Hannah Wagner
ACCT 115-010
Chapters 3 , 4
Chapter 3 Homework
Question E3-2
Caash Basis Income Satement
Revenues:
Cash Sales
$500,000
Customer deposits $70,000
Accural Basis Income Satment
Revenues:
Sales to customers $750,000
Expenses:
Inventory Purchases 90,000
Wages paid.
180,300
Utilities paid.
17,200
Expenses:
Cost of sales
Wages expense
Utilities Expense
485,000
184,000
19,130
Net Income
Net Income
$61,870
$282,500
Req 2) Accrual basis financial statements provide more useful
information to external users. Financial statemnts created under cash
basis accounting normally postpone (ex: $250,000 credit sales) or
accelerate (ex: $70,000 customer deposits) recognition of revenue and
expenses long before or after goods and services are produced and
delivered until cash is received or paid). They also do not necessarily
reflect all assets opr liabilities of a company on a particular date
Question E3-3
Activity
Revenue Account Affected
Amount of Revenue earned in September
a
None
No revenue for Sept
b
Interest Revenue
c
Sales Revenue
$125
(=$15,000 x 10% x
1month/12 months)
$32,000
d
None
e
Sales Revenue
f
None
g
None
h
None
I
None
No transaction has
occurred; exchange of
promises only
$16,000
(=1,000 shirts x $16 per
shirt)
Revenue earned when
goods are delivered
Payment is relatedto
revue recorded
previously in e when
delivered, not when
cash is paid
No revnue is earned in
Sept. Earnings process is
not yet complete;
recorded as the liability
unearned Revenue
(deferred Revenue)
No revenue is earned;
the issuance of stock is a
financing activity
No revnue is earned in
Sept. earnings process
not yet complete
j
Ticket Sales revenue
k
None
l
Sales revenue
$10,000,000
(=$70,000,000/ 7
games)
No revnue earned in
Sept. Earnings process
not yet complete
$96,000
m
Sales Revenue
$300
Question E3-5
Assets
Liabilities
SE
Revenues
Expenses
Net
Income
a
+623
NE
+623
NE
NE
NE
b
+6,320
-4,893
+1,427
NE
NE
NE
NE
c
-5,300
-5,000
-300
NE
+300
-300
d
+123,949
+53,917
NE
+177,866
+177,866
NE
+177,866
e
NE
+25,294
-25,249
NE
+25,249
-25,249
f
-118,241
-118,241
NE
NE
NE
NE
g
-10,069
NE
-10,069
NE
+10,069
-10,069
h
+38,200
-38,200
NE
NE
NE
NE
NE
i
+16,231
+16,231
NE
NE
NE
NE
j
-111,934
NE
-111,934
NE
+111,934
-111,934
k
-830
-830
NE
NE
NE
NE
Question E3-7
(dollars in millions)
a) Buildings (+Asset)
432
Equipment (+Asset)
254
Cash(-Asset)
686
Debits equals credits. Assets increase and decrease by the same
amount
b) Cash (+asset)
119
Short term notes payable(+liability)
119
Debits equal credits. Assets and liabilities increase by the same
amount
c) Cash (+A)
26,813
Accounts Recievable (+A)
28,558
Service Revenue (+R , +SE)
55,371
Debits equal credits. Revenue increases retained earnings (part of
SE). SE and assets increase by same amount
d) Accounts payable (-L)
132,074
Cash (-A)
132,074
Debits equal Credits. Assets and liabilities decrease by the same
amount
e) Inventory (+A)
41,683
Accounts payable (+L)
41,683
Debits equal credits. Assets and Liabilities increase by the same
amount.
f) Wages Expense (+E, -SE)
6,540
Cash (-A)
6,540
Debits equal credits. Expenses decrease retained earnings (part of SE)
Stockholders’ equity and assets decrease by the same amount
g) Cash (+A)
Accounts Recievable (-A)
22,043
22,043
Debits equal credits. Assets increaseand decrease by same
amount
h) Fuel Expense (+E, -SE)
1,750
Cash (-A)
1,750
Debits equal Credits. Expenses decrease retained earnings (part of
SE). SE and assers decrease by the same amount
i) Retained Earnigs (-SE)
698
Dividends Payable (+L)
698
Debits equal Credits. Liabilities increase and stockholders’ equity
decrease by same amount.
j) Utilities Expense (+E, -SE)
121
Cash(-A)
110
Accounts payable (+L)
11
Debits equal credits. Expenses decrease retaned earnings (part of SE).
