accounting tools for business decision makers 4e ch3

Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-1

CHAPTER 3The Accounting Information System

Study Objectives1. Analyze the effect of business transactions on the basic accounting equation.2. Explain what an account is and how it helps in the recording process.3. Define debits and credits and explain how they are used to record business transactions.4. Identify the basic steps in the recording process.5. Explain what a journal is and how it helps in the recording process.6. Explain what a ledger is and how it helps in the recording process.7. Explain what posting is and how it helps in the recording process.8. Explain the purposes of a trial balance.9. Classify cash activities as operating, investing, or financing.

Summary of Questions by Study Objectives and Blooms TaxonomyItem SO BT Item SO BT Item SO BT Item SO BT Item SO BT

Questions 1. 4 C 6. 3 C 11. 3 K 16. 5 K 21. 7 K 2. 1 C 7. 3 C 12. 3 K 17. 5 K 22. 8 AN 3. 1 C 8. 3 C 13. 3 K 18. 5 AP 4. 1 K 9. 3 K 14. 3 K 19. 6 C 5. 2 K 10. 3 K 15. 4 K 20. 8 C

Brief Exercises 1. 1 C 4. 3 K 7. 4 C 9. 5 AP 11. 8 AP 2. 1 AP 5. 3 C 8. 4 C 10. 7 AP 12. 8 AP 3. 1 AP 6. 5 AP

Do It! Review Exercises 1. 1 C 2. 2, 3 C 3. 4, 5 AP 4. 6, 7 AP

Exercises 1. 1 C 5. 1 AP 8. 5 AP 12. 5, 8 AP 15. 8 AN 2. 1 AP 6. 3, 5 AP 9. 3, 4,

5 AP13. 7, 8 AP 16. 8 AP

3. 1 AP 7. 3 C 10. 14. 5, 8 AP 17. 3 K 4. 1 AP 11.

7, 81, 5,

7

AP

AP18. 9 AP

19. 9 APProblems: Set A

1. 1 AP 5. 6. 7. 8 AN 9. 8 AN 2. 1 AP 8. 3. 1 AP

3, 5,6, 7,

8 AP

3, 5,6, 7,

8 AP 4. 3, 5 AP

3, 5,6, 7,

8 APProblems: Set B

1. 1 AP 5. 6. 7. 8 AN 9. 8 AN 2. 1 AP 8. 3. 1 AP

3, 5,6, 7,

8 AP

3, 5,6, 7,

8 AP 4. 3, 5 AP

3, 5,6, 7,

8 AP

3-2 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)

ASSIGNMENT CHARACTERISTICS TABLE

ProblemNumber Description

DifficultyLevel

TimeAllotted (min.)

1A Analyze transactions and compute net income. Moderate 4050

2A Analyze transactions and prepare financial statements. Moderate 4050

3A Analyze transactions and prepare an income statement,retained earnings statement, and balance sheet.

Moderate 5060

4A Journalize a series of transactions. Simple 2030

5A Journalize transactions, post, and prepare a trial balance. Simple 3040

6A Journalize transactions, post, and prepare a trial balance. Moderate 4050

7A Prepare a correct trial balance. Moderate 3040

8A Journalize transactions, post, and prepare a trial balance. Moderate 4050

9A Analyze errors and their effects on the trial balance. Moderate 3040

1B Analyze transactions and compute net income. Moderate 4050

2B Analyze transactions and prepare financial statements. Moderate 4050

3B Analyze transactions and prepare an income statement,retained earnings statement, and balance sheet.

Moderate 5060

4B Journalize a series of transactions. Simple 2030

5B Journalize transactions, post, and prepare a trial balance. Simple 3040

6B Journalize transactions, post, and prepare a trial balance. Moderate 4050

7B Prepare a correct trial balance. Moderate 3040

8B Journalize transactions, post, and prepare a trial balance. Moderate 4050

9B Analyze errors and their effects on the trial balance Moderate 3040


ANSWERS TO QUESTIONS

1. The system of collecting and processing transaction data and communicating financial informa-tion to decision makers is known as the accounting information system.

2. Yes, a business can enter into a transaction in which only the left side of the accounting equationis affected. An example would be a transaction where an increase in one asset is offset by adecrease in another asset. An increase in the equipment account which is offset by a decrease inthe cash account is a specific example.

3. Accounting transactions are the economic events of the company recorded by accountants becausethey affect the basic accounting equation.

(a) The death of a major stockholder of the company is not an accounting transaction as it does notaffect the basic accounting equation.

(b) Supplies purchased on account is an accounting transaction because it affects the basicaccounting equation.

(c) An employee being fired is not an accounting transaction as it does not affect the basicaccounting equation.

(d) Paying a cash dividend to stockholders is an accounting transaction as it does affect thebasic accounting equation.

4. (a) Decrease assets and decrease stockholders equity.(b) Increase assets and decrease assets.(c) Increase assets and increase stockholders equity.(d) Decrease assets and decrease liabilities.

5. An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or creditside. Because the alignment of these parts resembles the letter T, it is referred to as a T account.

6. Disagree. The terms debit and credit are synonymous with left and right, respectively.

7. James is incorrect. The double-entry system merely records the dual (two-sided) effect of a transac-tion on the accounting equation. A transaction is not recorded twice; it is recorded once, and mustaffect two or more accounts to keep the basic accounting equation in balance. In other words, foreach transaction, debits must equal credits.

8. Gayle is incorrect. A debit balance only means that debit amounts exceed credit amounts in anaccount. Conversely, a credit balance only means that credit amounts are greater than debit amountsin an account. Thus, a debit or credit balance is neither favorable or unfavorable.

9. (a) Asset accounts are increased by debits and decreased by credits.(b) Liability accounts are decreased by debits and increased by credits.(c) The common stock account is decreased by debits and increased by credits.


Questions Chapter 3 (Continued)10. (a) Accounts Receivabledebit balance.

(b) Cashdebit balance.(c) Dividendsdebit balance.(d) Accounts Payablecredit balance.(e) Service Revenuecredit balance.(f) Salaries and Wages Expensedebit balance.(g) Common Stockcredit balance.

11. (a) Accounts Receivableassetdebit balance.(b) Accounts Payableliabilitycredit balance.(c) Equipmentassetdebit balance.(d) Dividendsstockholders equitydebit balance.(e) Suppliesassetdebit balance.

12. (a) Debit Supplies and credit Accounts Payable.(b) Debit Cash and credit Notes Payable.(c) Debit Salaries and Wages Expense and credit Cash.

