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Solutions to Chapter 3 Homework
BRIEF EXERCISE 3-2
A Co.
B Co.
Supplies used: $675 + $1,695 - $225 = $2,145
Supplies on hand, May 31, 2008: $640 + $2,825 - x = $2,715
x = $750
BRIEF EXERCISE 3-3
(a)
Mar. 2
Cleaning Supplies ...................................
Accounts Payable..............................
3,880
3,880
(b)
Cleaning Supplies used = $945 + $3,880 - $980 = $3,845
(c)
Dec. 31
Cleaning Supplies Expense ...................
Cleaning Supplies .............................
3,845
3,845
(d)
Jan. 1
Mar. 2
Dec. 31
Bal.
Cleaning Supplies
945
3,880 Dec. 31
Cleaning Supplies Expense
Dec. 31
3,845
3,845
980
BRIEF EXERCISE 3-4
(a)
(b)
June 1
Prepaid Insurance .....................................
Cash ......................................................
9,900
9,900
Monthly cost: $9,900 ÷ 12 = $825/month;
Number of months expired: June to December—7 months
Amount expired in 2007: 7 months x $825 = $5,775
Number of months remaining: January to May—5 months
Amount unexpired at December 31: 5 months x $825 = $4,125
Total $9,900 = $5,775 + $4,125
(c)
Dec. 31
Insurance Expense ....................................
5,775
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Prepaid Insurance ................................
5,775
(d)
June 1
Prepaid Insurance
9,900 Dec. 31
Dec. 31
Bal.
5,775
Dec. 31
Insurance Expense
5,775
4,125
BRIEF EXERCISE 3-7
(a)
An adjusting entry will be needed because services have been provided in
November but will not be invoiced until the first of December.
(b)
Nov. 30
Accounts Receivable ................................
Service Revenue ..................................
375
375
(c)
No, Zieborg will not have to make a journal entry on December 1 when they
invoice Crispy because the November 30th adjusting entry already recorded
the amount.
(d)
Dec. 9
Cash............................................................
Accounts Receivable ...........................
375
375
BRIEF EXERCISE 3-8
(a)
(b)
(c)
Dec. 26
Dec. 31
Jan. 2
Salaries Expense .......................................
Cash ......................................................
5,000
Salaries Expense .......................................
Salaries Payable ...................................
3,000
Salaries Expense .......................................
Salaries Payable ........................................
Cash ......................................................
2,000
3,000
5,000
3,000
5,000
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BRIEF EXERCISE 3-9
(a)
July 1/07
(b) Dec. 31/07
(c)
Dec. 31/08
Vehicles ................................................... 40,000
Cash .................................................
Note Payable ...................................
Interest Expense ....................................
Interest Payable ..............................
($22,000 x 6% x 6/12)
18,000
22,000
660
660
Interest Expense ($22,000 x 6%) .......... 1,320
Interest Payable .....................................
660
Note Payable .......................................... 22,000
Cash ................................................
23,980
EXERCISE 3-3
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
3. Accrued expenses
4. Accrued revenues
1. Prepaid expenses
4. Accrued revenues
2. Unearned revenues
No entry required
1. Prepaid expenses
3. Accrued expenses
1. Prepaid expenses
EXERCISE 3-4
(a)
June 1
Sept. 15
Nov. 1
Dec. 1
Various
(b)
Dec. 31
Prepaid Insurance .....................................
Cash ......................................................
4,740
Cash............................................................
Unearned Revenue...............................
3,600
Prepaid Rent ..............................................
Cash ......................................................
6,875
Prepaid Cleaning .......................................
Cash ......................................................
3,150
Cash............................................................
Unearned Gift Certificate Sales...........
1,250
Insurance Expense ....................................
2,765
4,740
3,600
6,875
3,150
1,250
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Prepaid Insurance ................................
$4,740 x 7/12 = $2,765
31 Unearned Revenue ....................................
Revenue ................................................
$3,600 x 3/9 = $1,200
Dec. 31
2,765
1,200
1,200
Rent Expense .............................................
