 Accounts receivable .......................................... 1,150
124 Office supplies .................................................... 1,525
128 Prepaid insurance .............................................. 6,800
173 Buildings ............................................................. 150,000
174 Accumulated depreciation–Buildings .............. $ 1,500
209 Salaries payable ................................................. 100
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 5
SAFE STORAGE CO.
Income Statement
For Month Ended July 31
Storage revenue ......................................... $10,950
Expenses
Depreciation expense–Buildings ............ $1,500
Salaries expense ...................................... 2,100
Insurance expense ................................... 400
Rent expense ............................................ 2,000
Office supplies expense .......................... 875
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 5
SAFE STORAGE CO.
Balance Sheet
July 31
Assets
Cash ............................................................. $ 22,850
Accounts receivable .................................. 1,150
Office supplies ............................................ 1,525
Prepaid insurance ...................................... 6,800
Buildings ..................................................... $150,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Part 6
Closing entries
July 31 Storage Revenue ....................................... 403 10,950
Income Summary .................................. 901 10,950
Close revenue account.
31 Income Summary ....................................... 901 8,225
Depreciation Exp—Buildings .............. 606 1,500
Salaries Expense .................................. 622 2,100
Insurance Expense... ............................ 637 400
Rent Expense ........................................ 640 2,000
Office Supplies Expense ...................... 650 875
Repairs Expense ................................... 684 950
Telephone Expense .............................. 688 400
Close expense accounts.
31 Income Summary ....................................... 901 2,725
Retained Earnings ................................ 318 2,725
Close Income Summary.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Ledger as of July 31
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
July 2 30,000 30,000
3 2,000 28,000
5 2,400 25,600
10 7,200 18,400
14 1,000 17,400
24 9,800 27,200
28 1,000 26,200
29 950 25,250
30 400 24,850
31 2,000 22,850
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
July 31 Adjusting 1,150 1,150
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Continued)
Common Stock Acct. No. 307
Date Explanation PR Debit Credit Balance
July 2 180,000 180,000
Retained Earnings Acct. No. 318
Date Explanation PR Debit Credit Balance
July 31 Closing 2,725 182,725
31 Closing 2,000 180,725
Dividends Acct. No. 319
Date Explanation PR Debit Credit Balance
July 31 2,000 2,000
31 Closing 2,000 0
Storage Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
July 24 9,800 9,800
31 Adjusting 1,150 10,950
31 Closing 10,950 0
Depreciation Expense—Buildings Acct. No. 606
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-5B (Concluded)
Office Supplies Expense Acct. No. 650
Date Explanation PR Debit Credit Balance
July 31 Adjusting 875 875
31 Closing 875 0
Repairs Expense Acct. No. 684
Date Explanation PR Debit Credit Balance
July 29 950 950
31 Closing 950 0
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-6B (15 minutes)
20.
Not on balance sheet
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7B (75 minutes)
Part 1
ANARA CO.
Income Statement
For Year Ended December 31
Revenues
Services revenue ................................................ $59,600
Rent revenue ....................................................... 4,500
Interest revenue .................................................. 2,320
Total revenues .................................................... $66,420
Expenses
Depreciation expense—Building ...................... 2,000
Depreciation expense—Equipment .................. 1,000
Wages expense .................................................. 22,030
Interest expense ................................................. 1,550
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7B (Continued)
ANARA CO.
Balance Sheet
December 31
Assets
Current assets
Cash ..................................................................... $ 7,400
Supplies .............................................................. 15,800
Prepaid insurance .............................................. 1,000
Total current assets ........................................... $ 24,200
Plant assets
Equipment ........................................................... $24,000
Accumulated depreciation—Equipment .......... (4,000) 20,000
Building ............................................................... 100,000
Accumulated depreciation—Building .............. (10,000) 90,000
Land ..................................................................... 30,500
Total plant assets ............................................... 140,500
Total assets ........................................................... $164,700
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-7B (Continued)
(2) Income Summary ......................................... 37,530
Depreciation Expense—Building ........ 2,000
Depreciation Expense—Equipment .... 1,000
(4) Retained Earnings ........................................ 8,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 3
Problem 3-8BB (90 minutes) Part 1
POWER DEMOLITION COMPANY
Work Sheet
For Year Ended April 30
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 ...................................................
