Chapter 3
Solutions to Exercises and Problems
E 3-1 Listed below are the accounts for Risky Company and a series of transactions.
Indicate the accounts that would be debited and credited for each transaction.
Transaction
Account
Debited
Account
Credited
Mr. Cast, the owner, invested cash in business
Purchased office equipment on account
Purchased office supplies. Paid part in cash, balance
payable in 30 days
h
e
d
a
p
h,p
Paid rent for the building
Received part of the fee for services performed for a
client in cash, balance to be received in 60 days
m
h,f
h
o
Bought a two-year insurance and paid in full
q
l
h
h
g
i
Some portion of the fee received previously have been
earned
i
o
Made an adjusting entry for office supplies used in this
period
k
d
Closed the revenue account at the end of the period
Closed the Income Summary account at the end of the
period
o
n
n
a
Closed the owner’s withdrawals account at the end of the a
period
b
Depreciation for equipment is recorded
Received fee in advance from a client for services to be
rendered over next two months
E 3-2 On 31 January, in Caps Company the following adjusting entries were made to
record:
a- Depreciation for the month of January.
b- The portion of prepaid insurance which had expired in January.
c- Cost of supplies used in January
d- Earning of a portion of fees collected in advance.
e- Amount owed to the employees which had accrued since the last payday in January.
Indicate the effects of each of these adjusting entries in the following table using + for
increase, - for decrease, and NE for no effect.
Adj Entry
Assets
Liab.
O.E.
Rev.
Exp.
Net
Income
a
b
c
d
e
NE
NE
NE
NE
NE
+
+
-
NE
NE
NE
+
NE
+
+
+
NE
+
+
-
1
Chapter 3
Solutions to Exercises and Problems
E 3-3 Ms. B. Diri opened an ophthalmology clinic on 1 March 2007.
During March 2007 the following transactions occurred:
1. Performed treatment to patients who had private health insurance. At 31 March
TL6.750 of such services was earned but not billed to the insurance companies.
2. Telephone expense incurred during the month, but not paid amounted to TL58
3. Purchased surgical equipment on 3 March for TL24.250, paying TL15.000 in cash
and signed notes payable in 12 months for the rest. Monthly depreciation of the
equipment is estimated to be TL404.
4. On 4 March insured the surgical equipment for one year for TL1.200.
5. Purchased medical supplies of TL8.000 during the month and on 31 March,
determined that TL3.000 of supplies were on hand.
Required: Prepare the adjusting entries on 31 March, by using the following
accounts: Accumulated Depreciation, Surgical Equipment, Depreciation Expense,
Fees Earned, Fees Receivable, Insurance Expense, Prepaid insurance, Medical
Supplies, Medical Supplies Expense, Telephone Expense, Accrued Expenses.
1 Fees Receivable
Fees Earned
2 Telephone Expense
Accrued Expenses
3 Depreciation Expense
Accum.Depreciation
4 Insurance Expense
Prepaid Insurance
5 Medical Supplies Exp.
Medical Supplies
6.750
6.750
58
58
404
404
100
100
5.000
5.000
E 3-4 The Capital , Withdrawals and Income Summary accounts for Bilir’s Hair
Dressing are shown in T-account form below. The closing entries have been recorded
for the year ended 31 December 2007.
Mr. Bilir, Capital
31.Dec.07 5.625
16.250
11.875
22.500
Income Summary
31.Dec.07 26.875
38.750
31.Dec.07 11.875
Balance
-
31.Dec.06
31.Dec.07
Balance
31.Dec.07
2
Chapter 3
Solutions to Exercises and Problems
Mr. Bilir, Withdrawals
03.Mar.07 1.875
5.625
03.May.07 1.875
04.June.07 1.875
Balance
-
31.Dec.07
a. Determine the total revenues for the year.
b. Determine the total expenses for the year.
c. Determine the amount of withdrawals.
d. Determine the net income/(loss) for the company.
38.750
26.875
5.625
11.875
E 3-5 Prepare the journal entries for the following adjustments at 30 June.
a. Employee salaries owed for Monday thru Wednesday of a five day
work week, weekly payroll is TL 7.500
b. Unearned service revenue earned, TL 1.300
c. Depreciation expense for the building, TL 750.
d. Expired prepaid insurance, TL 450.
e. Accrued interest income, TL 5.600
a.
Date
30 June
Account
Salary Expense
Salaries Payable
b.
30 June
Unearned Revenues
Revenues
c.
d.
e.