Prepaid Rent .........................................
$6,875 x 2/5 = $2,750
2,750
31 Cleaning Expense......................................
Prepaid Cleaning .......................................
1,050
31 Unearned Gift Certificate Sales ................
Gift Certificate Sales ............................
$1,250 - $475 = $775
775
2,750
1,050
775
(c)
June 1
Dec. 31
Bal.
Nov. 1
Dec. 31
Bal.
Dec. 1
Dec. 31
Bal.
Prepaid Insurance
4,740
Dec. 31
Dec. 31
Insurance Expense
2,765
Dec. 31
Rent Expense
2,750
Dec. 31
Cleaning Expense
1,050
2,765
1,975
Prepaid Rent
6,875
Dec. 31
2,750
4,125
Prepaid Cleaning
3,150
Dec. 31
1,050
2,100
Unearned Revenue
Sep. 15
3,600
Revenue
Dec. 31
1,200
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Accounting Principles, Third Canadian Edition
1,200
Dec. 31
Bal.
2,400
Unearned Gift Certificate Sales
Various
1,250
Dec. 31
775
Dec. 31
Bal.
Gift Certificate Sales
Dec. 31
775
475
EXERCISE 3-6
(a)
Dec.
31 Utility Expense ...........................................
Accounts Payable .................................
425
425
31 Salaries Expense........................................ 2,375
Salaries Payable ...................................
$3,325 x 5/7 = $2,375
(b)
Jan.
31 Interest Expense ........................................
Interest Payable ....................................
$45,000 x 5% x 1/12 = $188
188
31 Accounts Receivable .................................
Commission Revenue ..........................
920
31 Interest Receivable ....................................
Interest Revenue ...................................
$6,000 x 6% x 2/12 = $60
60
17 Accounts Payable ......................................
Cash .......................................................
425
2,375
188
920
60
425
2 Salaries Payable ......................................... 2,375
Salaries Expense........................................
950
Cash .......................................................
1 Interest Payable..........................................
Cash .......................................................
188
5 Cash ............................................................
Accounts Receivable ............................
920
3,325
188
920
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Accounting Principles, Third Canadian Edition
1 Cash ............................................................ 6,090
Interest Receivable ..............................
Interest Revenue ($6,000 x 6% x 1/12)
30
Note Receivable ....................................
60
6,000
EXERCISE 3-8
1.
Mar.
2.
3.
4.
5.
6.
31 Amortization Expense .............................
Accumulated Amortization
—Equipment........................................
($21,600 ÷ 6 x 3/12)
900
31 Unearned Rent Revenue ..........................
Rent Revenue ($9,300 × 2/3) ..............
6,200
31 Interest Expense ......................................
Interest Payable ..................................
($20,000 x 6% x 3/12)
300
31 Supplies Expense ....................................
Supplies ($2,800 - $850) .....................
1,950
31 Insurance Expense ($3,600 x 3/10) .........
Prepaid Insurance ...............................
1,080
31 Accounts Receivable ...............................
Rent Revenue ......................................
700
900
6,200
300
1,950
1,080
700
EXERCISE 3-9
Answer
(a)
Supplies balance
= $800
Supplies expense
Add: Supplies (1/31/08)
Less: Supplies purchased
Supplies (01/01/08)
Total premium
= $4,800
Total premium = Monthly premium x 12
$400 X 12 = $4,800
Purchase date
= Aug. 1, 2007
Purchase date: On Jan. 31, there are
6 months coverage remaining ($400 x 6). Thus,
the purchase date was 6 months earlier on Aug.
1, 2007.
Purchase date
On Jan. 31/08, there is $4,880 in
)
(b)
(c)
Calculation
$950
700
(850)
$800)
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= Jan. 1, 2003
accumulated amortization:
$4,880 ÷ $80/month = 61 months
Purchase date: 61 months earlier than Jan.
31/08, or 5 years and 1 month.