7,000
7,000
7,000
126
Supplies .............................................
16,000
(a)
8,100
7,900
7,900
128
Prepaid insurance ...........................
12,600
(b)
10,600
2,000
2,000
167
Equipment .........................................
200,000
200,000
200,000
168
Accumulated depreciation—
Equipment .......................................
14,000
(c)
7,000
21,000
21,000
201
Accounts payable ............................
6,800
(d)
800
7,600
7,600
203
Interest payable ................................
0
(h)
300
300
300
208
Rent payable .....................................
0
(f)
3,000
3,000
3,000
210
Wages payable .................................
0
(e)
2,000
2,000
2,000
213
Property taxes payable ...................
0
(g)
550
550
550
251
Long-term notes payable ...............
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-8BB (Continued)
Part 2 Adjusting entries (all dated April 30)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Supplies Expense ............................................. 8,100
Supplies ..................................................... 8,100
Record consumption of supplies.
(b) Insurance Expense ........................................... 10,600
Prepaid Insurance ..................................... 10,600
Record expiration of insurance.
(c) Depreciation Expense—Equipment................ 7,000
Accumulated Depreciation–Equipment .. 7,000
Record depreciation.
(d) Utilities Expense ............................................... 800
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
(2) Income Summary ......................................... 109,450
Depreciation Expense–Equipment ...... 7,000
Wages Expense..................................... 43,400
(4) Retained Earnings ........................................ 12,000
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-8BB (Continued)
Part 3
POWER DEMOLITION COMPANY
Income Statement
For Year Ended April 30
Demolition revenue .............................................. $187,000
Expenses
Depreciation expense–Equipment.................... $ 7,000
Wages expense .................................................. 43,400
Interest expense ................................................. 3,600
Insurance expense ............................................. 10,600
Rent expense ...................................................... 16,200
Supplies expense ............................................... 8,100
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-8BB (Concluded)
POWER DEMOLITION COMPANY
Balance Sheet
April 30
Assets
Current assets
Cash ..................................................................... $ 7,000
Supplies .............................................................. 7,900
Prepaid insurance .............................................. 2,000
Total current assets ........................................... $ 16,900
Plant assets
Equipment ........................................................... 200,000
Accumulated depreciation–Equipment ............ (21,000) 179,000
Total assets ........................................................... $195,900
Liabilities
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-9B (30 minutes)
Part 1
SANTO COMPANY
Income Statement
For Year Ended December 31
Services revenue ........................................ $54,700
Expenses
Depreciation expense—Equipment ........ $ 2,000
Wages expense ........................................ 26,400
Insurance expense ................................... 600
Rent expense ............................................ 3,600
Store supplies expense ........................... 1,200
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-9B (Continued)
SANTO COMPANY
Balance Sheet
December 31
Assets
Current assets
Cash ........................................................... $14,450
Store supplies ........................................... 5,140
Prepaid insurance .................................... 1,200
Total current assets ................................. $20,790
Plant assets
Equipment ................................................. 31,000
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
(2) Income Summary ............................................ 35,760
Depreciation Expense, Equipment ......... 2,000
(4) Retained Earnings ........................................... 15,000
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-10BA (40 minutes)
Part 1
Method that records prepaid expenses and unearned revenues in balance sheet accounts
Apr. 1 Prepaid Consulting .............................................. 2,450
Cash ............................................................... 2,450
Paid for future consulting.
1 Prepaid Insurance ................................................ 3,600
Cash ............................................................... 3,600
Paid insurance for one year.
30 Cash ....................................................................... 8,500
Unearned Revenue ....................................... 8,500
Received fees in advance.