30 June
30 June
30 June
Debit Credit
4.500
4.500
1.300
1.300
Depreciation Expense
Accumulated Depreciation
750
Insurance Expense
Prepaid Insurance
450
Interest Receivable
Interest Revenue
5.600
750
450
5.600
E 3-6 Prepare the adjusting journal entries needed at 31 December for each of the
following independent cases.
a. Unearned rent revenue of TL 4.500 represents one year rent revenue
collected in advance from the tenant on 1 August.
b. The company had notes payable for a bank. The interest expense accrued
for the note payable on 31 December is TL 6.000
c. Revenue earned but not billed to customers is TL 7.750.
d. Monthly salary expense is TL 45.000 and the company pays salaries on the
15th day of each month.
e. The unadjusted balance of supplies account is TL 950. The count of
supplies on 31 December revealed TL 250 of supplies on hand.
3
Chapter 3
Solutions to Exercises and Problems
f. Building was purchased last year at a cost of TL 150.000. The building’s
useful life is estimated to be 40 years.
g. On 1 May the company paid TL 3.600 for the insurance of company
premises for 12 months period.
a.
Date
31 December
Account
Unearned Revenues
Revenues
b.
31 December
Interest Expense
Interest Payable
6.000
Fees Receivable
Revenues
7.750
c.
d.
e.
f.
g.
31 December
31 December
31 December
31 December
31 December
Debit Credit
1.875
1.875
6.000
7.750
Salaries Expense
Salaries Payable
22.500
Supplies Expense
Supplies
700
22.500
700
Depreciation Expense
Accumulated Depreciation
3.750
Insurance Expense
Prepaid Insurance
2.400
3.750
2.400
E 3-7 The following are the unadjusted account balances of GPS Technology A.Ş. as
of 31 July 2007: Accounts Receivable, TL 2.350; Office Supplies, TL 1.100; Salary
Payable, 0; Unearned Revenues, TL 750; Revenues, TL 11.150; Salary Expense, TL
1.950 Office Supplies Expense, 0. The following information was gathered by the
accounting department:
a. Revenues earned but not yet billed TL 1.375
b. Unearned service revenue that has been earned TL 575
c. Supplies on hand TL 210
d. Salaries earned by the employees but not yet paid TL 747
Date
Account
Debit Credit
a.
31 July
Fees Receivable
1.375
Revenues
1.375
b.
c.
d.
31 July
31 July
31 July
Unearned Revenue
Revenues
575
Office Supplies Expense
Office Supplies
890
Salary Expense
Salary Payable
747
4
575
890
747
Chapter 3
Solutions to Exercises and Problems
E 3-8 Tell whether each of the following accounts is a balance sheet or income
statement account and indicate the normal balance of each of the account.
a. Accounts Payable
Balance sheet
Credit
b. Supplies
Balance sheet
Debit
c. Capital
Balance sheet
Credit
d. Fees Earned
Income statement
Credit
e. Supplies Expense
Income statement
Debit
f.
Accounts Receivable
Balance sheet
Debit
g. Unearned Revenue
Balance sheet
Credit
h. Equipment
Balance sheet
Debit
i.
Accumulated Depreciation Balance sheet
Credit
E3-9 Below is a list of accruals that would affect the net income statement, balance
sheet items, and cash flow of the period. State the effect of each item on the net
income of 2006, the balance sheet items at the end of 2006, and the cash flow of 2006.
In all cases, assume that the fiscal year is the same as the calendar year.
a. YAA Company rents its construction machinery for TL 20.000 per month,
plus insurance. On October 1, 2006, the company paid annual insurance of TL
6.000 in a single payment.
Prepaid insurance (balance sheet) increase 4.500
Cash (balance sheet) (cash flows) decrease 6.000
Insurance expense (amount corresponding to October till December) increase
1.500
b. UCM Company purchased a computer network service for TL 6.000 on 15
February 2006. The company depreciates similar assets at a rate of 20% of the
cost per annum, beginning the month following the purchase.
Office equipment (balance sheet) increase 6.000
Accumulated depreciation (balance sheet) increase 1.000
Depreciation expense increase (income decrease) 1.000
Cash decrease 6.000
c. CSM Company borrowed TL 100.000 from NHA Bank for six months on 1
November 2006, at an interest rate of 24%. The interest and the principal will
be paid together at the end of the life of the note.
i.
State the effects on CSM Company’s accounts.
Cash increase (balance sheet) 100.000
Bank loans (balance sheet) 100.000
Interest expense (income statement) increase 4.000
Interest payable (balance sheet) increase 4.000
ii. State the effects on NHA Bank’s accounts.
Cash decrease (balance sheet) 100.000
Receivables (balance sheet) increase 100.000
Interest income (income statement) increase 4.000
Interest receivable (balance sheet) increase 4.000
5
Chapter 3
Solutions to Exercises and Problems
d. AYN Company paid RAND Company TL 12.000 for the decoration of their
new offices at the end of November 2006. RAND Company started the job in
December 2006 and completed almost 25% by the end of 2006.
i.
State the effects on RAND Company’s accounts.