13. (a) Cashboth debit and credit entries.(b) Accounts Receivableboth debit and credit entries.(c) Dividendsdebit entries only.(d) Accounts Payableboth debit and credit entries.(e) Salaries and Wages Expensedebit entries only.(f) Service Revenuecredit entries only.

14. Normal balances for accounts in Tootsie Rolls financial statements: Accounts Receivabledebit;Income Taxes Payablecredit; Salescredit; Selling, Marketing, and Administrative Expensesdebit.

15. The basic steps in the recording process are:(1) Analyze each transaction in terms of its effect on the accounts.(2) Enter the transaction information in a journal.(3) Transfer the journal information to the appropriate accounts in the ledger.

16. (a) The debit should be entered first.(b) The credit should be indented.

17. (a) No, debits and credits should not be recorded directly in the ledger.(b) The advantages of using the journal are:

(1) It discloses in one place the complete effect of a transaction.(2) It provides a chronological record of all transactions.(3) It helps to prevent or locate errors because the debit and credit amounts for each entry

can be readily compared.

18. (a) Cash............................................................................................................................ 12,000Common Stock ................................................................................................ 12,000 (Issued stock for cash)

(b) Prepaid Insurance .................................................................................................... 800Cash................................................................................................................... 800 (Paid one-year insurance policy)


Questions Chapter 3 (Continued)

(c) Supplies ..................................................................................................................... 1,800Accounts Payable ........................................................................................... 1,800 (Purchased supplies on account)

(d) Cash ........................................................................................................................... 7,500Service Revenue............................................................................................. 7,500 (Received cash for services rendered)

19. (a) The entire group of accounts maintained by a company, including all the asset, liability, andstockholders equity accounts, is referred to collectively as the ledger.

(b) The chart of accounts is important, particularly for a company that has a large number ofaccounts, because it helps organize the accounts and identify their location in the ledger.

20. A trial balance is a list of accounts and their balances at a given time. The primary purpose of atrial balance is to prove the mathematical equality of debits and credits after all journalized trans-actions have been posted. A trial balance also facilitates the discovery of errors in journalizingand posting. In addition, it is useful in preparing financial statements.

21. The proper sequence is as follows:(b) Accounting transaction occurs.(c) Information is entered in the journal.(a) Debits and credits are posted to the ledger.(e) Trial balance is prepared.(d) Financial statements are prepared.

22. (a) The trial balance would balance.(b) The trial balance would not balance since the debits would be $720 higher than the credits.


SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

Assets Liabilities Stockholders Equity(a)(b)(c)

++

+NENE

NE+

BRIEF EXERCISE 3-2

Assets = Liabilities + Stockholders Equity

Cash +Accounts

Receivable + Supplies =AccountsPayable +

BondsPayable +

CommonStock +

RetainedEarnings

(1) +$60,000 +$60,000(2) 9,000 $9,000 Paid div.(3) +13,000 $13,000(4) +$3,100 +$3,100

BRIEF EXERCISE 3-3

Assets = Liabilities + Stockholders Equity

Cash + Inventory + Equipment =AccountsPayable +

CommonStock +

RetainedEarnings

(1) $286,176 +$286,176(2) +137,590 +$137,590 Issued stock(3) +$68,480 +$68,480

BRIEF EXERCISE 3-4DebitEffect

CreditEffect

NormalBalance

(a)(b)(c)(d)(e)(f)

Accounts PayableAdvertising ExpenseService RevenueAccounts ReceivableRetained EarningsDividends

DecreaseIncreaseDecreaseIncreaseDecreaseIncrease

IncreaseDecreaseIncreaseDecreaseIncreaseDecrease

CreditDebitCreditDebitCreditDebit


BRIEF EXERCISE 3-5

Account Debited Account CreditedJune 1

23

12

CashEquipmentRent ExpenseAccounts Receivable

Common StockAccounts PayableCashService Revenue

BRIEF EXERCISE 3-6

June 1 Cash .................................................................................. 5,000Common Stock..................................................... 5,000

2 Equipment....................................................................... 1,100Accounts Payable................................................ 1,100

3 Rent Expense................................................................. 740Cash ......................................................................... 740

12 Accounts Receivable................................................... 700Service Revenue .................................................. 700

BRIEF EXERCISE 3-7

The basic steps in the recording process are:

1. Analyze each transaction. In this step, source documents are exam-ined to determine the effects of the transaction on the accounts.

2. Enter each transaction in a journal. This step is called journalizing andit results in making a chronological record of the transactions.

3. Transfer journal information to ledger accounts. This step is calledposting. Posting makes it possible to accumulate the effects of jour-nalized transactions on individual accounts.


BRIEF EXERCISE 3-8

(a) Basic Analysis (b) Debit-Credit AnalysisAug. 1 The asset Cash is increased;

the stockholders equityaccount Common Stock isincreased.

Debits increase assets:debit Cash $10,000. Creditsincrease stockholders equity:credit Common Stock $10,000.

4 The asset Prepaid Insuranceis increased; the asset Cashis decreased.

Debits increase assets:debit Prepaid Insurance $1,500.Credits decrease assets:credit Cash $1,500.

16 The asset Cash is increased;the revenue ServiceRevenue is increased.

Debits increase assets:debit Cash $900.Credits increase revenues:credit Service Revenue $900.

27 The expense Salaries andWages Expense is increased;the asset Cash is decreased.

Debits increase expenses:debit Salaries and WagesExpense $620.Credits decrease assets:credit Cash $620.

BRIEF EXERCISE 3-9

Aug. 1 Cash .................................................................................. 10,000Common Stock ..................................................... 10,000

4 Prepaid Insurance......................................................... 1,500Cash ......................................................................... 1,500

16 Cash .................................................................................. 900Service Revenue .................................................. 900

27 Salaries and Wages Expense ................................... 620Cash ......................................................................... 620


BRIEF EXERCISE 3-10

Cash Service Revenue5/12 1,600 5/15 2,000

5/5 3,800 5/15 2,000

Accounts Receivable5/5 3,800 5/12 1,600

BRIEF EXERCISE 3-11

LYNDON COMPANYTrial BalanceJune 30, 2012

Debit CreditCash ..........................................................................................Accounts Receivable...........................................................Equipment ...............................................................................Accounts Payable.................................................................Common Stock ......................................................................Dividends.................................................................................Service Revenue ...................................................................Salaries and Wages Expense ...........................................Rent Expense .........................................................................

