CHAPTER 3 The Accounting Information System Study Objectives 1. 2. 3. 4. 5. 6. 7. 8. 9.
Analyze the effe Analyze effect ct of of busin business ess tran transacti sactions ons on the basi basic c accou accountin nting g equat equation. ion. Expla Ex plain in what what an acco accoun untt is and and how how itit helps helps in the the reco recordi rding ng proc process ess.. Define Defi ne debit debits s and cred credits its and and expla explain in how how they they are are used used to reco record rd busine business ss transa transaction ctions. s. Iden Id enti tify fy the the bas basic ic ste steps ps in in the the reco record rdin ing g proc proces ess. s. Expla Ex plain in what what a journ journal al is is and and how how it help helps s in the the reco record rding ing pr proce ocess. ss. Expla Ex plain in what what a ledge ledgerr is and and how how itit help helps s in the the reco recordi rding ng proc process ess.. Expla Exp lain in what what po posti sting ng is is and and how how it help helps s in the the reco recordi rding ng proc process ess.. Expl Ex plai ain n the the pu purp rpos oses es of a tri trial al ba bala lanc nce. e. Classi Cla ssify fy cash cash acti activit vities ies as oper operati ating, ng, inv invest esting ing,, or fina financi ncing. ng.
Summary of Questions by Study Objectives and Bloom’s Taxonomy Item
SO
BT
Item
SO
1. 2. 3. 4. 5.
4 1 1 1 2
C C C K K
6. 7. 8. 9. 10.
3 3 3 3 3
1. 2. 3.
1 1 1
C AP AP
4. 5. 6.
3 3 5
1.
1
C
2.
2, 3
1. 2.
1 1
C AP
5. 6.
1 3, 5
3. 4.
1 1
AP AP AP
7.
3
1. 2. 3. 4. 1. 2. 3. 4.
1 1 1 3, 5 1 1 1 3, 5
AP AP AP AP AP AP AP AP
5. 5.
5. 5.
3, 5, 6, 7, 8
3, 5, 6, 7, 8
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BT
Item
SO
BT
Item
SO
BT
16. 17. 18. 19. 20.
5 5 5 6 8
K K AP C C
21. 22.
7 8
K AN
K 9. C 10. AP Do It! Review Exercises C 3. 4, 5 AP 4. Exercises AP 8. 5 AP 12. AP 9. 3, 4, 13. 5 AP C 10. 7, 8 AP 14. 1, 5, 11. 7 AP
5 7
AP AP
11. 12.
8 8
AP AP
6, 7
AP
5, 8 7, 8
AP AP
15. 16.
8 8
AN AP
5, 8
AP
17. 18.
3 9
K AP
19.
9
AP
9. 9.
8
AN AN
9. 9.
8
AN AN
C C C K K
AP
AP
Item
SO
BT
Questions 11. 3 K 12. 3 K 13. 3 K 14. 3 K 15. 4 K Brief Exercises 7. 4 C 8. 4 C
Problems: Set A 6. 3, 5, 6, 7, 8 AP Problems: Set B 6. 3, 5, 6, 7, 8 AP
Kimmel Accounting, 4/e Solutions Manual
7. 8.
7. 8.
8 3, 5, 6, 7, 8
AN
8 3, 5, 6, 7, 8
AN
AP
AP
(For Instructor Use Only)
3-1
ASSIGNMENT CHARACTERISTICS TABLE Problem Number
3-2
Description
Difficulty Level
Time Allotted (min.)
1A
Analyze transactions and compute net income.
Moderate
40–50
2A
Analyze transactions and prepare financial statements.
Moderate
40–50
3A
Analyz Anal yze e tra trans nsac acti tion ons s and and pr prep epar are e an an inc incom ome e sta state teme ment nt,, retained earnings statement, and balance sheet.
Moderate
50–60
4A
Journalize a series of transactions.
Simple
20–30
5A
Journalize transactions, post, and prepare a trial balance.
Simple
30–40
6A
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
7A
Prepare a correct trial balance.
Moderate
30–40
8A
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
9A
Analyze errors and their effects on the trial balance.
Moderate
30–40
1B
Analyze transactions and compute net income.
Moderate
40–50
2B
Analyze transactions and prepare financial statements.
Moderate
40–50
3B
Analyz Anal yze e tra trans nsac acti tion ons s and and pr prep epar are e an an inc incom ome e sta state teme ment nt,, retained earnings statement, and balance sheet.