Question E3-8
a) Cash (+A)
Short Term note payable (+L)
2,300,000
2,300,000
b) Equipment (+A)
Cash (-A)
98,000
98,000
c) Inventory (+A)
Accounts Payable (+L)
35,000
35,000
d) Repairs Expense (+E, -SE)
Cash (-A)
62,000
62,000
e) Cash (+A)
390,000
Unearned pass revenue (+L)
390,000
f) Two Transactions Occur
1)Accounts Receivable (+A)
700
Ski Shop sales revenue (+R, +SE)
2)Cost of goods sold (+E, -SE)
400
Inventory (-A)
700
400
g) Cash (+A)
Lift Revenue (+R, +SE)
320,000
320,000
h) Cash (+A)
Unearned rent revenue
3,500
3,500
i) Accounts Payable (-L)
Cash (-A)
17,500
17,500
j) Cash (+A)
Accounts Recievable (-A)
400
400
k) Wages Expense (+E, -SE)
Cash (-A)
245,000
245,000
Req 2.
Accounts Recievable
Beg. bal. 1,000
400
(f)
700
End bal.
1,300
(j)
Question E3-9
2/1 Rent Expense (+E, -SE)
275
Cash(-A)
275
2/2 Fuel Expense (+E, -SE)
Accounts Payable (+L)
2/4 Cash (+A)
Unearned Revenue (+L)
490
490
820
820
2/7 Cash (+A)
Transport Revenue (+R, +SE)
910
910
2/10 Advertsing Expense (+E, -SE)
Cash (-A)
2/14 Wages Payable (-L)
Cash (-A)
2/18 Cash (+A)
Accounts Recievable (+A)
Transport Revenue (+R, +SE)
2/25 Parts Supplies (+A)
Accounts Payable (+L)
2/27 Retained Earnings (-SE)
Dividends Payable (+L)
175
175
2,300
2,300
1,600
2,200
3,800
2,550
2,550
200
200
Chapter 4 Homework
Question E4-1
Cash
Jameson Consultants, Inc.
Unadjusted Trial Balance
At End of the Current Year
Debit
Credit
153,000
Accounts Recievable
225,400
Supplies
12,200
Prepaid Expenses
10,200
Investments
325,000
Buildings and Equipment
623,040
Accumulated Depreciation
Land
60,000
Accounts Payable
Salaries Payable
Unearned Consulting fees
Income Taxes Payable
Notes Payable
Common Stock
Additional Paid-In capital
Retained Earnings
Consulting Fees Revenue
Investment Income
Gain on sale of land
Salaries Expense
1,610,000
Utilities Expense
25,230
Travel Expense
23,990
Rent Expense
152,080
Professional Development Expense 18,600
Depreciation Expense
8,000
Supplies Expense
21,050
Interest Expense
17,200
Totals
3,284,990
18,100
96,830
25,650
32,500
3,030
160,000
3,370
220,000
144,510
2,564,200
10,800
6,000
3,284,990
Question E4-2
Types
Accounts to be Adjusted
Deferred Revenues
Deferred Revenues may need to be
adjusted for any revenue earned
during the period
Deferred revenue (L) and Product
Revenue and/or Service Revenue (R)
Accrued Revenues
Interest may be earned on short or
long term investments that may be
included in Other Current Assets or
Other Assets
Interest Receivable (A) and Interest
Revenue (R)
Any unrecorded sales or services
provided will need to be recorded
Deferred Expenses
Other current assers may include
supplies, prepaid rent, prepaid
insurance, or prepaid advertsing
Any additional use of property,
plant, and equipment during the
period will need to be recorded
Accounts Receivable (A) and Product
Revenue and/or Service Revenue (R)
Other current assets (A) ands selling,
general, and administrative Expense
(E)
Accumulated Depreciation(XA) and
cost of products and/or cost of
services (E)
Accrued Expenses
Interest incurred on short term Note Accrued Liabailities (L) and Interest
Payable and long-term Debt will
Expense (E)
need to be recorded
Accrued Liabailities (L) and Selling,
There are likely many other accrued General, and Administrative
expenses to be recorded including
Expenses (among other expenses)
wages, warranties, and utilities;
(E); Other Liabailities (L) (Penion and
pension, and contingencies
contingencies among other
expenses)
Income taxes must be computed for
the period and accrued
Income Tax Payable (L) and Income
Tax Expense (E)
Temporary accounts that accumulate during the period are closed at
the end of the year to the permanent account retained earnings. These
include: Product revenue, service revenue, interest revenue, cost of
products, cost of services, interest expense, research and development
expense, selling, general, and administrative expense, other expenses,