$ 5,400 3,000 13,000

1,200

4,000 1,000$27,600

$ 1,000 18,000

8,600

$27,600


BRIEF EXERCISE 3-12

PELICAN COMPANYTrial Balance

December 31, 2012

Debit CreditCash..........................................................................................Prepaid Insurance ................................................................Accounts Payable ................................................................Unearned Service Revenue...............................................Common Stock......................................................................Retained Earnings................................................................Dividends ................................................................................Service Revenue...................................................................Salaries and Wages Expense...........................................Rent Expense.........................................................................

$20,800 3,500

5,000

14,600 2,600$46,500

$ 2,500 1,800 10,000 6,600

25,600

$46,500


SOLUTIONS TO DO IT! REVIEW EXERCISES

DO IT! 3-1

Assets = Liabilities + Stockholders EquityRetained Earnings

Cash +Accounts

Receivable =AccountsPayable +

CommonStock + Revenues Expenses Dividends

(1) +$20,000 +$20,000(2) +$20,000 20,000(3) +$1,800 $1,800(4) 3,000 $3,000

DO IT! 3-2

Phil would likely need the following accounts in which to record the trans-actions necessary to ready his photography studio for opening day:

Cash (debit balance) Equipment (debit balance)Supplies (debit balance) Accounts Payable (credit balance)Notes Payable (credit balance) Common Stock (credit balance)

DO IT! 3-3

Each transaction that is recorded is entered in the general journal. Thethree activities would be recorded as follows:

1. Cash....................................................................................... 8,000Common Stock.......................................................... 8,000

2. Supplies ............................................................................... 950Accounts Payable .................................................... 550Cash.............................................................................. 400

3. No entry because no transaction has occurred.

DO IT! 3-4

Cash4/1 1,9004/3 3,400

4/16 5004/20 300

4/30 4,500


SOLUTIONS TO EXERCISESEXERCISE 3-1

1. Increase in assets and increase in stockholders equity.2. Decrease in assets and decrease in stockholders equity.3. Increase in assets and increase in stockholders equity.4. Increase in assets and increase in stockholders equity.5. Decrease in assets and decrease in stockholders equity.6. Increase in liabilities and decrease in stockholders equity.7. Increase in assets and decrease in assets.8. Increase in assets and decrease in assets.9. Increase in assets and increase in liabilities.

EXERCISE 3-2

Assets = Liabilities + Stockholders EquityRetained Earnings

Cash +Accounts

Receivable + Equipment =AccountsPayable +

CommonStock + Revenues Expenses

(1) +$30,000 +$30,000(2) $ 4,000 $4,000 Rent Expense(3) +12,000 $12,000(4) +5,000 +$5,000 Service Revenue(5) 8,000 8,000 Utilities Expense(6) +40,000 +$40,000 Issued Stock(7) 30,000 30,000(8) +1,300 1,300 Advertising Expense

$15,000 + $12,000 + $30,000 = $ 1,300 + $40,000 + $5,000 $13,300

$33,000 $33,000

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$131

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$131

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EXERCISE 3-3


EXERCISE 3-4

(a) 1. Stockholders invested $20,000 cash in the business. 2. Purchased equipment for $5,000, paying $1,000 in cash and the

balance of $4,000 on account. 3. Paid $750 cash for supplies. 4. Earned $9,500 in revenue, receiving $4,100 cash and $5,400 on

account. 5. Paid $1,500 cash on accounts payable. 6. Paid $2,000 cash dividends to stockholders. 7. Paid $800 cash for rent. 8. Collected $450 cash from customers on account. 9. Paid salaries of $3,000.10. Incurred $300 of utilities expense on account.

(b) Issued common stock........................................................................ $20,000Service revenue ................................................................................... 9,500Dividends ............................................................................................... (2,000)Rent expense ........................................................................................ (800)Salaries and wages expense ........................................................... (3,000)Utilities expense................................................................................... (300)Increase in stockholders equity .................................................... $23,400

(c) Service revenue ................................................................................... $ 9,500Rent expense ........................................................................................ (800)Salaries and wages expense ........................................................... (3,000)Utilities expense................................................................................... (300)Net income............................................................................................. $ 5,400


EXERCISE 3-5NIGEL COMPANYIncome Statement

For the Month Ended August 31, 2012

RevenuesService revenue................................................................. $9,500

ExpensesSalaries and wages expense......................................... $3,000Rent expense...................................................................... 800Utilities expense ................................................................ 300

Total expenses.......................................................... 4,100Net income ................................................................................... $5,400

NIGEL COMPANYRetained Earnings Statement


Retained earnings, August 1........................................................................ $ 0Add: Net income ............................................................................................ 5,400

5,400Less: Dividends............................................................................................... 2,000Retained earnings, August 31...................................................................... $3,400

NIGEL COMPANYBalance Sheet

August 31, 2012

AssetsCurrent Assets:Cash............................................................................................. $15,500Accounts receivable .............................................................. 4,950Supplies ..................................................................................... 750

Total current assets ...................................................... 21,200Equipment ................................................................................. 5,000

Total assets...................................................................... $26,200Liabilities and Stockholders Equity

Current liabilitiesAccounts payable .......................................................... $ 2,800

Stockholders equityCommon stock................................................................ $20,000Retained earnings.......................................................... 3,400 23,400

Total liabilities and stockholders equity ...... $26,200

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EXERCISE 3-6


EXERCISE 3-6 (Continued)(b)

General JournalTrans. Account Titles Debit Credit

1. Cash ..............................................................................Common Stock.................................................

15,00015,000

2. Equipment...................................................................Cash .....................................................................

10,00010,000

3. Supplies.......................................................................Accounts Payable............................................

300 300

4. Accounts Receivable...............................................Service Revenue ..............................................

3,700 3,700

5. Advertising Expense ...............................................Cash .....................................................................

200 200

6. Cash ..............................................................................Accounts Receivable......................................

1,100 1,100

7. Accounts Payable.....................................................Cash .....................................................................

300 300

8. Dividends ....................................................................Cash .....................................................................

400 400

EXERCISE 3-7

Oct. 1 Debits increase assets: debit Cash $30,000.Credits increase stockholders equity: credit Common Stock $30,000.

2 No accounting transaction.

3 Debits increase assets: debit Equipment $3,800.Credits increase liabilities: credit Accounts Payable $3,800.


EXERCISE 3-7 (Continued)Oct. 6 Debits increase assets: debit Accounts Receivable $10,800.

Credits increase revenues: credit Service Revenue $10,800.