May 1 Prepaid Advertising ............................................. 4,450
Cash ............................................................... 4,450
Paid for future advertising.
23 Cash ..................................................................... 10,450
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-10BA (Continued)
Part 2
Method that records prepaid expenses and unearned revenues in income statement accounts
Apr. 1 Consulting Expense ........................................... 2,450
Cash ............................................................. 2,450
Paid for future consulting services.
1 Insurance Expense ............................................. 3,600
Cash ............................................................. 3,600
Paid insurance for one year.
30 Cash ..................................................................... 8,500
Services Revenue ....................................... 8,500
Received cash in advance.
May 1 Advertising Expense .......................................... 4,450
Cash ............................................................. 4,450
Paid for future advertising.
23 Cash ..................................................................... 10,450
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-10BA (Concluded)
Part 3
There are no differences between the two methods in terms of the amounts
that appear on the financial statements. In both cases, the financial
statements reflect the following identical balances.
Prepaid consulting as of May 31 .................................................. $ 450
Consulting expense for two months ........................................... 2,000
Insurance expense for two months ............................................. 600
Prepaid insurance as of May 31 ................................................... 3,000
Unearned revenue as of May 31 ($4,600 + $4,950) ..................... 9,550
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Part 1
SOLUTIONS CO.
Work Sheet
For Year Ended December 31
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Dr. Cr.
Dr. Cr.
Dr. Cr.
Cash ..............................................
10,000
10,000
Accounts receivable ..................
0
(e)
2,450
2,450
Supplies .......................................
7,600
(b)
4,150
3,450
Machinery ....................................
50,000
50,000
Accumulated depreciation—
Machinery ..................................
20,000
(f)
3,800
23,800
Interest payable ..........................
0
(c)
800
800
Salaries payable ........................
0
(a)
400
400
Unearned revenue .....................
7,200
(d)
4,000
3,200
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-11BC (Continued)
Part 2 (all adjusting entries dated December 31)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Salaries Expense .......................................... 400
Salaries Payable.................................... 400
Record accrued wages.
(b) Supplies Expense ......................................... 4,150
Supplies ................................................. 4,150
Record cost of used supplies.
(c) Interest Expense ........................................... 800
Interest Payable .................................... 800
Record accrued interest expense.
(d) Unearned Revenue ....................................... 4,000
Services Revenue ................................. 4,000
Record revenue earned.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Problem 3-11BC (Concluded)
Part 4
Instructor note: Entries are shown without an account reference column because no posting is required.
Jan. 4 Salaries Expense .......................................... 1,200
Cash ....................................................... 1,200
Record payroll payment.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
SERIAL PROBLEM – SP 3
Serial Problem, Business Solutions (150 minutes) — Part 1
<Note: The general ledger is shown at the end of this assignment>
Journal entries
Dec. 2 Advertising Expense .................................. 655 1,025
Cash .....................................................101 1,025
Paid share of mall advertising costs.
3 Repairs Expense–Computer ..................... 684 500
Cash .....................................................101 500
Repaired the computer.
4 Cash ............................................................. 101 3,950
Accounts Receivable ..........................106 3,950
Collected accounts receivable.
10 Wages Expense .......................................... 623 750
Cash .....................................................101 750
Paid employee for part-time work.
14 Cash ............................................................. 101 1,500
Unearned Computer Services Revenue ...236 1,500
Received advance on work to be performed.
15 Computer Supplies .................................... 126 1,100
Accounts Payable ...............................201 1,100
Purchased supplies on credit.
16 No entry recorded in the journal.
20 Cash ............................................................. 101 5,625
Computer Services Revenue .............403 5,625
Collected cash revenue from customer.
28 Cash ............................................................. 101 3,000
Accounts Receivable ..........................106 3,000
Collected accounts receivable.
29 Mileage Expense ........................................ 676 192
Cash .....................................................101 192
Reimbursed Rey for mileage.
31 Dividends .................................................... 319 1,500
Cash .....................................................101 1,500
Paid cash dividends.