Moderate
50–60
4B
Journalize a series of transactions.
Simple
20–30
5B
Journalize transactions, post, and prepare a trial balance.
Simple
30–40
6B
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
7B
Prepare a correct trial balance.
Moderate
30–40
8B
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
9B
Analyze errors and their effects on the trial balance
Moderate
30–40
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
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ANSWERS TO QUESTIONS 1.
The system of collecting and processing transaction data and communicating financial information to decision makers is known as the accounting information system.
2.
Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the equipment account which is offset by a decrease in the cash account is a specific example.
3.
Accounting transactions are the economic events of the company recorded by accountants because they affect the basic accounting equation. (a)
The death death of of a major major stockholde stockholderr of the compan company y is not not an accounting accounting transaction as it does does not affect the basic accounting equation. equation. (b) Sup Supplie plies s purchased purchased on account account is an accounti accounting ng transactio transaction n because because it affects the basic basic accounting equation. (c) An employe employee e being fired fired is not an account accounting ing transact transaction ion as it does does not affect affect the basic basic accounting equation. (d) Paying a cash dividend to stockholders stockholders is is an accounting transaction as it does affect affect the basic accounting equation. 4.
(a) (b) (c) (d)
Decrease asse Decrease assets ts and and decrea decrease se stockh stockholde olders’ rs’ equi equity. ty. Increa Inc rease se asse assets ts and and decr decrea ease se asse assets. ts. Increase Incr ease asse assets ts and and incr increase ease stock stockhold holders’ ers’ equi equity. ty. Decre De crease ase asset assets s and decre decrease ase liabi liabilit lities ies..
5.
An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or credit side. Because the alignment alignment of these parts resembles the letter T, it is referred to as a T account.
6.
Disagree. The terms debit and credit are synonymous with left and right, respectively.
7.
James is incorrect. The double-entry system merely records the dual (two-sided) effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, and must affect two or more accounts to keep the basic accounting equation in balance. In other words, for each transaction, debits must equal credits.
8.
Gayle is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable or unfavorable.
9.
(a) Asset Asset accounts accounts are are increas increased ed by debit debits s and decrea decreased sed by by credits. credits. (b) Liab Liability ility accou accounts nts are decre decreased ased by by debits debits and increa increased sed by credit credits. s. (c) The common common stock accou account nt is decrea decreased sed by by debits debits and incre increased ased by by credits. credits.
Copyright © 2011 John Wiley & Sons, Inc.
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(For Instructor Use Only)
3-3
Questions Chapter 3 (Continued) 10.
(a) (b)) (b (c)) (c (d) (e) (f) (g)
Accounts Accou nts Rece Receiva ivable ble—de —debit bit bala balance nce.. Cash Ca sh—d —deb ebit it ba bala lanc nce. e. Divi Di vide dend nds— s—de debi bitt bala balanc nce. e. Accou Acc ounts nts Paya Payable ble—cr —credi editt balan balance. ce. Servi Se rvice ce Reve Revenue nue—cr —cred edit it bala balance nce.. Salar Sa laries ies an and d Wage Wages s Expen Expense— se—de debit bit bal balanc ance. e. Common Com mon Sto Stock— ck—cre credit dit bal balan ance. ce.
11.
(a) (b) (c) (d) (e)
Accounts Rece Accounts Receivab ivable—a le—asset— sset—deb debit it bala balance. nce. Accounts Acco unts Paya Payable— ble—liab liability ility—cred —credit it bala balance. nce. Equip Eq uipme ment— nt—ass asset— et—de debit bit ba balan lance. ce. Dividends Divid ends—stoc —stockhol kholders ders’’ equ equity—d ity—debit ebit bala balance. nce. Suppl Su pplies ies—as —asset set—de —debit bit bal balan ance. ce.
12.
(a) Debit Debit Suppl Supplies ies and cred credit it Accou Accounts nts Paya Payable. ble. (b) Deb Debit it C Cash ash an and d credi creditt Notes Notes Pay Payab able. le. (c) Debi Debitt Salari Salaries es and and Wage Wages s Expens Expense e and and credi creditt Cash. Cash.
13.
(a) (b) (c) (d) (e) (f)
14.
Normal balances for accounts in Tootsie Roll’s financial statements: Accounts Receivable—debit; Income Taxes Payable—credit; Sales—credit; Selling, Marketing, and Administrative Expenses— debit.
15.