10 Debits increase assets: debit Cash $140.Credits increase revenues: credit Service Revenue $140.

27 Debits decrease liabilities: debit Accounts Payable $700.Credits decrease assets: credit Cash $700.

30 Debits increase expenses: debit Salaries and WagesExpense $3,000.Credits decrease assets: credit Cash $3,000.

EXERCISE 3-8

General JournalDate Account Titles Debit CreditOct. 1 Cash............................................................................

Common Stock...............................................30,000

30,000

2 No entry.

3 Equipment.................................................................Accounts Payable..........................................

3,800 3,800

6 Accounts Receivable.............................................Service Revenue ............................................

10,80010,800

10 Cash............................................................................Service Revenue ............................................

140 140

27 Accounts Payable...................................................Cash ...................................................................

700 700

30 Salaries and Wages Expense .............................Cash ...................................................................

3,000 3,000


EXERCISE 3-9

General JournalDate Account Titles Debit CreditMay 4 Accounts Payable ...................................................

Cash....................................................................700

700

7 Accounts Receivable .............................................Service Revenue.............................................

6,8006,800

8 Supplies .....................................................................Accounts Payable ..........................................

850 850

9 Equipment .................................................................Cash....................................................................

1,0001,000

17 Salaries and Wages Expense..............................Cash....................................................................

530 530

22 Maintenance and Repair Expense.....................Accounts Payable ..........................................

900 900

29 Prepaid Insurance...................................................Cash....................................................................

1,200 1,200


EXERCISE 3-10

(a)Cash Accounts Payable

Oct. 1 30,000 Oct. 27 700 Oct. 27 700 Oct. 3 3,80010 140 30 3,000 Bal. 3,100

Bal. 26,440Common Stock

Accounts Receivable Oct. 1 30,000Oct. 6 10,800 Bal. 30,000Bal. 10,800

Service RevenueEquipment Oct. 6 10,800

Oct. 3 3,800 10 140Bal. 3,800 Bal. 10,940

Salaries and Wages ExpenseOct. 30 3,000Bal. 3,000

(b) PLUNKETT REAL ESTATE AGENCYTrial Balance

October 31, 2012

Debit CreditCash ................................................................................Accounts Receivable.................................................Equipment.....................................................................Accounts Payable.......................................................Common Stock............................................................Service Revenue .........................................................Salaries and Wages Expense .................................

$26,44010,800 3,800

3,000$44,040

$ 3,100 30,000 10,940

$44,040


EXERCISE 3-11

(a) Assets = Liabilities + Stockholders Equity

Cash + Equipment =AccountsPayable +

CommonStock Dividends

Sept. 1 +$20,000 +$20,000 Issued stock5 3,000 +$9,000 +$ 6,000

25 4,000 4,00030 500 $500 Dividends

$ 12,500 + $9,000 = $ 2,000 + +$20,000 $500

$21,500.. $21,500

(b)General Journal J1

Date Account Titles Debit CreditSept. 1 Cash ...........................................................................

Common Stock..............................................20,000

20,000

5 Equipment................................................................Accounts Payable.........................................Cash ..................................................................

9,000 6,000 3,000

25 Accounts Payable..................................................Cash ..................................................................

4,000 4,000

30 Dividends .................................................................Cash ..................................................................

500 500


EXERCISE 3-11 (Continued)(c)

Cash9/1 20,000 9/5 3,000

9/25 4,000 9/30 500

Bal. 12,500

Equipment9/5 9,000 Bal. 9,000

Accounts Payable9/25 4,000 9/5 6,000

Bal. 2,000

Common Stock9/1 20,000Bal. 20,000

Dividends9/30 500 Bal. 500


EXERCISE 3-12

(a)General Journal

Date Account Titles and Explanation Debit CreditApr. 1 Cash.............................................................................

Common Stock ............................................... (Issued stock for cash)

15,00015,000

4 Supplies .....................................................................Accounts Payable .......................................... (Purchased supplies on account)

5,2005,200

7 Accounts Receivable .............................................Service Revenue............................................. (Billed clients for services rendered)

3,4003,400

12 Cash.............................................................................Service Revenue............................................. (Received cash for revenue earned)

700 700

15 Salaries and Wages Expense..............................Cash.................................................................... (Paid salaries)

800 800

25 Accounts Payable ...................................................Cash.................................................................... (Paid creditors on account)

3,5003,500

29 Cash.............................................................................Accounts Receivable .................................... (Received cash in payment of account)

800 800

30 Cash.............................................................................Unearned Service Revenue ........................ (Received cash for future services)

900 900


EXERCISE 3-12 (Continued)(b) McGREGOR GARDENING COMPANY, INC.

Trial BalanceApril 30, 2012

Debit CreditCash ................................................................................Accounts Receivable.................................................Supplies .........................................................................Accounts Payable.......................................................Unearned Service Revenue.....................................Common Stock............................................................Service Revenue .........................................................Salaries and Wages Expense .................................

$13,100 2,600 5,200

800$21,700

$ 1,700 900 15,000 4,100

$21,700


EXERCISE 3-13

(a)Cash

Aug. 1 8,000 10 1,700 31 600

Aug. 12 1,200

Bal. 9,100

Accounts ReceivableAug. 25 3,400 Aug. 31 600Bal. 2,800

EquipmentAug. 12 6,200 Bal. 6,200

Notes Payable Aug. 12 5,000 Bal. 5,000

Common Stock Aug. 1 8,000 Bal. 8,000

Service Revenue Aug. 10 1,700

25 3,400 Bal. 5,100

(b) GALAXY INC.Trial Balance

August 31, 2012

Debit CreditCash.................................................................................Accounts Receivable .................................................Equipment......................................................................Notes Payable...............................................................Common Stock.............................................................Service Revenue..........................................................

$ 9,100 2,800 6,200

$18,100

$ 5,000 8,000 5,100$18,100


EXERCISE 3-14

(a) Oct. 1 Cash........................................................................... 7,000Common Stock ............................................. 7,000 (Issued stock for cash)

10 Cash........................................................................... 980Service Revenue........................................... 980 (Received cash for services provided)

10 Cash........................................................................... 8,000Notes Payable ............................................... 8,000 (Obtained loan from bank)

20 Cash........................................................................... 700Accounts Receivable .................................. 700 (Received cash in payment of account)

20 Accounts Receivable ........................................... 920Service Revenue........................................... 920 (Billed clients for services provided)


EXERCISE 3-14 (Continued)(b) STAMPFER CO.

Trial BalanceOctober 31, 2012

Debit CreditCash.................................................................................Accounts Receivable .................................................Supplies..........................................................................Equipment......................................................................Notes Payable...............................................................Accounts Payable .......................................................Common Stock.............................................................Dividends .......................................................................Service Revenue..........................................................Salaries and Wages Expense..................................Supplies Expense........................................................Rent Expense................................................................

