self study solutions chapter 3

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

May 1 Cash 4,000

Common Stock 4,000

3 Equipment 1,100

Accounts Payable 1,100

13 Rent Expense 400

Cash 400

21 Accounts Receivable 500

Service Revenue 500

BRIEF EXERCISE 3-2

Aug. 2 Cash

Equipment

Owner’s Capital 14,500

7 Supplies

Accounts Payable 500

12 Cash

Accounts Receivable

Service Revenue 1,970

15 Rent Expense 600

Cash Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-

19 Supplies Expense 230

Supplies ($500 – $270)

Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-

BRIEF EXERCISE 3-3

July 1 Prepaid Insurance 15,000

Cash 15,000

Dec. 31 Insurance Expense 2,500

Prepaid Insurance

($15,000 X 1/2 X 1/3) 2,500

BRIEF EXERCISE 3-4

July 1 Cash 15,000

Unearned Service Revenue 15,000

Dec. 31 Unearned Service Revenue 3,000 2,500

Service Revenue

($15,000 X 1/2 X 1/3) 2,500

BRIEF EXERCISE 3-5

Feb. 1 Prepaid Insurance 720,000

Cash 720,000

June 30 Insurance Expense 150,000

Prepaid Insurance

($720,000 X 5/24) 150,000

BRIEF EXERCISE 3-6

Nov. 1 Cash 2,400


Unearned Rent Revenue 2,400

Dec. 31 Unearned Rent Revenue 1,600

Rent Revenue

($2,400 X 2/3) 1,600


BRIEF EXERCISE 3-7

Dec. 31 Salaries and Wages Expense 4,800

Salaries and Wages Payable

($8,000 X 3/5) 4,800

Jan. 2 Salaries and Wages Payable 4,800

Salaries and Wages Expense 3,200

Cash 8,000

BRIEF EXERCISE 3-8

Dec. 31 Interest Receivable 300

Interest Revenue 300

Feb. 1 Cash 12,400

Notes Receivable 12,000

Interest Receivable 300

Interest Revenue 100

BRIEF EXERCISE 3-9

Aug. 31 Interest Expense 300

Interest Payable 300

31 Accounts Receivable 1,400


31 Salaries and Wages Expense 700

Salaries and Wages Payable 700


31 Bad Debt Expense 900

Allowance for Doubtful Accounts 900


*BRIEF EXERCISE 3-12

(a) Cash receipts $142,000

+ Increase in accounts receivable

($18,600 – $13,000) 5,600

Service revenue $147,600

(b) Payments for operating expenses $ 97,000

– Increase in prepaid expenses

($23,200 – $17,500) (5,700)

Operating expenses $ 91,300

*BRIEF EXERCISE 3-13

(a) Salaries and Wages Payable 4,200


(b) Salaries and Wages Expense 7,000

Cash 7,000

(c) Salaries and Wages Payable 4,200


Cash 7,000


SOLUTIONS TO EXERCISES

EXERCISE 3-1 (15–20 minutes)

Apr. 2 Cash 30,000

Equipment 14,000


2 No entry—not a transaction.

3 Supplies 700


7 Rent Expense 600

Cash 600

11 Accounts Receivable 1,100


12 Cash 3,200


17 Cash 2,300


21 Insurance Expense 110

Cash 110

30 Salaries and Wages Expense 1,160

Cash 1,160


30 Supplies Expense 120

Supplies 120

30 Equipment 5,100




GERONIMO COMPANY

Trial Balance

April 30, 2012

Debit Credit

Cash $ 2,100

Accounts Receivable 2,750

Prepaid Insurance ($700 + $1,000) 1,700

Equipment 8,000

Accounts Payable ($4,500 – $1,000) $ 3,500

Property Tax Payable 560

Owner’s Capital ($11,200 + $3,200) 14,400

Owner’s Drawings 3,200



Advertising Expense ($1,100 + $300) 1,400

Property Tax Expense ($800 + $1,000) 1,800

$25,150 $25,150


The ledger accounts are reproduced below, and corrections are shown in

the accounts.