The basic steps in the recording process are: (1) Anal Analyze yze each each transac transaction tion in terms terms of its its effect effect on the accou accounts. nts. (2) Ente Enterr the the transa transaction ction infor informati mation on in in a jour journal. nal. (3) Tran Transfer sfer the the journal journal inform information ation to to the appropr appropriate iate accou accounts nts in the ledge ledger. r.
16.
(a) The deb debit it sho should uld be ent entere ered d first first.. (b) The credit credit sho should uld be ind indent ented. ed.
17.
(a) No, debits debits and and credits credits should should not be recor recorded ded direct directly ly in the the ledger. ledger. (b) The advan advantag tages es of of using using the the journ journal al are: are: (1) It disclose discloses s in one one place place the the comple complete te effect effect of a transac transaction. tion. (2) It provid provides es a chro chronolo nologica gicall record record of all all transac transactions tions.. (3) It helps helps to prevent prevent or locate error errors s because because the debit debit and and credit credit amounts amounts for each each entry entry can be readily compared.
18.
(a)
Cash—bot Cash— both h debit debit and cre credi ditt entri entries. es. Accounts Acco unts Rece Receivab ivable—b le—both oth debi debitt and and credit credit entr entries. ies. Divide Div idends nds—de —debi bitt en entri tries es on only. ly. Accounts Acco unts Paya Payable— ble—both both deb debit it and and credit credit entr entries. ies. Salaries Sala ries and Wag Wages es Expen Expense—d se—debit ebit entr entries ies only only.. Servi Se rvice ce Re Reven venue ue—cr —cred edit it ent entrie ries s onl only. y.
Cash............... Cash........... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... 12,000 Common Com mon Sto Stock ck .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. (Issued stock for cash)
(b) Prepaid Insurance ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... ..... ...... ...... ...... ...... ...... ..... ..... ...... ...... ...... ...... ...... ..... ..... ...... ...... ..... ..... ...... ...... ..... .. Cash... Cash. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. (Paid one-year insurance policy)
3-4
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Kimmel Accounting, 4/e Solutions Manual
12,00 12 ,000 0
800 800
(For Instructor Use Only)
Questions Chapter 3 (Continued)
(c)
(d)
Supplies .... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... Accou Ac counts nts Pa Payab yable le .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... (Purchased supplies on account)
1,800
Cash .... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... ... Servi Se rvice ce Rev Revenu enue.. e.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... (Received cash for services rendered)
7,500
1,800 1,8 00
7,500 7,5 00
19.
(a) The entire entire group group of accounts accounts maintai maintained ned by a compan company, y, including including all the the asset, asset, liability, liability, and stockholders’’ equity accounts, is referred to collectively as the ledger. stockholders (b) The chart of accounts accounts is important, important, particula particularly rly for a company company that that has a large large number number of accounts, because it helps organize the accounts and identify their location in the ledger.
20.
A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to prove the mathematical equality of debits and credits after all journalized transactions have been posted. A trial balance also facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing financial statements.
21.
The proper sequence is as follows: (b) Acc Accoun ountin ting g tra transa nsacti ction on occ occurs urs.. (c) Inf Inform ormati ation on is is enter entered ed in in the the journ journal. al. (a) De Debit bits s and cred credits its are are poste posted d to the the ledger ledger.. (e)) Tr (e Tria iall bala balanc nce e is pre prepa pare red. d. (d) Fin Financ ancia iall statem statement ents s are are prepa prepared red..
22.
(a) The tri trial al bal balanc ance e would would bal balanc ance. e. (b) The trial balance would not not balance balance since the debits debits would be $720 $720 higher higher than the credits. credits.
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-5
SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 3-1
(a) (b) (c)
Assets + + –
Liabilities + NE NE
Stockholders’ Equity NE + –
BRIEF EXERCISE 3-2
Cash (1)
+$60,000
(2)
–9,000
(3)
+13,000
Assets = Liabilities + Stockholders’ Equity Accounts Accounts Bonds Common Retained + Receivable + Supplies = Payable + Payable + Stock + Earnings +$60,000 –$9,000
Paid div.