$15,7301,020

2203,000

300

500180

250$21,200

$ 8,000 1,500 9,000

2,700

$21,200

EXERCISE 3-15

Error(a)

In Balance(b)

Difference(c)

Larger Column1.2.3.4.5.6.

NoYesYesNoYesNo

$400

300

36

Debit

Credit

Credit


EXERCISE 3-16

(a) ROSHEK DELIVERY SERVICETrial BalanceJuly 31, 2012

Debit CreditCash ($98,370 Debit total without Cash $85,946) ......................................................................Accounts Receivable .................................................Prepaid Insurance .......................................................Equipment......................................................................Accounts Payable .......................................................Salaries and Wages Payable ...................................Notes Payable (due 2015) .........................................Common Stock.............................................................Retained Earnings.......................................................Dividends .......................................................................Service Revenue..........................................................Salaries and Wages Expense..................................Maintenance and Repairs Expense.......................Insurance Expense .....................................................

$12,424 13,400 2,200 59,360

700

7,428 1,958 900$98,370

$ 8,400 820 28,450 40,000 5,200

15,500

$98,370


EXERCISE 3-16 (Continued)(b) ROSHEK DELIVERY SERVICE

Income StatementFor the Month Ended July 31, 2012

Revenues Service revenue .......................................................... $15,500Expenses Salaries and wages expense.................................. $7,428 Maintenance and repairs expense........................ 1,958 Insurance expense..................................................... 900 Total expenses........................................................ 10,286Net income........................................................................ $ 5,214

ROSHEK DELIVERY SERVICERetained Earnings Statement

For the Month Ended July 31, 2012

Retained earnings, July 1 ............................................ $ 5,200Add: Net income .......................................................... 5,214

10,414Less: Dividends ............................................................. 700Retained earnings, July 31.......................................... $ 9,714


EXERCISE 3-16 (Continued)ROSHEK DELIVERY SERVICE

Balance SheetJuly 31, 2012

AssetsCurrent Assets Cash ............................................................................... $12,424 Accounts receivable ................................................. 13,400 Prepaid insurance...................................................... 2,200 Total current assets .............................................. $28,024Equipment ........................................................................ 59,360 Total assets.............................................................. $87,384

Liabilities and Stockholders EquityCurrent Liabilities Accounts payable...................................................... $ 8,400 Salaries and wages payable................................... 820 Total current liabilities ......................................... $ 9,220Notes payable ................................................................. 28,450 Total liabilities......................................................... 37,670Stockholders EquityCommon stock................................................................ 40,000Retained earnings.......................................................... 9,714 Total stockholders equity.................................. 49,714 Total liabilities and stockholders equity....... $87,384


EXERCISE 3-17

(a) (b)Account

Normal BalanceDebit or Credit

Balance Sheet orIncome Statement

Accounts payableAccounts receivableCommon stockDepreciation expenseInterest expenseInterest incomeInventoriesPrepaid expensesProperty and EquipmentRevenues

CreditDebitCreditDebitDebitCreditDebitDebitDebitCredit

Balance sheetBalance sheetBalance sheetIncome statementIncome statementIncome statementBalance sheetBalance sheetBalance sheetIncome statement

EXERCISE 3-18

1. Financing activity2. Operating activity3. Operating activity4. Non-cash event5. Financing activity6. Non-cash event7. Operating activity8. Investing activity9. Non-cash event

EXERCISE 3-19

1. Financing activity2. Financing activity3. Investing activity4. Operating activity5. Non-cash event6. Operating activity7. Non-cash event8. Operating activity9. Financing activity

(a)VA

GA

BO

ND

TR

AVE

L A

GEN

CY IN

C.

Ass

ets

=Li

abili

ties

+St

ockh

olde

rs E

quity

Ret

aine

d Ea

rnin

gsCa

sh+

Acc

ount

sR

ecei

vabl

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lies

+Eq

uipm

ent

=

Acc

ount

sPa

yabl

e+

Com

mon

Stoc

k+

Rev

enue

s

Expe

nses

D

ivid

ends

1.+

$30,0

00+

$30,0

00

2.90

0$9

00R

ent E

xpen

se

3.3,

400

+$3

,400

4.+

$200

20

0A

dver

tisin

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5.50

0+

$500

6.+

3,00

0+

$9,00

0+

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00Se

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7.40

0$4

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ivid

ends

8.20

020

0

9.1,

800

1,

800

Sala

ries

and

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e

10.

+

9,00

0 9,

000

$3

4,800

+ $

0

+ $5

00+

$3

,400

=$

0

+ $3

0,000

+ $1

2,000

$2

,900

$4

00

$3

8,700

$3

8,700

PROBLEM 3-1A

SOLUTIONS TO PROBLEM



PROBLEM 3-1A (Continued)(b) Service Revenue................................................................ $12,000

ExpensesSalaries and Wages Expense............................... $1,800Rent Expense............................................................. 900Advertising Expense............................................... 200 2,900

Net Income......................................................... $ 9,100

OR

Revenues ............................................................................. $12,000Less: Expenses ................................................................ 2,900Net Income........................................................................... $ 9,100

(a)TA

YLO

R M

AD

E CO

NSU

LTIN

G IN

C.

Ass

ets

=Li

abili

ties

+St

ockh

olde

rs E

quity

Ret

aine

d Ea

rnin

gsD

ate

Cash

+

Acc

ount

sR

ecei

vabl

e+

Supp

lies

+Eq

uipm

ent=

Not

esPa

yabl

e+

Acc

ount

sPa

yabl

e+

Com

mon

Stoc

k+

Rev

enue

s

Expe

nses

D

ivid

ends

May

1+

$15,0

00+

$15,0

00

260

0$6

00R

ent E

xpen

se

3+

$500

+$5

00

515

015

0A

dver

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9+

1,40

0+

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0Se

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venu

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1220

0$2

00D

ivid

ends

15+

4,20

0+

4,20

0Se

rvic

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venu

e

172,

500

2,

500

Sala

ries

and

Wag

esEx

pens

e20

50

050

0

23+

1,20

01,

200

26+

5,00

0+

$5,00

0

2920

0+

$2,00

0+

1,80

0

30 18

0

18

0

Utili

ties

Expe

nse

$1

8,270

+$3

,000

+ $5

00+

$2

,000

= $5

,000

+ $1

,800

+ $1

5,000

+ $5

,600

$3

,430

$2

00

$23,7

70 $2

3,770

PROBLEM 3-2A



PROBLEM 3-2A (Continued)(b) TAYLOR MADE CONSULTING INC.