(d)
Salaries payable
= $1,400
Cash paid
Salaries payable (01/31/08)
$2,500
800
3,300
1,900
$1,400
Less: Salaries expense
Salaries payable (12/31/07)
(e)
Unearned revenue
= $1,050
Service revenue (01/31/08)
Unearned revenue (01/31/08)
$2,000
750
2,750
1,700
$1,050
Cash received in Jan.
Unearned revenue (12/31/07)
EXERCISE 3-10
Aug.
31 Accounts Receivable ($9,230 - $8,700) ............
Service Revenue ..........................................
530
31Office Supplies Expense ......................................
Office Supplies .............................................
1,745
31Insurance Expense ...............................................
Prepaid Insurance ........................................
1,260
31Amortization Expense ..........................................
Accumulated Amortization
—Office Equipment ......................................
1,175
31 Salaries Expense ...............................................
Salaries Payable ...........................................
1,125
31 Unearned Service Revenue
($1,600 - $900) ....................................................
Service Revenue ............................................
530
1,745
1,260
1,175
1,125
700
700
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EXERCISE 3-11
LIM COMPANY
Income Statement
Year Ended August 31, 2008
Revenues
Service revenue .........................................................................
Expenses
Salaries expense ........................................................ $18,125
Office supplies expense ............................................
1,745
Rent expense..............................................................
15,000
Insurance expense.....................................................
1,260
Amortization expense ................................................
1,175
Total expenses......................................................................
Net income .......................................................................................
$46,230
37,305
$ 8,925
LIM COMPANY
Statement of Owner's Equity
Year Ended August 31, 2008
E. Lim, capital, September 1, 2007 .................................................
Add: Net income ............................................................................
Less: Drawings ...............................................................................
E. Lim, capital, August 31, 2008 .....................................................
$25,600
8,925
34,525
10,000
$24,525
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EXERCISE 3-11 (Continued)
LIM COMPANY
Balance Sheet
August 31, 2008
Assets
Cash .................................................................................................
Accounts receivable .......................................................................
Office supplies ................................................................................
Prepaid insurance ...........................................................................
Office equipment ............................................................. $14,100
Less: Accumulated amortization ..................................
4,700
Total assets ................................................................................
$10,500
9,230
700
2,520
9,400
$32,350
Liabilities and Owner's Equity
Liabilities
Accounts payable ......................................................................
Salaries payable .........................................................................
Unearned rent revenue ..............................................................
Total liabilities.......................................................................
$05,800
1,125
900
7,825
Owner's equity
E. Lim, capital .............................................................................
Total liabilities and owner's equity .....................................
24,525
$32,350
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*EXERCISE 3-12
(a)
Jan.
(b)
Jan.
2 Insurance Expense ..................................
Cash .....................................................
2,460
10 Supplies Expense ....................................
Cash .....................................................
1,700
15 Cash ..........................................................
Service Revenue .................................
4,200
31 Prepaid Insurance ....................................
Insurance Expense .............................
($2,460 x 11/12)
2,255
31 Supplies ....................................................
Supplies Expense ...............................
550
31 Service Revenue ......................................
Unearned Service Revenue................
2,700
2,460
1,700
4,200
2,255
550
2,700
(c)
Insurance Expense
Jan. 2
2,460
Jan. 31
Jan. 31
Bal.
205
5,040
Service Revenue
Jan. 15
2,700
Jan. 31
Bal.
Prepaid Insurance
Jan. 31
2,255
Supplies
550
Jan.
1
15
Jan. 31
Bal.
Cash
5,000 Jan. 2
4,200
10
2,255
Supplies Expense
Jan. 10
1,700
Jan. 31
Jan. 31
Bal.
1,150
2,460
1,700
Jan. 31
Jan. 31
550
4,200
1,500
Unearned Service Revenue
Jan. 31
2,700
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PROBLEM 3-2A
1.
Jan.
Dec.
2.
May
Dec.
3.
Nov.
Dec.
4.
Dec.
Dec.
5.
May
Dec.
1 Office Supplies .........................................
Cash .....................................................