–$13,000
(4)
+$3,100
+$3,100
BRIEF EXERCISE 3-3 Assets Cash (1)
–$286,176
(2)
+137,590
(3)
+ Inventory +
Equipment
=
Liabilities
+
=
Accounts Payable
+
Stockholders’ Equity Common Stock
+
Retained Earnings
+$286,176 +$137,590 +$68,480
Issued stock
+$68,480
BRIEF EXERCISE 3-4
(a) (b) (c) (d) (e) (f)
3-6
Accounts Payable Advertising Expense Service Revenue Accounts Receivable Retained Earnings Dividends
Debit Effect Decrease Increase Decrease Increase Decrease Increase
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Credit Effect Increase Decrease Increase Decrease Increase Decrease
Kimmel Accounting, 4/e Solutions Manual
Normal Balance Credit Debit Credit Debit Credit Debit
(For Instructor Use Only)
BRIEF EXERCISE 3-5
June 1 2 3 12
Account Debited Cash Equipment Rent Expense Accounts Receivable
Account Credited Common Stock Accounts Payable Cash Service Revenue
BRIEF EXERCISE 3-6 June 1 2 3 12
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Comm Co mmon on St Sto ock. ck......................................................
5,000
Equipment .... Equipment.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Paya yab ble. e.................................................
1,100
Rentt Exp Ren Expens ense e ................................................................. Cash Ca sh .........................................................................
740
Accoun Acc ounts ts Rec Receiv eivabl able.. e.................................................... Service Revenue ..................................................
700
5,00 5, 000 0 1,100 740 74 0 700
BRIEF EXERCISE 3-7 The basic steps in the recording process are: 1.
Analyze each tran Analyze transact saction ion.. In In this this step step,, sour source ce docu documen ments ts are are exam exam-ined to determine the effects of the transaction on the accounts.
2.
Enter each Enter each tran transact saction ion in a jou journal rnal.. This This step step is call called ed jour journal nalizin izing g and and it results in making a chronological record of the transactions.
3.
Transfer Trans fer jou journa rnall infor informat mation ion to to ledger ledger acco accoun unts. ts. T Thi his s step step is call called ed posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts.
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-7
BRIEF EXERCISE 3-8 (a) Basic Analysis
(b)
Debit-Credit Analysis
Aug Au g. 1
The asset Cash is increased; the stockholders’ equity account Common Stock is increased.
Debits increase assets: debit Cash $10,000. Credits increase stockholders’ equity: credit Common Stock $10,000.
4
The asset Prepaid Insurance is increased; the asset Cash is decreased.
Debits increase assets: debit Prepaid Insurance $1,500. Credits decrease assets: credit Cash $1,500.
16
The asset Cash is increased; the revenue Service Revenue is increased.
Debits increase assets: debit Cash $900. Credits increase revenues: credit Service Revenue $900.
27
The expense Salaries and Wages Expense is increased; the asset Cash is decreased.
Debits increase expenses: debit Salaries and Wages Expense $620. Credits decrease assets: credit Cash $620.
BRIEF EXERCISE 3-9 Aug. 1 4 16 27
3-8
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Comm Co mmon on Sto tock ck .....................................................
10,000
Prepaid Insu Prepaid Insurance. rance... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... Cash Ca sh .........................................................................
1,500
Cash ... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... Service Revenue ..................................................
900
Sal alar ariies and and Wag Wages Exp Expen ense se ................................... Cash Ca sh .........................................................................
620 62 0
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10,0 10 ,000 00
Kimmel Accounting, 4/e Solutions Manual
1,50 1, 500 0 900 620 62 0
(For Instructor Use Only)
BRIEF EXERCISE 3-10
5/12 5/15
5/5
Cash 1,600 2,000
Service Revenue 5/5 5/15
3,800 2,000
Accounts Receivable 3,800 5/12 1,600
BRIEF EXERCISE 3-11 LYNDON COMPANY Trial Balance June 30, 2012 Ca sh ......................... Cash ................................................... ................................................... ....................................... .............. Acco Ac count unts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Equi Eq uipm pmen entt ....................... ................................................ .................................................. ............................... ...... Acco Ac count unts s Pay Payab able le..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Comm Co mmon on Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Dividends................................................................................. Servi Ser vice ce Re Reve venu nue e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Salaries Sala ries and Wage Wages s Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Rent Re nt Ex Expe pens nse e ......................... .................................................. ................................................ .......................
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Kimmel Accounting, 4/e Solutions Manual
Debit $ 5,400 3,000 13,000
Credit
$ 1,000 18,000 1,200 8,600 4,000 1,000 $27,600
(For Instructor Use Only)
$27,600
3-9
BRIEF EXERCISE 3-12 PELICAN COMPANY Trial Balance December 31, 2012 Cash.......................................................................................... Prepa Pr epaid id Ins Insur uranc ance e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Accou Ac count nts s Pa Paya yable ble ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Unearned Service Revenue............................................... Common Stock...................................................................... Reta Re taine ined d Ear Earnin nings gs..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Divi Di vide dend nds s ......................... .................................................. .................................................. .............................. ..... Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Salaries and Wages Expense........................................... Rent Expense.........................................................................