Income StatementFor the Month Ended May 31, 2012

RevenuesService revenue ($1,400 + $4,200) ................... $5,600

ExpensesSalaries and wages expense............................. $2,500Rent expense.......................................................... 600Utilities expense .................................................... 180Advertising expense ............................................ 150

Total expenses.............................................. 3,430Net income........................................................................ $2,170

(c) TAYLOR MADE CONSULTING INC.Balance SheetMay 31, 2012

AssetsCurrent assets

Cash .......................................................................... $18,270Accounts receivable ............................................ 3,000Supplies ................................................................... 500

Total current assets .................................... $21,770Equipment ............................................................... 2,000

Total assets.................................................... $23,770

Liabilities and Stockholders EquityCurrent liabilities

Notes payable ........................................................ $ 5,000Accounts payable ................................................. 1,800

Total current liabilities................................ $ 6,800Stockholders Equity

Common stock....................................................... 15,000Retained earnings ($0 + $2,170 $200)......... 1,970 16,970

Total liabilities and stockholders equity ........................................................... $23,770

(a)D

ICK

R

EBER

IN

C.

Ass

ets

=Li

abili

ties

+ St

ockh

olde

rs E

quity

Cash

+

Acc

ount

sR

ecei

vabl

e+

Supp

lies

+Eq

uipm

ent

=

Not

espa

yabl

e+

Acc

ount

sPa

yabl

e+

Com

mon

Stoc

k+

Ret

aine

dEa

rnin

gs+

R

even

ues

Ex

pens

es

Div

iden

dsJu

ly 3

1B

al.

$4,00

0+

$2,50

0+

$500

+$5

,000

=$4

,200

+$6

,200

+$1

,600

Aug

. 1+

1,10

01,

100

42,

700

2,

700

9+

3,60

0+

1,80

0+

$5,40

0Se

rvic

e Re

venu

e

1570

0+

4,00

0+

3,30

0

192,

450

$1

,400

Sala

ries

and

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70

0R

ent E

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se

35

0A

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2370

0$7

00D

ivid

ends

26+

5,00

0+

$5,00

0

31

+

380

38

0

Utili

ties

Expe

nse

$7,15

0+

$3,20

0+

$500

+$9

,000

= $5

,000

+$5

,180

+$6

,200

+$1

,600

+ $5

,400

$2

,830

$7

00

$19,8

50 $1

9,850

PROBLEM 3-3A



PROBLEM 3-3A (Continued)

(b) ROBIN KLANN INC.Income Statement


RevenuesService revenue ........................................................ $5,400

ExpensesSalaries and wages expense................................ $1,400Rent expense............................................................. 700Utilities expense ....................................................... 380Advertising expense ............................................... 350

Total expenses................................................. 2,830Net income........................................................................... $2,570

ROBIN KLANN INC.Retained Earnings Statement


Retained earnings, August 1............................................................... $1,600Add: Net income................................................................................... 2,570

4,170Less: Dividends...................................................................................... 700Retained earnings, August 31............................................................. $3,470


PROBLEM 3-3A (Continued)ROBIN KLANN INC.

Balance SheetAugust 31, 2012


Cash ............................................................................ $7,150Accounts receivable .............................................. 3,200Supplies ..................................................................... 500

Total current assets ...................................... $10,850Office equipment..................................................... 9,000

Total assets ..................................................... $19,850


Notes payable .......................................................... $5,000Accounts payable................................................... 5,180

Total current liabilities ................................. $10,180Stockholders equity

Common stock ........................................................ 6,200Retained earnings .................................................. 3,470 9,670

Total liabilities and stockholders equity............................................................. $19,850


PROBLEM 3-4A

Date Account Titles and Explanation Debit CreditMar. 1 Cash.............................................................................


50,00050,000

3 Land.............................................................................Buildings....................................................................Equipment .................................................................

Cash.................................................................... (Purchased Arnies Golf Land)

23,000 9,000 6,000

38,000

5 Advertising Expense..............................................Cash.................................................................... (Paid for advertising)

1,200 1,200

6 Prepaid Insurance...................................................Cash.................................................................... (Paid for one-year insurance policy)

2,400 2,400

10 Equipment .................................................................Accounts Payable .......................................... (Purchased equipment on account)

5,500 5,500


1,600 1,600

19 Cash (100 X $25)......................................................Unearned Service Revenue ........................ (Received cash for coupon books sold)

2,500 2,500

25 Dividends...................................................................Cash.................................................................... (Payment of cash dividend)

500 500



Date Account Titles and Explanation Debit CreditMar. 30 Salaries and Wages Expense .............................

Cash ................................................................... (Paid salaries expense)

800 800

30 Accounts Payable...................................................Cash ................................................................... (Paid creditor on account)

5,5005,500

31 Cash............................................................................Service Revenue ............................................ (Received cash for revenue earned)

900 900


PROBLEM 3-5A

(a)

Date Account Titles and Explanation Debit CreditApr. 1 Cash.............................................................................

Common Stock ............................................... (Issued shares of stock for cash)

18,00018,000

1 No entrynot a transaction.

2 Rent Expense ...........................................................Cash.................................................................... (Paid monthly office rent)

900 900

3 Supplies .....................................................................Accounts Payable .......................................... (Purchased supplies on account from Spring Green Company)

1,300 1,300

10 Accounts Receivable .............................................Service Revenue............................................. (Billed clients for services rendered)

1,900 1,900

11 Cash.............................................................................Unearned Service Revenue ........................ (Received cash advance for future service)

700 700


2,800 2,800

30 Salaries and Wages Expense..............................Cash.................................................................... (Paid monthly salary)

1,500 1,500

30 Accounts Payable ...................................................Cash.................................................................... (Paid Spring Green Company on account)

300 300


PROBLEM 3-5A (Continued)(b)

Cash4/1 18,000 4/11 700 4/20 2,800

4/2 900 4/30 1,500 4/30 300

Bal. 18,800

Accounts Receivable4/10 1,900 Bal. 1,900

Supplies4/3 1,300 Bal. 1,300

Accounts Payable4/30 300 4/3 1,300

Bal. 1,000

Unearned Service Revenue 4/11 700 Bal. 700

Common Stock 4/1 18,000 Bal. 18,000

Service Revenue 4/10 1,900 4/20 2,800 Bal. 4,700

Salaries and Wages Expense4/30 1,500 Bal. 1,500

Rent Expense4/2 900 Bal. 900


PROBLEM 3-5A (Continued)(c) TOWNE ARCHITECTS INC.