Cash increase 12.000
Liabilities (balance sheet) increase 9.000
Revenues (income statement) 3.000
ii. State the effects on AYN Company’s accounts.
Cash decrease 12.000
Property plant and equipment (balance sheet) increase 3.000
Advances given (balance sheet-assets) increase 9.000
e. An inexperienced accountant at BHB Company recorded the purchase of a
company car (in August 2006 for TL 35.000) as an automobile rental expense
and as a deduction from cash. The Company expects to use the car for 5 years
with no salvage.
Rent expense is overstated by 35.000
Depreciation expense is understated by 2.917
Property plant and equipment is understated by (32.083)
E3-10 The following accounts are taken from the books of ABA Corporation, for the
current fiscal year that ended on December 31 after the closing entries. Based on the
available information, answer the questions that follow.
Common Stock
1.1.07
Dividends Payable
200.000
15.3.08
2.000
15.6.08
2.000
15.9.08
2.000
15.12.08
4.000
Retained Earnings
31.12.07
10.000
1.1.07
31.12.07
a.
b.
c.
d.
31.12.07
10.000
Income Summary
70.000
31.12.07
165.000
31.12.07
45.000
31.12.07
210.000
Determine the total revenues for the year. 210.000
Determine the total expenses for the year. 165.000
Determine the amount of dividends. 10.000
Determine the net income/(loss) for the company. 45.000 net income
E3-11 The accountant of BAY Company made a number of errors in journalizing and
posting transactions, as described below. Prepare the journal entries to correct the
errors. Each error is independent.
a. Rent of TL 300, paid for the current month, was recorded as a debit to Prepaid
insurance and a credit to Cash.
Rent Expense
300
Prepaid Rent
300
6
Chapter 3
Solutions to Exercises and Problems
b. Equipment of TL 1.500, purchased on account, was recorded as a debit to
Buildings and a credit to Cash.
Equipment
Cash
Buildings
Accounts Payable
1.500
1.500
1.500
c. Payment of TL 400 cash to M. Kuzey, the owner, for personal use was
recorded as a debit to Salary Expense and a credit to Cash.
Withdrawals
Salary Expense
400
400
d. Cash of TL 160, received from a customer on account, was recorded as a TL
610 debit to Cash and credit to Accounts Receivable.
No error
e. A TL 30 cash payment for utilities expense was recorded as a debit to Supplies
and a credit to Cash.
Utility expenses
Supplies
30
30
E3-12 In January 2005, two fresh university graduates opened a computer service
company. For each of the following transactions, please give the journal entry, if any,
in general-journal form. If an entry is not appropriate, write “N/A”.
Then, prepare an adjusting entry in general-journal form (if any would be appropriate)
on January 31. If an entry is not appropriate, write “N/A”
Please note: some items will not have entries on the day they occur and some items
will not have adjusting entries.
1. On 2 January, each of the two owners contributed TL 10.000 to the company.
2 January
Debit
20.000
Cash
Capital
Credit
20.000
2. On 2 January, the company bought software and equipment for TL 3.600,
paying TL 1.000 with the remainder on account. The owners estimate that they
will use the software and equipment for three years.
2 January
Debit
3.600
Office Equipment
7
Credit
Chapter 3
Solutions to Exercises and Problems
Cash
Accounts Payable
1.000
2.600
31 January Depreciation Expense
Accumulated Depreciation
100
100
3. On 2 January, the company borrowed TL 30.000 from a bank. The loan is due
in six months (on 1 July 2005) and has interest at an annual rate of 20%.
Debit
Credit
2 January Cash
30.000
Bank Loans
30.000
31 January Interest Expense
Interest Payable
500
500
4. On 3 January, the company bought paper, pens, computer supplies and other
basic supplies for TL 5.000, paying TL 2.500 in cash and the remainder on 1
February. On 31 January, a physical count of the supplies showed TL 3.000
worth still on hand.
3 January
Debit
5.000
Office Supplies
Cash
Accounts Payable
Credit
2.500
2.500
31 January Supplies Expense
Office Supplies
2.000
2.000
5. On 5 January, the company had its first client, receiving TL 100 in cash for
upgrading a computer.
5 January
Debit
100
Cash
Revenues
Credit
100
6. The company acquired a large client that needed upgrades on many of its
office computers. On 14 January, the company sent a bill for TL 2.500 for
services performed the previous week. The account will be collected in midFebruary.
Debit
2.500
14 January Accounts Receivable
Revenues
Credit
2.500
7. On 20 January, the company paid a salary to an employee who had worked 10
days and received a salary of TL 30 per day. The employee will work an
additional seven days in January; the next salary payment is 2 February.