3,100
31 Supplies Expense ($3,100 - $770) ...........
Office Supplies....................................
2,330
1 Prepaid Insurance ....................................
Cash .....................................................
5,040
31 Insurance Expense
($5,040 x 8/12) ...........................................
Prepaid Insurance ...............................
15 Cash ..........................................................
Unearned Service Revenue................
31 Unearned Service Revenue
($425 x 2) ...................................................
Service Revenue .................................
15 Prepaid Rent .............................................
Cash .....................................................
3,100
2,330
5,040
3,360
3,360
1,275
1,275
850
850
4,500
4,500
31 No entry required
1 Equipment ................................................ 30,800
Cash .....................................................
31 Amortization Expense .............................
Accumulated Amortization—
Equipment [$30,800 ÷ 7 x (8/12)]........
30,800
2,933
2,933
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PROBLEM 3-4A
(a)
1.
Prepaid Insurance – before adjustments
A2958 –
B4564 –
2.
($10,320 x 18/24)
Unearned Subscription Revenue – before adjustments
Oct 1
Nov 1
Dec 1
(b)
1.
$ 5,700
7,740
$13,440
Dec. 31
$16,800
21,120
26,880
$64,800
(350 x $48)
(440 x $48)
(560 x $48)
Insurance Expense ..................................
Prepaid Insurance ...............................
8,010
8,010
Prepaid Insurance at December 31, 2007:
B4564
$10,320 x 6/24
$2,580
A2958
$ 5,700 x 12/24
2,850
$5,430
Expired insurance and adjustment = $13,440 - $5,430 = $8,010
2.
Dec. 31
Unearned Subscription Revenue ............
Rent Subscription Revenue ...............
9,960
9,960
Unearned Subscription Revenue at December 31, 2007:
October 350 x $48 x 9/12 =
$ 12,600
November 440 x $48 x 10/12 =
17,600
December 560 x $48 x 11/12 =
24,640
$54,840
Earned Revenue and adjustment = $64,800 - $54,840 = $9,960
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PROBLEM 3-4A (Continued)
(b) (Continued)
3.
Dec. 31
6 x $625 =
3 x $750 =
Total
4.
5.
Dec. 31
Dec.
Salaries Expense......................................
Salaries Payable .................................
1,200
1,200
$3,750
2,250
$6,000 x 1/5 = $1,200
Interest Receivable ..................................
Interest Revenue .................................
$8,000 x 7.75% x 3/12 = $155
31 Amortization Expense
($128,250 ÷ 30) ..........................................
Accumulated Amortization—
Building ...............................................
31 Amortization Expense
($165,000 ÷ 40) ..........................................
Accumulated Amortization—
Building ...............................................
155
155
4,275
4,275
4,125
4,125
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PROBLEM 3-6A
(a)
1.
2.
3.
4.
5.
6.
7.
8.
9.
Dec.
31 Accounts Receivable ...............................
Service Revenue .................................
1,750
1,750
31 Insurance Expense ($3,840 × 10/12) ..... 3,200
Prepaid Insurance ...............................
3,200
31 Supplies Expense ....................................
Supplies ($2,535 - $570) .....................
1,965
1,965
31 Amortization Expense—
Automobiles ............................................. 15,500
Accumulated Amortization—
Automobiles ($62,000 ÷ 4) ..................
31 Amortization Expense—Furniture ..........
Accumulated Amortization—
Furniture ($16,000 ÷ 10) ......................
31 Interest Expense
($46,000 x 7% x 3/12)................................
Interest Payable ..................................
15,500
1,600
1,600
805
805
31 Salaries Expense......................................
Salaries Payable ($230 × 3) ................
690
31 Unearned Revenue...................................
Service Revenue ($600 x 2) ................
1,200
690
1,200
31 No adjustment required
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PROBLEM 3-6A (Continued)
(b)
CASH
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
12,165
ACCOUNTS RECEIVABLE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
Balance
3,200
4,950
1,750
PREPAID INSURANCE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
3,200
Balance
3,840
640
PREPAID RENT
Explanation
Date
Dec.