Trial BalanceApril 30, 2012

Debit CreditCash.................................................................................Accounts Receivable .................................................Supplies..........................................................................Accounts Payable .......................................................Unearned Service Revenue......................................Common Stock.............................................................Service Revenue..........................................................Salaries and Wages Expense..................................Rent Expense................................................................

$18,800 1,900 1,300

1,500 900$24,400

$ 1,000 700 18,000 4,700

$24,400


PROBLEM 3-6A

(a) & (c)Cash

10/1 Bal. 8,200 10/5 1,300

10/15 1,200 10/20 1,900 10/29 300 10/31 400

Bal. 5,700

Accounts Receivable10/1 Bal. 2,600 10/10 5,100

10/5 1,300

Bal. 6,400

Supplies10/1 Bal. 2,100 Bal. 2,100

Equipment10/1 Bal. 8,000 Bal. 8,000

Accounts Payable10/20 1,900 10/1 Bal. 4,800

Bal. 2,900

Unearned Service Revenue10/17 600 10/1 Bal. 1,000

Bal. 500

Common Stock10/1 Bal. 15,000Bal. 15,000

Dividends10/29 300 Bal. 300

Service Revenue10/10 5,10010/17 600Bal. 5,700


Utilities Expense10/31 400 Bal. 400



Date Account Titles and Explanation Debit CreditOct. 5 Cash.............................................................................

Accounts Receivable .................................... (Received collections from customers on account)

1,3001,300

10 Accounts Receivable .............................................Service Revenue............................................. (Billed customers for services performed)

5,1005,100

15 Salaries and Wages Expense..............................Cash.................................................................... (Paid employee salaries)

1,2001,200

17 Unearned Service Revenue .................................Service Revenue............................................. (Performed services for customers who paid in advance)

600 600

20 Accounts Payable ...................................................Cash.................................................................... (Paid creditors on account)

1,9001,900

29 Dividends...................................................................Cash.................................................................... (Payment of cash dividend)

300 300

31 Utilities Expense......................................................Cash.................................................................... (Paid utilities)

400 400


PROBLEM 3-6A (Continued)(d) MIMOSA COMPANY

Trial BalanceOctober 31, 2012

Debit CreditCash ................................................................................Accounts Receivable.................................................Supplies .........................................................................Equipment.....................................................................Accounts Payable.......................................................Unearned Service Revenue.....................................Common Stock............................................................Dividends.......................................................................Service Revenue .........................................................Salaries and Wages Expense .................................Utilities Expense .........................................................

$ 5,700 6,400 2,100 8,000

300

1,200 400$24,100

$ 2,900 500 15,000

5,700

$24,100


PROBLEM 3-7A

MICHELS CO.Trial BalanceJune 30, 2012

Debit CreditCash ($3,090 $780 + $870).....................................Accounts Receivable*................................................Supplies ($800 $340)...............................................Equipment ($3,000 + $340) .......................................Accounts Payable ($3,686 $206 $260) ...........Unearned Service Revenue......................................Common Stock.............................................................Dividends ($800 + $600) ............................................Service Revenue..........................................................Salaries and Wages Expense ($3,600 + $700 $600) ............................................Utilities Expense..........................................................

$ 3,180 3,910 460 3,340

1,400

3,700 910$16,900

$ 3,220 1,200 9,000

3,480

$16,900

*$3,190 + $780 $870 $90 + $900


PROBLEM 3-8A

(a) & (c)Cash

3/1 Bal. 16,000 3/9 9,900 3/20 8,300 3/31 750 3/31 20,000

3/2 2,000 3/10 10,900 3/12 500 3/20 5,000 3/31 3,800

Bal. 32,750

Accounts Receivable3/31 750 Bal. 750

Land3/1 Bal. 38,000 Bal. 38,000

Buildings3/1 Bal. 22,000 Bal. 22,000

Equipment3/1 Bal. 16,000 Bal. 16,000

Accounts Payable3/10 10,900 3/1 Bal. 12,000

3/2 8,000 Bal. 9,100

Common Stock3/1 Bal. 80,000Bal. 80,000

Service Revenue3/9 9,9003/20 8,3003/31 20,000Bal. 38,200

Sales Revenue3/31 1,500Bal. 1,500

Advertising Expense3/12 500 Bal. 500

Rent Expense3/2 10,000 3/20 5,000 Bal. 15,000




Date Account Titles and Explanation Debit CreditMar. 2 Rent Expense...........................................................

Accounts Payable..........................................Cash ................................................................... (Rented films for cash and on account)

10,000 8,000 2,000


9 Cash ............................................................................Service Revenue ............................................ (Received cash for admissions)

9,900 9,900

10 Accounts Payable ($8,000 + $2,900).................Cash ................................................................... (Paid creditors on account)

10,90010,900


12 Advertising Expense .............................................Cash ................................................................... (Paid advertising expenses)

500 500

20 Cash ............................................................................Service Revenue ............................................ (Received cash for admissions)

8,300 8,300

20 Rent Expense...........................................................Cash ................................................................... (Paid film rental)

5,000 5,000

31 Salaries and Wages Expense .............................Cash ................................................................... (Paid salaries expense)

3,800 3,800



Date Account Titles and Explanation Debit CreditMar. 31 Cash............................................................................

Accounts Receivable ............................................Sales Revenue (15% X $10,000)................... (Received cash and balance on account for concession revenue)

750 750

1,500

31 Cash............................................................................Service Revenue............................................ (Received cash for admissions)

20,00020,000

(d) SCIFI THEATER INC.Trial Balance

March 31, 2012

Debit CreditCash .............................................................................Accounts Receivable..............................................Land..............................................................................Buildings.....................................................................Equipment..................................................................Accounts Payable....................................................Common Stock.........................................................Service Revenue ......................................................Sales Revenue ..........................................................Advertising Expense ..............................................Rent Expense............................................................Salaries and Wages Expense ..............................

$ 32,750 750 38,000 22,000 16,000

500 15,000 3,800$128,800

$ 9,100 80,000 38,200 1,500

$128,800


PROBLEM 3-9A

Error (a) In Balance (b) Difference (c) Larger Column1. No $600 Debit2. Yes None N/A3. Yes None N/A4. No $680 Credit5. Yes None N/A6. Yes None N/A7. No $900 Debit8. Yes None N/A

(a)N

EW D

AW

N W

INDO

W W

ASH

ING

IN

C.