Cash Account

s

Payable

Bal. 5,912 (4) 190 Bal. 7,044

(1) 270 Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-

Acco

unts

Recei

vable

Commo

n Stock

Bal. 5,240 (1) 270 Bal. 8,000

Suppl

ies

Retained

Earnings

Bal. 2,967 Bal. 2,000


EXERCISE 3-3 (Continued)

Equip

ment

Service

Revenue

Bal. 6,100 Bal. 5,200

(2) 1,900 (3) 2,025

(5) 80

Office

Expense

Bal. 4,320 (2) 1,900

SCARLATTI CORPORATION

Trial Balance (Corrected)

April 30, 2012

Debit Credit

Cash $ 5,992


Supplies 2,967

Equipment 8,000

Accounts Payable $ 7,044

Common Stock 8,000

Retained Earnings 2,000


Office Expense 2,420

$24,349 $24,349



OAKLEY CO.

Trial Balance

June 30, 2012

Debit Credit

Cash ($2,870 + $360 – $65 – $65) $ 3,100

Accounts Receivable ($3,231 – $360) 2,871

Supplies ($800 – $500) 300

Equipment ($3,800 + $500) 4,300

Accounts Payable ($2,666 – $206 – $260) $ 2,200

Unearned Service Revenue ($1,200 – $225) 975

Common Stock 6,000

Dividends 575

Retained Earnings 3,000

Service Revenue ($2,380 + $801 + $225) 3,406

Salaries and Wages Expense ($3,400 + $670 – $575) 3,495

Office Expenses 940

$15,581 $15,581


1. Depreciation Expense ($250 X 3) 750

Accumulated Depreciation—Equipment 750

2. Unearned Rent Revenue ($6,300 X 1/3) 2,100

Rent Revenue 2,100

3. Interest Expense 500



4. Supplies Expense 2,150

Supplies ($2,800 – $650) 2,150

5. Insurance Expense ($300 X 3) 900

Prepaid Insurance 900



(a) Salaries and Wages Expense 2,900

Salaries and Wages Payable 2,900

(b) Utilities Expenses 600


(c) Interest Expense ($60,000 X 8% X 1/12) 400


(d) Utilities Expenses 117



(a) 1. Aug. 31 Insurance Expense ($4,500 X 3/12) 1,125

Prepaid Insurance 1,125

2. Aug. 31 Supplies Expense ($2,600 – $650) 1,950

Supplies 1,950

3. Aug. 31 Depreciation Expense 1,080

Accumulated Depreciation—

Buildings 1,080

($120,000 – $12,000 = $108,000;

$108,000 X 4% = $4,320 per

year;

$4,320 X 3/12 = $1,080)

Aug. 31 Depreciation Expense 360


Accumulated Depreciation—

Equipment 360

($16,000 – $1,600 = $14,400;

$14,400 X 10% = $1,440;

$1,440 X 3/12 = $360)

4. Aug. 31 Unearned Rent Revenue 3,800

Rent Revenue 3,800

5. Aug. 31 Salaries and Wages Expense 375


6. Aug. 31 Accounts Receivable 800

Rent Revenue 800

7. Aug. 31 Interest Expense 1,000

Interest Payable

[($50,000 X 8%) X 3/12] 1,000


(b) UHURA RESORT

Adjusted Trial Balance

August 31, 2012

Debit Cred

it

Cash $ 19,600

Accounts Receivable 800

Prepaid Insurance ($4,500 – $1,125) 3,375

Supplies ($2,600 – $1,950) 650

Land 20,000

Buildings 120,000


Accumulated Depreciation—Buildings $

1,080

Equipment 16,000

Accumulated Depreciation—Equipment 360

Accounts Payable 4,500

Unearned Rent Revenue ($4,600 – $3,800) 800


Interest Payable 1,000

Mortgage Payable 50,000

Common Stock 100,00

0

Dividends 5,000

Rent Revenue ($86,200 + $3,800 + $800) 90,800

Salaries and Wages Expense

($44,800 + $375) 45,175

Utilities Expenses 9,200

Maintenance and Repairs Expenses 3,600

Insurance Expense 1,125

Supplies Expense 1,950

Depreciation Expense 1,080

Depreciation Expense 360

Interest Expense 1,000

$248,915 $248,9

15


EXERCISE 3-12 (20–25 Minutes)