3-10
Copyright © 2011 John Wiley & Sons, Inc.
Debit $20,800 3,500
Credit $ 2,500 1,800 10,000 6,600
5,000 25,600 14,600 2,600 $46,500
Kimmel Accounting, 4/e Solutions Manual
$46,500
(For Instructor Use Only)
SOLUTIONS TO DO IT! REVIEW EXERCISES DO IT! 3-1 Assets Cash (1) (2)
=
Liabilities
Accounts + Receivable =
Accounts Payable
+
Stockholders’ Equity Common Stock
Retained Earnings + Revenues – Expenses –
+$20,000 +$20,000
Dividends
+$20,000
–20,000
(3) (4)
+
+$1,800
–$1,800
–3,000
–$3,000
DO IT! 3-2 Phil would likely need the following accounts in which to record the transactions necessary to ready his photography studio for opening day: Cash (debit balance) Supplies (debit balance) Notes Payable (credit balance)
Equipment (debit balance) Accounts Payable (credit balance) Common Stock (credit balance)
DO IT! 3-3 Each transaction that is recorded is entered in the general journal. The three activities would be recorded as follows: 1. 2. 3.
Cash....... Cash..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Common Stock.......................................................... Suppli Sup plies es ............................................................................... Accounts Payable .................................................... Cash. h............................................................................... No en entr try y bec becau ause se no tr tran ansa sact ctio ion n has has oc occu curr rred ed..
8,000 8,000 950 550 400
DO IT! 3-4 4/1 4/3 4/30
Copyright © 2011 John Wiley & Sons, Inc.
Cash 1,900 4/16 3,400 4/20 4,500
Kimmel Accounting, 4/e Solutions Manual
500 300
(For Instructor Use Only)
3-11
SOLUTIONS TO EXERCISES EXERCISE 3-1 1. 2. 3. 4. 5. 6. 7. 8. 9.
Increa Incr ease se in in asset assets s and and incr increa ease se in in stoc stockh khol olde ders rs’’ equi equity ty.. Decr De crea ease se in in asse assets ts and and decr decrea ease se in in stoc stockh khol olde ders rs’’ equi equity ty.. Incr In crea ease se in in asset assets s and and incr increa ease se in in stoc stockh khol olde ders rs’’ equi equity ty.. Incr In crea ease se in in asset assets s and and incre increas ase e in sto stock ckho hold lder ers’ s’ equ equit ity. y. Decr De crea ease se in in asse assets ts and and decr decrea ease se in in stoc stockh khol olde ders rs’’ equi equity ty.. Increa Inc rease se in in liab liabili ilitie ties s and and decr decreas ease e in in stoc stockho kholde lders’ rs’ equ equity ity.. Incr In crea ease se in in asse assets ts and and dec decre reas ase e in as asse sets ts.. Incr In crea ease se in in asse assets ts and and dec decre reas ase e in as asse sets ts.. Incr In creas ease e in in ass assets ets an and d inc incre reas ase e in in lia liabi bili liti ties es..