Ass

ets

=Li

abili

ties

+St

ockh

olde

rs E

quity

Ret

aine

d Ea

rnin

gsCa

sh+

Acc

ount

sR

ecei

vabl

e+

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lies

+Eq

uipm

ent

=

Acc

ount

sPa

yabl

e+

Com

mon

Stoc

k+

Rev

enue

s

Expe

nses

D

ivid

ends

1.+

$20,0

00+

$20,0

00

2.9,

000

+$9

,000

3.70

0$7

00R

ent E

xpen

se

4.30

0+

$300

5.+

$750

75

0A

dver

tisin

g Ex

pens

e

6.+

7,20

0+

$7,20

0Se

rvic

e Re

venu

e

7.50

0$5

00D

ivid

ends

8.1,

700

1,

700

Sala

ries

and

Wag

esEx

pens

e

9.14

0 14

0Ut

ilitie

s Ex

pens

e

10.

+$1

,000

+1,

000

Serv

ice

Reve

nue

11.

+

650

65

0

$15,5

10+

$

350

+ $3

00+

$9

,000

= $7

50+

$2

0,000

+ $8

,200

$3

,290

$5

00

$2

5,160

$2

5,160

PROBLEM 3-1B



PROBLEM 3-1B (Continued)(b) Service Revenue ($7,200 + $1,000).............................. $8,200

ExpensesSalaries and Wages Expense............................... $1,700Advertising Expense............................................... 750Rent Expense............................................................. 700Utilities Expense....................................................... 140 3,290

Net Income......................................................... $4,910

OR

Revenues ............................................................................. $8,200Less: Expenses ................................................................ 3,290Net Income........................................................................... $4,910

(a)A

LDR

ICH

SE

RVI

CE IN

C.

Ass

ets

=Li

abili

ties

+St

ockh

olde

rs E

quity

Ret

aine

d Ea

rnin

gsD

ate

Cash

+

Acc

ount

sR

ecei

vabl

e+

Supp

lies

+Eq

uipm

ent=

Not

esPa

yabl

e+

Acc

ount

sPa

yabl

e+

Com

mon

Stoc

k+

Rev

enue

s

Expe

nses

D

ivid

ends

June

1$1

5,000

$15,0

00

22,

000

+$1

5,000

+$1

3,000

360

0$6

00R

ent E

xpen

se

5+

$2,40

0+

$2,40

0Se

rvic

e Re

venu

e

930

0$3

00D

ivid

ends

12+

$240

+$2

40

15+

750

75

0

17+

200

20

0A

dver

tisin

gEx

pens

e20

+1,

500

+1,

500

Serv

ice

Reve

nue

2350

050

0

2618

018

0Ut

ilitie

s Ex

pens

e

2924

024

0

30 75

0

75

0

Sala

ries

and

Wag

es E

xpen

se$1

2,680

+ $1

,650

+ $2

40+

$1

5,000

= $1

2,500

+ $2

00+

$15,0

00+

$3

,900

$1

,730

$3

00

$29,5

70 $2

9,570

PROBLEM 3-2B



PROBLEM 3-2B (Continued)(b) ALDRICH SERVICE INC.

Income StatementFor the Month Ended June 30, 2012

RevenuesService revenue ($2,400 + $1,500) ................... $3,900

ExpensesSalaries and wages expense............................. $750Rent expense.......................................................... 600Advertising expense ............................................ 200Utilities expense .................................................... 180

Total expenses.............................................. 1,730Net income........................................................................ $2,170

(c) ALDRICH SERVICE INC.Balance SheetJune 30, 2012

AssetsCurrent Assets

Cash........................................................................... $12,680Accounts receivable............................................. 1,650Supplies.................................................................... 240

Total current assets..................................... $14,570Equipment ........................................................................ 15,000

Total assets............................................................. $29,570

Liabilities and Stockholders EquityCurrent Liabilities

Notes payable......................................................... $12,500Accounts payable ................................................. 200

Total liabilities ............................................... $12,700Stockholders equity

Common stock....................................................... 15,000Retained earnings* ............................................... 1,870 16,870

Total liabilities and stockholders equity ........................................................... $29,570

*($0 + $2,170 $300)

(a)TI

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9,750

PROBLEM 3-3B



PROBLEM 3-3B (Continued)

(b) TIEDE COMPANYIncome Statement

For the Month Ended September 30, 2012

RevenuesService revenue ............................................................ $10,600

ExpensesRent expense................................................................. $1,100Salaries and wages expense.................................... 900Advertising expense ................................................... 250Utilities expense ........................................................... 220

Total expenses..................................................... 2,470Net income............................................................................... $8,130

TIEDE COMPANYRetained Earnings Statement

For the Month Ended September 30, 2012

Retained earnings, September 1........................................................ $ 700Add: Net income ................................................................................... 8,130

8,830Less: Dividends...................................................................................... 600Retained earnings, September 30 ..................................................... $8,230


PROBLEM 3-3B (Continued)TIEDE COMPANY

Balance SheetSeptember 30, 2012


Cash .......................................................................... $10,250Accounts receivable ............................................ 8,800Supplies ................................................................... 600

Total current assets .................................... $19,650Equipment............................................................... 10,100

Total assets ................................................... $29,750


Notes payable ........................................................ $ 5,000Accounts payable................................................. 4,520

Total current liabilities ............................... $ 9,520Stockholders equity

Common stock ...................................................... 12,000Retained earnings ................................................ 8,230 20,230

Total liabilities and stockholders equity........................................................... $29,750


PROBLEM 3-4B

Date Account Titles and Explanation Debit CreditApr. 1 Cash ............................................................................


70,00070,000

4 Land.............................................................................Cash ................................................................... (Purchased land for cash)

50,00050,000

8 Advertising Expense..............................................Accounts Payable.......................................... (Incurred advertising expense on account)

1,200 1,200

11 Salaries and Wages Expense .............................Cash ................................................................... (Paid salaries)

2,700 2,700


13 Prepaid Insurance...................................................Cash ................................................................... (Paid for one-year insurance policy)

7,200 7,200

17 Dividends...................................................................Cash ................................................................... (Payment of cash dividend)

600 600

20 Cash ............................................................................Service Revenue ............................................ (Received cash for services provided)

6,000 6,000

25 Cash (100 X $90)......................................................Unearned Service Revenue ........................ (Received advance for future services)

9,000 9,000

accounting tools for business decision makers 4e ch3

Documents

trial balance moderate

series of transactions

correct trial balance

balance sheet

recording process

bt item

kimmel accounting

income statement