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 2
Adjusting entries
Dec. 31 Computer Supplies Expense .........................652 3,065
Computer Supplies .................................126 3,065
Adjustment for supplies used (supplies
balance less cost of supplies available).
31 Insurance Expense .........................................637 555
Prepaid Insurance ...................................128 555
Adjustment for expired insurance (1/4
of $2,220 original prepaid amount).
31 Wages Expense ..............................................623 500
Wages Payable ........................................210 500
Adjustment for accrued wages.
31 Depreciation Expense–Computer Equip .......613 1,250
Accumulated Depreciation—
Computer Equipment ...........................168 1,250
Adjustment for computer equipment depreciation:
Cost ......................................................... $20,000
Predicted life ........................................... 4 years
Annual depreciation (cost/life) ............... $5,000
Expense for three months ...................... $1,250
31 Depreciation Expense—Office Equip ............612 400
Accumulated Depreciation—
Office Equipment ..................................164 400
Adjustment for office equipment depreciation:
Cost ......................................................... $8,000
Predicted life ........................................... 5 years
Annual depreciation (cost/life) ............... $1,600
Expense for three months ...................... $400
31 Rent Expense ..................................................640 2,475
Prepaid Rent ............................................131 2,475
Adjustment for expired rent (3/4 of
$3,300 original prepaid amount).
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 3
BUSINESS SOLUTIONS
Adjusted Trial Balance
December 31, 2021
Debit Credit
Cash ........................................................................... $ 48,372
Accounts receivable ................................................. 5,668
Computer supplies ................................................... 580
Prepaid insurance ..................................................... 1,665
Prepaid rent ............................................................... 825
Office equipment ...................................................... 8,000
Accumulated depreciation—Office equipment ....... $ 400
Computer equipment ................................................ 20,000
Accumulated depreciation—Computer equipment 1,250
Accounts payable ..................................................... 1,100
Wages payable .......................................................... 500
Unearned computer services revenue ................... 1,500
Common stock ........................................................... 73,000
Retained earnings ...................................................... 0
Dividends .................................................................... 7,100
Computer services revenue ..................................... 31,284
Depreciation expense—Office equipment .............. 400
Depreciation expense—Computer equipment ........ 1,250
Wages expense ......................................................... 3,875
Insurance expense ................................................... 555
Rent expense ............................................................ 2,475
Computer supplies expense .................................... 3,065
Advertising expense .................................................. 2,753
Mileage expense ....................................................... 896
Miscellaneous expenses .......................................... 250
Repairs expense—Computer ................................... 1,305 _______
Totals .......................................................................... $109,034 $109,034
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 4
BUSINESS SOLUTIONS
Income Statement
For Three Months Ended December 31, 2021
Revenue
Computer services revenue ....................................... $31,284
Expenses
Depreciation expense—Office equipment ............... $ 400
Depreciation expense—Computer equipment ......... 1,250
Wages expense ........................................................... 3,875
Insurance expense ..................................................... 555
Rent expense .............................................................. 2,475
Computer supplies expense ...................................... 3,065
Advertising expense ................................................... 2,753
Mileage expense ......................................................... 896
Miscellaneous expenses ............................................ 250
Repairs expense—Computer ..................................... 1,305
Total expenses ............................................................ 16,824
Net income .................................................................... $14,460
Part 5
BUSINESS SOLUTIONS
Statement of Retained Earnings
For Three Months Ended December 31, 2021
Retained earnings, October 1, 2021 ............................ $ 0
Add: Net income ........................................................ 14,460
14,460
Less: Dividends .......................................................... 7,100
Retained earnings, December 31, 2021 ...................... $ 7,360
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 6
BUSINESS SOLUTIONS
Balance Sheet
December 31, 2021
Assets
Current assets
Cash ................................................................ $48,372
Accounts receivable ..................................... 5,668
Computer supplies ........................................ 580
Prepaid insurance ......................................... 1,665
Prepaid rent ................................................... 825
Total current assets ...................................... 57,110
Plant assets
Office equipment ........................................... $ 8,000
Accumulated depreciation–Office equip ....... (400) 7,600
Computer equipment .................................... 20,000
Accumulated depreciation–Computer equip . (1,250) 18,750
Total plant assets .......................................... 26,350
Total assets ...................................................... $83,460
Liabilities
Current liabilities
Accounts payable .......................................... $ 1,100
Wages payable .............................................. 500
Unearned computer services revenue ........ 1,500
Total liabilities ................................................. 3,100
Equity
Common stock ................................................ 73,000
Retained earnings ........................................... 7,360
Total equity ...................................................... 80,360
Total liabilities and equity .............................. $83,460
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Serial Problem (Continued)
Part 7
<Note: The general ledger is displayed at the end>
Closing entries
Dec. 31 Computer Services Revenue .......................... 403 31,284
Income Summary ...................................... 901 31,284
Close revenue account.