and income tax expense
Question E4-3
Req 1
The annual reporting period for this company is January 1 through
December 31
Req 2
Both transactions are accruals because revenue has been earned and
expenses incurred but no cash has yet been recived or paid
(a) 1. Wages expense is incurred
2. Cash will be paid in the next period to employees who worked
in the current period – an accrued expense needs to be recorded
3. Amount: $4,000 given
Adjusting entry- December 31
Wages Expense (+E, -SE)
Wages Payable (+L)
To record wages accrued at year-end
4,000
4,000
(b)1. Interest Revenue is now earned
2. Cash will be received in the future- an accrued revenue
needs to be recorded
3. Amount $1,500 given
Adjusted Entry-December 31
Interest Receivable (+A)
1,500
Interestr Revenue (+R, +SE)
1,500
To record interest earned at year-end
Req 3
Adjusting entries are necessary at the end of the accounting
period to ensure that all revenues earned and expenses incurred
and the related assets and liabilities are measured properly. The
entries above are accruals
Question E4-4
Req 1) The annual reporting period for this company is January 1
through December 31
Req 2) Both transactions are accruals because expenses have
been incurred but no cash has yet been paid
(a) 1.Interest Expense is incurred
2. Cash will be paid in the next period to the bank for using the
borrowed funds in the current period- an accrued expense
needs to be recorded.
3. Amount: $60,000 principal x .10 rate x 10 months/12 months
= $5,000
Adjusting entry-December 31
Interest Expense (+E, -SE)
Interest payable (+L)
To record interest accrued at year-end
5,000
5,000
(b)
1.Utilities expense is incurred
2. Cash will be paid in the future- an accrued expense needs
to be recorded
3. Amount: $360 given
Adjusting entry-December 31
Utilities Expense (+E, -SE)
360
Utilities Payable (+L)
360
To record utilities incurred at year-end
Req. 3
Adjusting entries are necessary at the end of the accounting period to
ensure that all revenues earned and expenses incurred above are
accruals; entries (a) and (b) are both accrued expenses. In applying the
accrual basis of accounting, expenses should be recognized when
incurred in generating revenues
Question E4-5
Req 1.
$4,800 x 3/24 =$600 used
Adjusting Entry:
Insurance Expense (+E, -SE)
Prepaid insurance (-A)
Req 2.
Beg balance
$13,000
600
600
Supplies purchased 75,000
Supplies on hand at year-end.
(20,000)
Supplied used
$68,000
Adjusted entry:
Shipping supplies expense
Shipping supplies
68,000
68,000
Req 3.
Prepaid insurance
10/1
4,800
AJE. 600
End
4,200
Shipping Supplies
Beg. 13,000
Purch 75,000
AJE 68,000
End
20,000
Insurance Expense
AJE
End
600
600
Shipping Supplies Expense
AJE 68,000
End 68,000
Income statement
Insurance expense
$600
Shipping supplies expense
$68,000
Req 4
Balance sheet
Prepaid Insurance
Shipping Supplies
Question E4-6
Req 1.
$4,200
$ 20,000
Prepaid advertising is a deferred expense that needs to be adjusted
each period fopr the amount used during the period
$1,800 x 3months/6months =$900 used
Adjusting entry
Advertising expense (+E, -SE)
900
Prepaid Advertising (-A)
900
Req 2.
Construction equipment is a deferred expense that needs to be
adjusted at the end of the period for the amount of the equipment
used during the period
The amount used for the year is given as $34,000
Adjusting Entry:
Depreciation Expense (+E, -SE)
34,000
Accumulated Depreciation (+XA, -A)
34,000
Re 3.
Prepaid Advertsing
Advertsing Expense
1/1
1,800
AJE 900
AJE 900
End
900
End 900
Accumulated Dpreciation
132,000 Beg
34,000 AJE
End
166,0000
Depreciation Expense
AJE 34,000
End 34,000
Construction Equipment
End 34,000
Income Staement:
Advertising expense $900
Depreciation expense
$34,000
Req 4.
Balance Sheet:
Prepaid Advertising
$900
Construction Equip
$340,000
Less: Accumulated Depreciation 166,000
Construction equip (net)
174,000