(a) FLYNN DESIGN AGENCY

Income Statement

For the Year Ended December 31, 2012

Revenues


00

Expenses

Salaries and wages expense $12,300

Depreciation expense 7,000

Rent expense 4,000

Supplies expense 3,400

Insurance expense 850

Interest expense 500

Total expenses 28,0

50

Net income $30,4

50

FLYNN DESIGN AGENCY

Statement of Retained Earnings


Retained earnings, January 1 $ 3,500

Add: Net income 30,450

Retained earnings, December 31 $33,950


(a) (Continued) FLYNN DESIGN AGENCY Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-

Balance Sheet

December 31, 2012

Assets

Cash $10,0

00

Accounts receivable 21,50

0

Supplies 5,000

Prepaid insurance 2,500

Equipment $60,000

Less: Accumulated depreciation—equipment 35,000 25,0

00

Total assets $64,0

00

Liabilities and Stockholders’ Equity

Liabilities

Notes payable $ 5,000

Accounts payable 8,000

Unearned service revenue 5,600

Salaries and wages payable 1,300

Interest payable 150

Total liabilities $20,0

50

Stockholders’ equity

Common stock $10,000

Retained earnings 33,950 43,9

50


Total liabilities and stockholders’

equity

$64,0

00

(b) 1. Based on interest payable at December 31, 2012, interest is $25

per month or .5% of the note payable. .5% X 12 = 6% interest per

year.

2. Salaries and Wages Expense, $12,300 less Salaries and Wages

Payable 12/31/12, $1,300 = $11,000. Total Payments, $17,500 –

$11,000 = $6,500 Salaries and Wages Payable 12/31/11.

*EXERCISE 3-20 (20–25 minutes)

(a) Ad

jus

tin

g

En

tri

es:

1. Insurance Expense ($6,000 X 5/24) 1,250


2. Rent Revenue ($2,400 X 1/3) 800

Unearned Rent Revenue 800

3. Supplies 290

Advertising Expense 290

4. Interest Expense 770



*EXERCISE 3-20 (Continued)

(b) Re

ve

rsi

ng

En

tri

es:

1. No reversing entry required.

2. Unearned Rent Revenue 800

Rent Revenue 800

3. Advertising Expense 290

Supplies 290

4. Interest Payable 770

Interest Expense 770


SOLUTIONS TO PROBLEMS

PROBLEM 3-5

(a) -1-


Accumulated Depreciation—Equipment

(1/16 X $168,000) 1

0

,

5

0

0

-2-

Interest Expense 1,440*

Interest Payable

($90,000 X 8% X 72/360) 1

,

4

4

0

*

-3-

Admissions Revenue 60,000

Unearned Admissions Revenue

(2,000 X $30) 6 Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-

0

,

0

0

0

-4-

Prepaid Advertising 1,100

Advertising Expense 1

,

1

0

0

-5-



,

7

0

0

(b) 1. Interest expense, $2,840 ($1,400 + $1,440).

2. Admissions revenue, $320,000 ($380,000 – $60,000).

3. Advertising expense, $12,580 ($13,680 – $1,100).

4. Salaries and wages expense, $62,300 ($57,600 + $4,700).

*Note to instructor: If 30-day months are assumed, interest expense =

$1,400 ($90,000 X 8% X 70/360).