31
Balance
Ref.

Debit
Credit
Balance
1,150
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PROBLEM 3-6A (Continued)
(b) (Continued)
SUPPLIES
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
1,965
Balance
2,535
570
AUTOMOBILES
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
62,000
ACCUMULATED AMORTIZATION—AUTOMOBILES
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
15,500
Balance
15,500
31,000
OFFICE FURNITURE
Explanation
Date
Dec.
31
Balance
Ref.

Debit
Credit
Balance
16,000
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PROBLEM 3-6A (Continued)
(b) (Continued)
ACCUMULATED AMORTIZATION—OFFICE FURNITURE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
1,600
Balance
5,600
7,200
NOTES PAYABLE
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
46,000
UNEARNED REVENUE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
Balance
3,600
2,400
1,200
INTEREST PAYABLE
Explanation
Date
Dec.
31
Ref.
J2
Debit
Credit
805
Balance
805
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PROBLEM 3-6A (Continued)
(b) (Continued)
SALARIES PAYABLE
Explanation
Date
Dec.
31
Ref.
Debit
J2
Credit
690
Balance
690
C. OROSCO, CAPITAL
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
56,000
C. OROSCO, DRAWINGS
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
38,400
SERVICE REVENUE
Date
Dec.
31
31
31
Explanation
Ref.
Balance

J2
J2
Debit
Credit
1,750
1,200
Balance
101,605
103,355
104,555
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PROBLEM 3-6A (Continued)
(b) (Continued)
SALARIES EXPENSE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
Balance
57,500
58,190
690
INTEREST EXPENSE
Date
Dec.
31
31
Explanation
Ref.
Balance

J2
Debit
Credit
Balance
2,415
3,220
805
RENT EXPENSE
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
13,800
REPAIR EXPENSE
Explanation
Date
Dec.
31
Balance
Ref.

Debit
Credit
Balance
6,000
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PROBLEM 3-6A (Continued)
(b) (Continued)
GAS AND OIL EXPENSE
Explanation
Date
Dec.
31
Balance
Ref.
Debit
Credit

Balance
9,300
INSURANCE EXPENSE
Explanation
Date
Dec.
31
Ref.
Debit
J2
Credit
3,200
Balance
3,200
AMORTIZATION EXPENSE—AUTOMOBILES
Explanation
Date
Dec.
31
Ref.
Debit
J2
15,500
Credit
Balance
15,500
AMORTIZATION EXPENSE—FURNITURE
Explanation
Date
Dec.
31
Ref.
Debit
J2
Credit
1,600
Balance
1,600
SUPPLIES EXPENSE
Explanation
Date
Dec.
31
Ref.
J2
Debit
1,965
Credit
Balance
1,965
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3-20
Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-6A (Continued)
(c)
OROSCO SECURITY SERVICE
Adjusted Trial Balance
December 31, 2008
Debit
Cash ................................................................................ $ 12,165
Accounts receivable ......................................................
4,950
Prepaid insurance ..........................................................
640
Prepaid rent ....................................................................
1,150
Supplies ..........................................................................
570
Automobiles ...................................................................
62,000
Accumulated amortization—automobiles ....................
Office Furniture ..............................................................
16,000
Accumulated amortization—office furniture ................
Notes payable .................................................................
Unearned revenue ..........................................................
Interest payable ..............................................................
Salaries payable .............................................................
C. Orosco, capital ...........................................................
C. Orosco, drawings ......................................................
38,400
Service revenue ..............................................................
Salaries expense ............................................................
58,190
Interest expense .............................................................
3,220
Rent expense ..................................................................
13,800
Repair expense ...............................................................
6,000
Gas and oil expense.......................................................
9,300
Insurance expense .........................................................
3,200
Amortization expense—automobiles ...........................
15,500
Amortization expense—office furniture .......................
1,600
Supplies expense ...........................................................
1,965
$248,650
Credit
$ 31,000
7,200
46,000
2,400
805
690
56,000
104,555
_______
$248,650
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3-21
Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-8A
(a)
Sept. 30 Accounts Receivable ...............................