Debit
8
Credit
Chapter 3
Solutions to Exercises and Problems
20 January Salary expense
Cash
300
31 January Salary Expense
Salary Payable
70
300
70
8. On 17 January, the company made an agreement with a computer retail shop
that the company will service computers for customers of the shop. The
customers will pay the retail shop when the service is performed. The
company will send a bill to the retail shop on the first day of every month. On
31 January, the company had performed services in the amount of TL 1.200.
Debit
1.200
31 January Accounts Receivable
Revenues
Credit
1.200
9. On 30 January, the company paid TL 900 to a security company, for security
services to guard the premises for the month of January.
Debit
900
30 January Security Expenses
Cash
Credit
900
10. On 30 January, the two owners each took TL 2.000 in cash, for personal living
expenses.
Debit
Credit
30 January Withdrawals
4.000
Cash
4.000
P 3-1
a. Prepare the adjusting entries
1 Office Supplies Expense
Office Supplies
2 Rent Expense
Prepaid Rent
3 Depreciation Expense
Accumulated Depreciation
4 Accounts (Fees) Receivable
Fees Revenue
5 Interest Expense
Interest Payable
6 Unearned Fees
Fees Revenue
7 Salaries Expense
Salaries Payable
9.592
9.592
1.760
1.760
2.640
2.640
8.800
8.800
2.200
2.200
7.216
7.216
1.320
1.320
9
Chapter 3
Solutions to Exercises and Problems
b. Post the adjusting entries to T-accounts
Office Supplies
Beg.Bal
10.648
9.592
End.Bal
1.056
1
End.Bal
Beg Bal
2
End.Bal
1
Office Supplies Expense
9.592
9.592
Rent Expense
17.600
1.760
19.360
Prepaid Rent
Beg.Bal
End.Bal
5.280
3.520
1.760
2
Depreciation Expense
3
2.640
End.Bal
2.640
Accumulated Depreciation
6.160 Beg. Bal
2.640
3
8.800 End.Bal
Accounts Receivable
Beg.Bal
33.000
4
8.800
End.Bal
41.800
Fees Revenue
290.400 Beg. Bal
8.800
4
7.216
6
306.416 End.Bal
Interest Expense
5
2.200
10
Chapter 3
Solutions to Exercises and Problems
End.Bal
2.200
Interest Payable
5
2.200
2.200 End.Bal
Unearned Fees
6
7216
11.880 Beg. Bal
4.664 End.Bal
Salaries Expense
Beg.Bal
197.600
7
1.320
End.Bal
198.920
Salaries Payable
5
1.320
1.320 End.Bal
c. Prepare the adjusted trial balance, the income statement and the balance sheet
Sound Advice Company
Adjusted Trial Balance
31.Dec.07
(in TL)
Cash
Accounts Receivable
Office Supplies
Prepaid Rent
Office Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Unearned Fees
Interest Payable
Salaries Payable
Mr. Advice, Capital
Mr. Advice, Withdrawals
Fees Revenues
Salaries Expense
Rent Expense
66.000
41.800
1.056
3.520
36.960
8.800
23.760
44.000
4.664
2.200
1.320
96.008
88.000
306.416
198.920
19.360
11
Chapter 3
Solutions to Exercises and Problems
Transportation Expense
Office Supplies Expense
Depreciation Expense
Interest Expense
17.120
9.592
2.640
2.200
Total
487.168
Sound Advice Company
Income Statement
For the year 2007
(in TL)
Fees Revenue
487.168
306.416
Expenses:
Salaries Expense
Rent Expense
Transportation
Expense
198.920
19.360
17.120
Office Supplies
Expense
9.592
Depreciation
Expense
Interest Expense
Net Income
2.640
2.200
Sound Advice Company
Balance Sheet
31.Dec.07
(in TL )
Assets
Cash
Accounts Receivable
Office Supplies
Prepaid Rent
Office Equipment
Accumulated Depreciation
Total Assets
66.000
41.800
1.056
3.520
36.960
-8.800
Liabilities and Owners' Equity
Accounts Payable
Notes Payable
Unearned Fees
Interest Payable
Salaries Payable
28.160
140.536
23.760
44.000
4.664
2.200
1.320
12
249.832
56.584
Chapter 3
Solutions to Exercises and Problems
Mr. Advice, Capital
Total Liabilities and Owners' Equity
64.592
140.536
13
Chapter 3
Solutions to Exercises and Problems
P 3-2 Refer to problem 2-6 of Chapter 2. The following is the information related to
Yağmur Bulut SMMM at the end of October 2007.
a. Consulting services performed but not yet billed to the clients totals to TL
3.800
b. Earned one month portion of the advance received on 22 October.
c. The count of supplies made on 31 October identified TL 40 of supplies on
hand.
d. Monthly depreciation should be recorded for the computer and furniture and
fixtures.
e. Salary of the accounting student was accrued but not paid.