31 Income Summary ............................................. 901 16,824
Depreciation Exp–Office Equipment ....... 612 400
Depreciation Exp–Computer Equipment .. 613 1,250
Wages Expense ........................................ 623 3,875
Insurance Expense .................................. 637 555
Rent Expense ........................................... 640 2,475
Computer Supplies Expense .................. 652 3,065
Advertising Expense ............................... 655 2,753
Mileage Expense ...................................... 676 896
Miscellaneous Expenses ........................ 677 250
Repairs Expense—Computer ................. 684 1,305
Close expense accounts.
31 Income Summary ............................................. 901 14,460
Retained Earnings .................................... 318 14,460
Close Income Summary account.
31 Retained Earnings ............................................ 318 7,100
Dividends ................................................... 319 7,100
Close Dividends account.
Note: Accounts with numbers that start with digits 1 or 2 (the
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
3. $261,981
4. $206,725
Explanation: The total expenses that would be debited to Income
Summary as step 2 in the closing entry process must be computed.
Apple’s total expenses for the most recent fiscal year-end are (in
millions):
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
1. (a) Apple
Current year, profit margin $55,256 / $260,174 = 21.2%
3. (a) Apple
Current year, current ratio $162,819 / $105,718 = 1.54
4. Google
Explanation: In the current year, Google has the higher current ratio,
suggesting a better ability to pay short-term obligations. Overall,
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
1. Samsung
Current year, profit margin $18,653 / $197,691 = 9.4%
2. Samsung
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
DISCUSSION QUESTIONS
9. Closing entries affect temporary accounts: revenues, expenses, dividends, and
10. (i) Closing entries prepare the temporary accounts—revenue and expense (and gain
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
18.AC The following reversing entry could be made as of the first day of the next
accounting period, after the post-closing trial balance is completed and financial
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
1. GAAP requires that annual deprecation be accumulated in a contra-
2. One strength of Smith’s method would be the ease of preparing the
3. While both approaches would lead to the same total assets on the
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
Communicating in Practice — BTN 3-2
This communication activity has no set solution. A class discussion of the
ratios can be conducted with emphasis on (1) return and profitability by
industries and (2) a contrast of debt financing between industries.
Teamwork in Action — BTN 3-3
Note that there is no specific solution to this activity. Still, the presentation
of each expert team should reflect the following summary points.
Before Adjusting
Balance Sheet Income Statement
Type Account Account Adjusting Entry
Prepaid expenses Asset overstated Expense understated Dr. Expense
Cr. Asset*
Unearned revenues Liability overstated Revenue understated Dr. Liability
Cr. Revenue
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3
1. a. To record the collection of cash from sale of the gift certificate in
advance of delivery of merchandise to the customer:
3. If the company carries additional inventory, it can potentially sell more
merchandise and increase its profits. This might further fuel increased
sales as additional customers might be attracted to its products. On
the other hand, carrying inventory has risks. The most important risk
Wild and Shaw, Fundamental Accounting Principles 25e Solutions Manual: Chapter 3