Commission Revenue ........................
($7,435 – $6,335)
1,100
30 Supplies Expense ....................................
Supplies ...............................................
485
30 Rent Expense ($1,350 - $900) ..................
Prepaid Rent........................................
450
30 Amortization Expense .............................
Accumulated Amortization—
Equipment ...........................................
470
30 Interest Expense ......................................
Interest Payable ..................................
60
30 Unearned Revenue ($875 - $550) ............
Commission Revenue ........................
325
30 Salaries Expense......................................
Salaries Payable .................................
840
30 Utilities Expense ($820 - $710) ................
Accounts Payable ...............................
110
1,100
485
450
470
60
325
840
110
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-8A (Continued)
(b)
IRABU CO.
Income Statement
Quarter Ended September 30, 2008
Revenues
Commission revenue ................................................
Expenses
Salaries expense .......................................................
Interest expense........................................................
Amortization expense ...............................................
Supplies expense......................................................
Utilities expense........................................................
Rent expense.............................................................
Total expenses.....................................................
Net loss ...........................................................................
$15,845
$13,940
60
470
485
820
1,350
17,125
$ (1,280)
IRABU CO.
Statement of Owner’s Equity
Quarter Ended September 30, 2008
Y. Irabu, capital, July 1, 2008 ..........................................................
Less: Net loss ..............................................................
$1,280
Drawings............................................................
2,700
Y. Irabu, capital, September 30, 2008 ............................................
$14,000
3,980
$10,020
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Accounting Principles, Third Canadian Edition
PROBLEM 3-8A (Continued)
(b) (Continued)
IRABU CO.
Balance Sheet
September 30, 2008
Assets
Cash ................................................................................
Accounts receivable ......................................................
Supplies ..........................................................................
Prepaid rent ....................................................................
Equipment.......................................................................
Less: Accumulated amortization .................................
Total assets ...............................................................
$ 3,250
7,435
1,265
1,050
$15,040
6,110
8,930
$21,930
Liabilities and Owner’s Equity
Liabilities
Notes payable.............................................................................
Accounts payable ......................................................................
Interest payable..........................................................................
Unearned rent revenue ..............................................................
Salaries payable .........................................................................
Total liabilities.......................................................................
$ 6,000
4,460
60
550
840
11,910
Owner’s equity
Y. Irabu, capital ..........................................................................
Total liabilities and owners’ equity .....................................
10,020
$21,930
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3-24
Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-8A (Continued)
(c)
Interest of 6% per year equals a monthly rate of 0.5%; monthly interest is
$30 ($6,000 x 0.5%). Since total interest expense is $60, the note has been
outstanding two months.
(d)
The company is not performing well. It incurred a loss for the quarter. In
particular the salary expense seems high in relation to the revenue. Another
negative indicator is the amount of drawings Yosuke has taken. This further
reduces the amount of owner’s equity.
The financial position of Irabu appears tenuous. Total cash and accounts
receivable ($10,685) are not enough to pay all liabilities outstanding
($11,910). If all accounts receivable are not collected, there may not be
adequate cash to repay all liabilities.
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Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-9A
(a)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
May
31 Insurance Expense ($1,872 x 9/12) .........
Prepaid Insurance ...............................
1,404
31 Supplies Expense ....................................
Supplies ($525 + $2,405 - $475) .........
2,455
31 Amortization Expense ($7,635 ÷ 3) .........
Accumulated Amortization—
Computer Equipment .........................
2,545
1,404
2,455
2,545
31 Amortization Expense ($9,640 ÷ 10) . 964
Accumulated Amortization—
Furniture ..............................................
31 Unearned Consulting Revenue ...............
Consulting Revenue ...........................
31 Interest Receivable
($7,500 × 5.5% × 2/12) ..............................
Interest Revenue .................................
31 Salaries Expense......................................
Salaries Payable .................................
964
3,650
3,650
69
69
890
890
No entry required.