Date
31 October
31 October
31 October
31 October
31 October
Cash
46.675
46.675
Office Furniture
5.400
Account
Fees Receivable
Revenues
Debit
3.800
Unearned Revenues
Revenues
200
Supplies Expense
Office Supplies
110
Depreciation Expense
Accumulated Depreciation
123
Salary Expense
Salary Payable
125
110
200
110
123
125
100
Supplies
150
110
40
Unearned Revenues
200
1.200
5.400
1.000
Revenues
525
3.800
200
4.525
Depreciation Expense
123
123
14
Office Eq
2.000
2.000
Accounts Payable
5.400
1.600
Supplies Expense
110
3.800
Accounts Receivable
100
5.400
Withdrawals
1.600
Credit
Rent Expense
1.200
Capital
Fees Rec
3.800
1.200
3.800
Accumulated Depreciation
123
123
Salary Ex
125
125
Chapter 3
Solutions to Exercises and Problems
Salary Payable
125
125
Yagmur Bulut,SMMM
Trial Balance
31 October
Cash
Accounts Receivable
Fees Receivable
Supplies
Office Equipment
Office Furniture
Accumulated Depreciation
Accounts Payable
Unearned Revenues
Salary Payable
Capital
Withdrawals
Revenues
Rent Expense
Salary Expense
Supplies Expense
Depreciation Expense
Total
Debit
46.675
100
3.800
40
2.000
5.400
Credit
123
5.400
1.000
125
50.000
1.600
4.525
1.200
125
110
123
61.173
61.173
Yagmur Bulut, SMMM
Income Statement
31 October 2007
Revenues
4.525
Expenses
Rent Expense
Supplies Expense
Depreciation Expense
Salary Expense
Total Expenses
1.200
110
123
125
1.558
Net Income
2.967
15
Chapter 3
Solutions to Exercises and Problems
Date
31 October
31 October
31 October
31 October
Account
Revenues
Income Summary
Debit
4.525
Income Summary
Rent Expense
Salary Expense
Supplies Expense
Depreciation Expense
1.558
Income Summary
Capital
2.967
Credit
4.525
1.200
125
110
123
2.967
Capital
Withdrawals
1.600
1.600
P 3-3 Red and White Organizations is engaged in organizing social activities like
birthday parties, wedding ceremonies. The adjusted trial balance of the Company as
of 31 December 2007 is presented below. Based on the adjusted trial balance prepare
the closing entries and the post closing trial balance.
Closing Entries
1 Fees Revenue
Income Summary
2 Income Summary
Depreciation Expense
Salaries Expense
Rent Expense
Transportation Expense
3 Income Summary
Mr.Red, Capital
4 Mr.Red, Capital
Mr.Red, Withdrawals
30.040
30.040
28.967
2.926
15.760
650
9.631
1.073
1.073
3.600
3.600
Red and White Organizations
Post Closing Trial Balance
31.Dec.07
(in TL)
Accounts
debit
Cash
Accounts Receivable
Office Supplies
Prepaid Rent
Office Equipment
credit
3.060
5.780
1.248
1.786
14.630
16
Chapter 3
Solutions to Exercises and Problems
Accumulated Depreciation
Accounts Payable
Notes Payable
Unearned Fees
Mr. Red, Capital
Total
5.852
1.949
2.750
1.480
14.473
26.504
26.504
P3-4 Vani Company’s trial balances before and after adjusting entries at the end of
the fiscal year 2007 appear below.