PROBLEM 3-6

(a) -1-



-2-



-3-

Bad Debt Expense 1,430

Allowance for Doubtful Accounts 1,430

-4-

Insurance Expense 480

Prepaid Insurance 480

-5-


Accumulated Depreciation—Equipment

($25,000 X .10) 2,500

-6-

Interest Expense 60

Interest Payable

($7,200 X .10 X 30/360) 60

-7-

Prepaid Rent Expense 750

Rent Expense 750


-8-


Salaries and Wages Payable 2,510


PROBLEM 3-6 (Continued)

(b) YORKIS PEREZ, CONSULTING ENGINEER

Income Statement


Service revenue ($100,000 – $6,000 + $4,900) $98,900

Expenses

Salaries and wages expense

($30,500+$2,510) $33,010

Rent expense ($9,750 – $750) 9,000


Bad debt expense 1,430

Utilities expense 1,080

Office expense 720

Insurance expense 480

Interest expense 60

Total expenses 48,280

Net income $50,620

YORKIS PEREZ, CONSULTING ENGINEER

Statement of Owners’ Equity


Onwer’s Capital, January 1 $ 52,010a


Less: Withdrawals (17,000 )

Owner’s Capital, December 31 $ 85,630

(a)Owner’s Capital—trial balance $ 35,010


Withdrawals during the year 17,000

Owner’s Capital, as of January 1, 2010 $ 52,010



YORKIS PEREZ, CONSULTING

ENGINEER

Balance Sheet

December 31, 2012

Assets

Current assets

Cash $29,500

Accounts receivable

($49,600 + $4,900) $54,500

Less: Allowance for

doubtful accounts (2,180)

*

52,320

Supplies 1,960

Prepaid insurance

($1,100 – $480) 620

Prepaid rent expense 750

Total current assets

Equipment 25,000

Less: Accumulated depreciation (8,750)** 16,250

Total assets

Liabilities and Owners’ Equity

Current liabilities

Notes payable $7,200



Salaries and wages

payable

2,510

Interest payable 60 $ 15,770

Owner’s Capital

($35,010 + $50,620) 85,630

Total liabilities and

owners’ equity $101,400

*($750 + $1,430)

**($6,250 + $2,500)


PROBLEM 3-8

(a)

Dec. 31 Accounts Receivable 3,500


31 Supplies Expense 2,900

Supplies 2,900

31 Insurance Expense 1,560


31 Depreciation Expense 5,000

Accumulated Depreciation—Equipment 5,000

31 Interest Expense 560


31 Unearned Service Revenue 1,900


31 Salaries and Wages Expense 820


(b) VEDULA ADVERTISING AGENCY

Income Statement


Revenues


Expenses

Salaries and wages expense $9,820



Rent expense 4,350

Supplies expense 2,900

Insurance expense 1,560

Interest expense 560

Total expenses 24,190

Net income $38,810



VEDULA ADVERTISING AGENCY

Retained Earnings Statement


Retained earnings, Janaury 1 $ 5,500


Less: Dividends (10,000)

Retained earnings, December 31 $34,310

VEDULA ADVERTISING AGENCY

Balance Sheet

December 31, 2012

Assets

Current assets

Cash $11,000

Accounts receivable 19,500

Supplies 6,500

Prepaid insurance 1,790

Total current assets

Equipment 60,000

Less: Accumulated depreciation (30,000) 30,000

Total assets

Liabilities and Stockholders’ Equity

Current liabilities

Notes payable $8,000

Accounts payable 2,000


Salaries and wages payable 820


Interest payable 560 $ 14,480

Stockholders’ Equity

Common stock 20,000

Retained earnings 34,310

Total stockholders’ equity 54,310

Total liabilities and

stockholders’ equity $68,790



(c) Service Revenue, Salaries and Wages Expense, Depreciation Expense,

Rent Expense, Supplies Expense, Insurance Expense, Interest

Expense, Dividends.

(d) Interest is $56 per month or .7% of the note payable ($56 ÷ $8,000).

.7% X 12 = 8.4% interest per year.

(e) Salaries and Wages Expense, $9,820, less Salaries and Wages Payable

12/31/12, $820 = $9,000. Total payments, $10,500 – $9,000 = $1,500

Salaries Payable 12/31/11.


self study solutions chapter 3

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wages expense

supplies expense

rent expense

wages payable

advertising expense

june30insurance expense

unearned rent revenue

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