31 Accounts Receivable ...............................
Consulting Revenue ...........................
2,925
31 Telephone Expense .................................
Accounts Payable ...............................
145
2,925
145
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Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-9A (Continued)
(b)
MAHADEO CONSULTING CO.
Adjusted Trial Balance
May 31, 2008
Debit
Cash ................................................................................ $ 2,825
Accounts receivable ($2,485 + $2,925) .........................
5,410
Note receivable ...............................................................
7,500
Interest receivable ..........................................................
69
Supplies ($2,930 - $2,455) ..............................................
475
Prepaid insurance ($1,872 - $1,404) ..............................
468
Computer equipment .....................................................
7,635
Accumulated amortization—
computer equipment ($2,545 + $2,545).......................
Furniture .........................................................................
9,640
Accumulated amortization—furniture
($964 + $964) .................................................................
Accounts payable ($1,476 + $145) ................................
Salaries payable .............................................................
Unearned consulting revenue ($5,280 - $3,650)...........
1,630
M. Mahadeo, capital .......................................................
M. Mahadeo, drawings ...................................................
66,850
Consulting revenue
($117,350 + $3,650 + $2,925) ........................................
Interest revenue .............................................................
Rent expense ..................................................................
10,120
Salaries expense ($32,950 + $890) ................................
33,840
Telephone expense ($1,560 + $145) ..............................
1,705
Supplies expense ...........................................................
2,455
Amortization expense ($2,545 + $964) ..........................
3,509
Insurance expense .........................................................
1,404
$153,905
Credit
$
5,090
1,928
1,621
890
18,752
123,925
69
_______
$153,905
Solutions Manual
3-27
Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-9A (Continued)
(c)
MAHADEO CONSULTING CO.
Income Statement
Year Ended May 31, 2008
Revenues
Consulting revenue ..................................................
Interest revenue ........................................................
Total revenue .......................................................
Expenses
Rent expense.............................................................
Salaries expense .......................................................
Telephone expense...................................................
Supplies expense......................................................
Amortization expense ...............................................
Insurance expense....................................................
Total expenses.....................................................
Net income ......................................................................
$123,925
69
123,994
$10,120
33,840
1,705
2,455
3,509
1,404
53,033
$ 70,961
MAHADEO CONSULTING CO.
Statement of Owner's Equity
Year Ended May 31, 2008
M. Mahadeo, capital, June 1, 2007 .................................................
Add: Net income ............................................................................
Less: Drawings ..............................................................................
M. Mahadeo, capital, May 31, 2008.................................................
$18,752
70,961
89,713
66,850
$22,863
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Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
PROBLEM 3-9A (Continued)
(c) (Continued)
MAHADEO CONSULTING CO.
Balance Sheet
May 31, 2008
Assets
Cash ................................................................................
Accounts receivable ......................................................
Note receivable ...............................................................
Interest receivable ..........................................................
Supplies ..........................................................................
Prepaid insurance ..........................................................
Computer equipment .....................................................
Less: Accumulated amortization .................................
Furniture .........................................................................
Less: Accumulated amortization .................................
Total assets ...............................................................
$ 2,825
5,410
7,500
69
475
468
$7,635
5,090
$9,640
1,928
2,545
7,712
$27,004
Liabilities and Owner's Equity
Liabilities
Accounts payable ......................................................................
Salaries payable .........................................................................
Unearned consulting revenue...................................................
Total liabilities.......................................................................
Owner's equity
M. Mahadeo, capital ...................................................................
Total liabilities and owner's equity .....................................
(d)
$ 1,621
890
1,630
4,141
22,863
$27,004
Mahadeo Consulting Co. is performing well. Net income is positive and
expenses represent only 43% of total revenues. Mohammed Mahadeo has
withdrawn cash from the company but the amount does not exceed net
income.
The financial position of Mahadeo Consulting Co. also appears positive.
Total cash and accounts receivable ($8,235) far exceed total liabilities
($4,141).
Solutions Manual
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Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
*PROBLEM 3-11A
(a)
1.