Account Name
Cash
Supplies
Prepaid Rent
Prepaid Insurance
Automobile
Acc. Depr.- Automobile
Equipment
Acc. Depr.- Equipment
Accounts Payable
Salaries Payable
Taxes Payable
Capital
Withdrawals
Service Fees Earned
Salaries Expense
Rent Expense
Supplies Expense
Depreciation Exp.- Automobile
Depreciation Exp.- Equipment
Utilities Expense
Taxes Expense
Insurance Expense
Miscellaneous Expense
Total
1
Supplies Expense
Supplies
Vani Company
Trial Balances
31 December 2007
Unadjusted
Adjusted
Debit
Credit
Debit
Credit
TL 1.720
TL 1.720
2.365
575
3.500
1.650
405
230
4.900
4.900
TL 825
TL 1.875
14.100
14.100
3.675
5.000
460
540
130
65
12.950
12.950
10.500
10.500
35.900
35.900
14.710
14.840
1.850
1.790
1.325
1.050
595
675
575
640
175
440
440
TL 53.810
TL 53.810
TL 56.460
TL 56.460
Debit
1790
Credit
1790
17
Chapter 3
Solutions to Exercises and Problems
2
3
4
5
6
7
8
Rent Expense
Prepaid Rent
1850
Insurance Expense
Prepaid Insurance
175
1850
175
Depreciation Exp.Automobile
Acc.Depr. - Automobile
1,050
1050
Depreciation Exp.-Equipment 1,325
Acc.Depr. - Equipment
1325
Utilities Expense
Accounts payable
80
80
Salaries Expense
Salaries Payable
130
Tax Expense
Taxes Payable
65
130
65
Closing Entries
1
2
3
4
Service Fees Earned
Income Summary
Debit
35900
Credit
35900
Income Summary
22785
Salaries Expense
Rent Expense
Supplies Expense
Depreciation Exp.Automobile
Depreciation Exp.-Equipment
Utilities Expense
Taxes Expense
Insurance Expense
Miscellaneous Expense
Income Summary
Capital
13115
Capital
Withdrawals
10500
14840
1850
1790
1325
1050
675
640
175
440
13115
10500
Income Statement
Vani Company
18
Chapter 3
Solutions to Exercises and Problems
Income Statement
31 December 2007
Service Fees Earned
Total Revenues
35,900
35,900
Expenses
Salaries Expense
Rent Expense
Supplies Expense
Depreciation Exp.-Automobile
Depreciation Exp.-Equipment
Utilities Expense
Taxes Expense
Insurance Expense
Miscellaneous Expense
Total Expenses
14840
1850
1790
1325
1050
675
640
175
440
22785
Net Income
13,115
Vani Company
Balance Sheet
31 December 2007
Cash
Supplies
Prepaid Rent
Prepaid Insurance
Automobile
Acc.Depr. - Automobile
Equipment
Acc.Depr.- Equipment
Total Assets
1,720
575
1,650
230
4,900
-1,875
14,100
-5,000
16,300
Accounts Payable
Salaries Payable
Taxes Payable
Total Liabilities
540
130
65
735
Owners' Equity
Capital
15,565
Total Liabilities and Owners' Equity
16,300
P3-5
GNN A.S.
Income Statement
Four Months Ended 30 April 2007
Service Revenue
139,932
Expenses
Salaries Expense
Supplies Expense
Advertising Expense
Utilities Expense
Repairs Expense
55,475
2,930
5,640
5,150
3,637
19
Chapter 3
Solutions to Exercises and Problems
Miscellaneous Expense
Depreciation Expense-Equipment
Depreciation Expense-Building
Insurance Expense
Total Expenses
3,345
3,600
900
340
81,017
Net Income Before Tax
58,915
GNN A.S.
Income Statement
For the Month Ended 30 April 2007
Service Revenue
34,792
Expenses
Salaries Expense
Supplies Expense
Advertising Expense
Utilities Expense
Repairs Expense
Miscellaneous Expense
Depreciation Expense-Equipment
Depreciation Expense-Building
Insurance Expense
Total Expenses
11,835
410
1,410
1,020
772
1,120
900
225
85
17,777
Net Income Before Tax
17,015
GNN A.S.
Balance Sheet
30-Apr-07
Cash
4,620
Supplies
910
Prepaid Insurance
900
Equipment
130,700
Acc.Depr. - Equipment
-27,300
Building
75,950
Acc.Depr.- Building
-10,025
Land
12,000
Total Assets
Accounts Payable
Salaries Payable
Common Stock
Retained Earnings
187,755
2,300
215
100,000
85,240
187,755
20
Chapter 3
Solutions to Exercises and Problems
Case Study – Ankuva Rentals
1. Journal entries
Date
Account
Business Transactions during 6 months
June.03 Cash
Capital
June.03 Cash
Bank Loans
Debit
Credit
40.000
40.000
10.000
10.000
June.03 Organization and Setup Expenses
Cash
1.000
July.03 Organization and Setup Expenses
Cash
1.750
June.03 Machinery and Equipment
Cash
1.000
1.750
4.200
4.200
July.03 Prepaid Rent
Cash
9.000
June.03 Deposits Given