2.
3.
4.
5.
6.
7.
Dec.
31 Supplies ....................................................
Supplies Expense ...............................
31 Interest Expense
($20,000 × 6% × 2/12) ...............................
Interest Payable ..................................
585
585
200
200
31 Prepaid Insurance ($2,220 x 7/12) ...........
Insurance Expense .............................
1,295
31 Graphics Fees Earned .............................
Unearned Consulting Fees ................
1,600
31 Amortization Expense
($46,500 ÷ 15 x 6/12) .................................
Accumulated Amortization—
Equipment ...........................................
1,295
1,600
1,550
1,550
31 Utilities Expense ......................................
Accounts Payable ...............................
225
31 Prepaid Rent .............................................
Rent Expense ......................................
565
225
565
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Chapter 3
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
*PROBLEM 3-11A (Continued)
(b)
ROYAL GRAPHICS COMPANY
Adjusted Trial Balance
December 31, 2008
Cash ................................................................................
Accounts receivable .....................................................
Supplies ..........................................................................
Prepaid insurance ..........................................................
Prepaid rent ....................................................................
Equipment.......................................................................
Accumulated amortization ............................................
Note payable ...................................................................
Accounts payable ($11,000 + $225) ..............................
Interest payable ..............................................................
Unearned graphics fees.................................................
J. Bejar, capital ...............................................................
J. Bejar, drawings...........................................................
Graphic fees earned ($62,400 - $1,600) ........................
Salaries expense ............................................................
Supplies expense ($3,230 - $585)..................................
Rent expense ($3,955 - $565) ........................................
Utilities expense ($1,740 + $225) ...................................
Amortization expense ....................................................
Insurance expense ($2,220 - $1,295).............................
Interest expense .............................................................
Debit
$ 7,250
7,450
585
1,295
565
46,500
Credit
$ 1,550
20,000
11,225
200
1,600
34,625
17,400
60,800
38,280
2,645
3,390
1,965
1,550
925
200
$130,000
_______
$130,000
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
*PROBLEM 3-11A (Continued)
(c)
ROYAL GRAPHICS COMPANY
Income Statement
Six Months Ended December 31, 2008
Revenues
Graphic fees earned .................................................
Expenses
Salaries expense .......................................................
Supplies expense......................................................
Rent expense.............................................................
Utilities expense........................................................
Amortization expense ...............................................
Insurance expense....................................................
Interest expense........................................................
Total expenses.....................................................
Net Income ......................................................................
$60,800
$38,280
2,645
3,390
1,965
1,550
925
200
48,955
$11,845
ROYAL GRAPHICS COMPANY
Statement of Owner's Equity
Six Months Ended December 31, 2008
J. Bejar, capital, July 1, 2008 ..........................................................
Add: Investment ...........................................................................
Net income ...........................................................................
Less: Drawings ................................................................................
J. Bejar, capital, December 31, 2008 ..............................................
$
0
34,625
11,845
46,470
17,400
$29,070
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Weygandt, Kieso, Kimmel, Trenholm, Kinnear
Accounting Principles, Third Canadian Edition
*PROBLEM 3-11A (Continued)
(c) (Continued)
ROYAL GRAPHICS COMPANY
Balance Sheet
December 31, 2008
Assets
Cash ................................................................................
Accounts receivable ......................................................
Supplies ..........................................................................
Prepaid insurance ..........................................................
Prepaid rent ....................................................................
Equipment.......................................................................
Less: Accumulated amortization .................................
Total assets ...............................................................
$ 7,250
7,450
585
1,295
565
$46,500
1,550
44,950
$62,095
Liabilities and Owner's Equity
Liabilities
Note payable...............................................................................
Accounts payable ......................................................................
Interest payable..........................................................................
Unearned consulting fees .........................................................
Total liabilities.......................................................................
Owner's equity
J. Bejar, capital...........................................................................
Total liabilities and owner's equity .....................................
$20,000
11,225
200
1,600
33,025
29,070
$62,095
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Chapter 3
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