Cash
3.000
9.000
3.000
July.03 Furniture and Fixtures
Cash
5.000
5.000
July.03 Inventory
Cash
14.000
14.000
July.03 Prepaid Insurance
Cash
800
800
During the year Salary Expense
Cash
1.795,5
1.795,5 =256.5*7
During the year Salary Expense
Cash
12.000
During the year Cash
Revenues
23.548
During the year Cash
Commission Expense
Revenues
4.664,8
95,2
12.000
23.548
4.760
During the year Utility Expenses
630
21
=2000*6
Chapter 3
Solutions to Exercises and Problems
Cash
630
During the year Utility Expenses
Cash
120
120
During the year Maintanence Expense
Cash
3.600
During the year Rent Expense
Cash
9.000
3.600
9.000
During the year Supplies
Cash
500
500
T-accounts
Cash
40.000
10.000
23.548
4.664,8
78.213
11.817,5
1.000
1.750
4.200
9.000
3.000
5.000
14.000
800
1.795,5
12.000
630
120
3.600
9.000
500
66.139
Salary Expense
1.795,5
12.000
13.795,5
Revenues
23.548
4.760
28.308
Commission Expense
95,2
95,2
Utility Expenses
630
120
750
Capital
40.000
40.000
Bank Loans
10.000
10.000
Org. and Setup Expenses
1.000
1.750
2.750
Maintanance Expenses
3.600
3.600
Rent Expense
9.000
9.000
Supplies
500
500
Machinery and Equipment
4.200
4.200
22
=600*6
Chapter 3
Solutions to Exercises and Problems
Prepaid Rent
9.000
9.000
Deposits Given
3.000
3.000
Furniture and Fixtures
5.000
5.000
Inventory
14.000
14.000
Prepaid Insurance
800
800
23
Chapter 3
Solutions to Exercises and Problems
Unadjusted Trial-balance
Ankuva Rentals
Unadjusted Trial Balance
31.Dec.03
Cash
Inventory
Supplies
Prepaid Rent
Prepaid Insurance
Machinery and Equipment
Furniture and Fixtures
Deposits Given
Bank Loans
Capital
Revenues
Utility Expenses
Rent Expense
Salary Expense
Commission Expense
Organization and Setup Expenses
Maintanance Expense
Total
Debit
11.817,5
14.000,0
500,0
9.000,0
800,0
4.200,0
5.000,0
3.000,0
Credit
10.000,0
40.000,0
28.308,0
750,0
9.000,0
13.795,5
95,2
2.750,0
3.600,0
78.308,0
78.308,0
Adjusting Entries
Dec.03 Accounts Receivable
Commission Expense
Revenues
393,96
8,04
402
Dec.03 Utilies Expense
Accounts Payable
80
Dec.03 Utilies Expense
Accounts Payable
25
80
25
Dec.03 Interest Expense
Interest Payable
2.400
Dec.03 Depreciation Expense
Accumulated Depreciation
1.550
Dec.03 Rent Expense
Prepaid Rent
9.000
Dec.03 Inventory Obsolesence Expense
Inventory
2.800
2.400
1.550
9.000
Dec.03 Insurance Expense
Prepaid Insurance
2.800
600
600
24
Chapter 3
Solutions to Exercises and Problems
Dec.03 Supplies Expense
Supplies
425
425
T-accounts after adjustments
Cash
40.000
10.000
23.548
4.664,8
1.000
1.750
4.200
9.000
3.000
5.000
14.000
800
1.795,5
12.000
630
120
3.600
9.000
500
66.139
Inventory Obs.
Expense
2.800
2.800
Salary Expense
1.795,5
12.000
13.795,5
Revenues
40.000
40.000
23.548
4.760
28.308
402
28.710
Commission Expense
95,2
95,2
8,04
103,24
Utility Expenses
630
120
750
80
25
855
Bank Loans
10.000
10.000
Maintanance Expenses
3.600
3.600
78.213
11.817,5
Capital
Org. and Setup Expenses
1.000
1.750
2.750
Rent Expense
9.000
9.000
9.000
18.000
Machinery and Equipment
4.200
4.200
Supplies
500
500
Prepaid Rent
9.000
9.000
425
75
9.000
-
Accounts Receivable
393,96
393,96
25
Insurance Expense
600
600
Supplies Expense
425
425
Chapter 3
Solutions to Exercises and Problems
Deposits Given
3.000
3.000
Accounts Payable
80
25
105
Furniture and Fixtures
5.000
5.000
Interest Expense
2.400
2.400
Inventory
14.000
14.000
2.800
Interest Payable
11.200
2.400
2.400
Prepaid Insurance
800
800
Depreciation Expense
1.550
1.550
600
200
Accumulated Depreciation
1.550
1.550
Adjusted Trial Balance
Ankuva Rentals
Adjusted Trial Balance
31.Dec.03
Cash
Accounts Receivable
Inventory
Supplies
Prepaid Rent
Prepaid Insurance
Machinery and Equipment
Furniture and Fixtures
Accumulated Depreciation
Deposits Given
Bank Loans
Accounts Payable
Interest Payable
Capital
Revenues
Utility Expenses
Rent Expense
Salary Expense
Commission Expense
Organization and Setup Expenses
Maintanance Expense
Depreciation Expense
Insurance Expense
Debit
11.817,5
393,96
11.200,00
75,00
200,00
4.200,00
5.000,00
Credit
1.550,00
3.000,00
10.000,00
105,00
2.400,00
40.000,00
28.710,00
855,00
18.000,00
13.795,50
103,24
2.750,00
3.600,00
1.550,00
600,00
26
Chapter 3
Solutions to Exercises and Problems
Supplies Expense
Inventory Obsolescence Expense
Interest Expense
Total
425,00
2.800,00
2.400,00
82.765,00
82.765,00
Closing Entries
Dec.03 Revenues
Income Summary
28.710,00
Dec.03 Income Summary
Utility Expenses
Rent Expense
Salary Expense
Commission Expense
Organization and Setup
Expenses
Maintenance Expense
Depreciation Expense
Insurance Expense
Supplies Expense
Inventory Obsolescence
Expense
Interest Expense
46.878,74
Dec.03 Capital
18.168,74
28.710
855,00
18.000,00
13.795,50
103,24
2.750,00
3.600,00
1.550,00
600,00
425,00
2.800,00
2.400,00
Income Summary
18.168,74
T-accounts
Cash
40.000
10.000
23.548
4.664,8
78.213
11.817,5
1.000
1.750
4.200
9.000
3.000
5.000
14.000
800
1.795,5
12.000
630
120
3.600
9.000
500
66.139
Capital
18.168,74
40.000
40.000
21.831,26
Salary Expense
1.795,5
12.000
13.795,5
13.795,5
Revenues
23.548
4.760
28.308
402
28.710
28.710
Commission Expense
95,2
95,2
8,04
103,24
103,24
Utility Expenses
630
120
750
80
25
27
Inventory Obs. Expense
2.800
2.800
2.800
Insurance Expense
600
600
600
Supplies Expense
425
425
425
Income Summary
46.878,74 28.710
18.168,74
-
Chapter 3
Solutions to Exercises and Problems
855
-
Bank Loans
10.000
10.000
Maintenance Expenses
3.600
3.600
3.600
Rent Expense
9.000
9.000
9.000
18.000
18.000
Supplies
500
500
425
75
Org. and Setup Expenses
1.000
1.750
2.750
2.750
Machinery and Equipment
4.200
4.200
Prepaid Rent
9.000
9.000
9.000
Deposits Given
3.000
3.000
Accounts Receivable
393,96
393,96
Furniture and Fixtures
5.000
5.000
Accounts Payable
80
25
105
Inventory
14.000
14.000
2.800
11.200
Prepaid Insurance
800
800
600
200
855
Interest Expense
2.400
2.400
2.400
Interest Payable
2.400
2.400
Depreciation Expense
1.550
1.550
1.550
Accumulated Depreciation
1.550
1.550
28
Chapter 3
Solutions to Exercises and Problems
Post Closing Trial Balance
Ankuva Rentals
Post Closing Trial Balance
31.Dec.03
Cash
Accounts Receivable
Inventory
Supplies
Prepaid Rent
Prepaid Insurance
Machinery and Equipment
Furniture and Fixtures
Accumulated Depreciation
Deposits Given
Bank Loans
Accounts Payable
Interest Payable
Capital
Revenues
Utility Expenses
Rent Expense
Salary Expense
Commission Expense
Organization and Setup Expenses
Maintenance Expense
Depreciation Expense
Insurance Expense
Supplies Expense
Inventory Obsolescence Expense
Interest Expense
Total
Debit
11.817.50
393,96
11.200,00
75,00
200,00
4.200,00
5.000,00
Credit
1.550,00
3.000,00
10.000,00
105,00
2.400,00
21.831,26
36.142,76
29
36.142,76
Chapter 3
Solutions to Exercises and Problems
Balance Sheet
Ankuva Rentals
Balance Sheet
As of 31 December 2003
(TL)
Liabilities
Short-term Liabilities
11.817,50 Bank Loans
393,96 Accounts Payable
11.200,00 Interest Payable
75,00 Total Short-term Liabilities
200,00
23.686,46
Assets
Current Assets
Cash
Accounts Receivable
Inventory
Supplies
Prepaid Rent
Prepaid Insurance
Total Current Assets
Long-term Assets
Machinery and Equipment
Furniture and Fixtures
Accumulated Depreciation
Deposits Given
Total Long-term Assets
Owners' Equity
Capital
Total Owners' Equity
4.200,00
5.000,00
(1.550,00)
3.000,00
10.650,00
Total Assets
34.336,46 Total Liabilities and Owners' Equity
Income Statement3
Ankuva Rentals
Income Statement
For the year ended 31 December 2003
(TL)
Revenues
Total revenues
28.710,00
28.710,00
Expenses
Utility Expenses
Rent Expense
Salary Expense
Commission Expense
Organization and Setup Expenses
Maintenance Expense
Depreciation Expense
Insurance Expense
Supplies Expense
Inventory Obsolescence Expense
Interest Expense
Total Expenses
855,00
18.000,00
13.795,50
103,24
2.750,00
3.600,00
1.550,00
600,00
425,00
2.800,00
2.400,00
46.878,74
Net Loss
(18.168,74)
30
10.000,00
105,00
2.400,00
12.505,00
21.831,26
21.831,26
34.36,46