EXERCISE 3-2 Assets
=
Accounts Cash
+
Receivable + Equipment = +$30,000
–$ 4,000
(3)
+12,000
(4)
+5,000
(5)
–8,000
(6)
+40,000
(7)
–30,000
Payable
Stockholders’ Equity Common
+
Stock
Retained Earnings + Revenues –
–$4,000
Rent Expense Re
–$12,000 +$5,000
Service Revenue –8,000
+$40,000
U tilities Expense Ut Issued Stock
–30,000 +1,300
$15,000 +
Expenses
+$30,000
(8) –$12,000
+
$30,000
=
$ 1,300
$33,000
3-12
+
Accounts
(1) (2)
Liabilities
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–1,300 +
$40,000 +
$5,000
–
Advertising Expense
$13,300
$33,000
Kimmel Accounting, 4/e Solutions Manual
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EXERCISE 3-3 e u n e v e R e c i v r e S
k c o t S d e u s s I s d n e d i v y i t D i u s q – E g n ’ i s r n r s e a e s d l E n o d e h e p x k i c n a E o t t e – S R s e u n e v e R
e s n e p x E t n e R
e u n e v e R e c i v r e S
e s n d e n p s a x s E d e s n i e r e d a g i l v a a i S W D 0 0 0 , 1 1 $ –
– 0 0 2 , 5 $ –
0 0 0 , 8 2 –
0 0 2 , 3 3 $ –
0 0 0 , 0 1 +
0 0 0 , 6 1 $ +
0 0 0 , 6 2 $ +
+ n o k m c o t m o S C +
+ 0 0 0 , 0 0 1 $
0 0 0 , 0 0 1 $ +
+
0 0 5 , 1 3 1 $
+ 0 0 0 , 5 4 $ +
e s l d b n a o y a B s P e i t i l + i b a i t s e L n l u b o a c y c a A P =
0 0 0 , 1 1 $
0 0 0 , 5 4 $ + 0 0 7 , 4 $ +
0 0 7 , 4 $
= t n e m p i u q E
0 0 0 , 0 6 $ +
0 0 0 , 0 6 $
+ s e i l p p s u t e S s s + A e s l t n b a u i v o e c c c e A R + h s a C
Copyr Co pyrigh ightt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
+ 0 0 7 , 4 $ +
0 0 7 , 4 $ + 0 0 0 , 0 1 $ +
0 0 0 , 0 0 1 $ + ) 1 (
0 0 0 , 5 4 +
0 0 0 , 0 6 –
0 0 0 , 6 1 +
0 0 0 , 0 1 $
0 0 0 , 8 2 –
0 0 0 , 1 1 –
) ) ) ) ) ) ) 2 ( 3 ( 4 ( 5 ( 6 ( 7 ( 8 (
) 9 (
0 0 2 , 5 –
Kimm Ki mmel el Accounting, 4/ 4/e e Soluti Solutions ons Manu Manual al
0 0 5 , 1 3 1 $
+ 0 0 8 , 6 5 $
(For (F or Inst Instruc ructor tor Use Use Onl Only) y)
3-13
EXERCISE 3-4 (a)) (a
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.. 10
Stock Sto ckho hollde ders rs in inve vest sted ed $2 $20, 0,00 000 0 ca cash sh in th the e bu busi sine ness ss.. Purcha Pur chased sed equ equipm ipment ent for $5, $5,000 000,, payi paying ng $1, $1,000 000 in cas cash h and and the the balance of $4,000 on account. Paiid $7 Pa $750 50 ca cash sh fo forr su sup ppl pliies es.. Earn Ea rned ed $9, $9,50 500 0 in reve revenu nue, e, rec recei eivi ving ng $4, $4,100 100 cas cash h and and $5,40 $5,400 0 on account. Paid Pa id $1 $1,5 ,500 00 ca cash sh on ac acco coun unts ts pa paya yabl ble. e. Paid Pa id $2 $2,0 ,000 00 ca cash sh di divi vide dend nds s to to sto stock ckho hold lder ers. s. Paid $800 cash for rent. Coll Co llec ecte ted d $45 $450 0 cas cash h fro from m cus custo tome mers rs on ac acco coun unt. t. Paid salaries of of $3 $3,000. Incu In curr rred ed $3 $300 00 of uti utili liti ties es ex expe pens nse e on on acc accou ount nt..
(b) Issued common stock stock.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Service revenue .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Dividen Div idends ds ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Rent expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Salaries and wages expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Utiliti Uti lities es exp expense ense... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Increase in stockholders’ equity .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..
$20,000 9,500 (2,000) (2,0 00) (800) (3,000) (300)) (300 $23,400
(c) Service revenue .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Rent expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Salaries and wages expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Utiliti Uti lities es exp expense ense... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Net inco income me ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...
$ 9,500 (800) (3,000) (300)) (300 $ 5,4 5,400 00
3-14
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
EXERCISE 3-5 NIGEL COMPANY Income Statement For the Month Ended August 31, 2012 Revenues Ser ervi vice ce re reve venu nue e ................................................................. Expenses Salaries and wages expense expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Rent expens expense e .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Utilities Utilitie s expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Total expenses. s........................................................... Nett in Ne inco come me ...................................................................................
$9,,50 $9 500 0 $3,000 800 300 4,100 $5,4 $5 ,400 00
NIGEL COMPANY Retained Earnings Statement For the Month Ended August 31, 2012 Ret ained Retaine d ear earning nings, s, Augu August st 1 ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Add: Net inco income me ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Less : Divi Less: Dividend dends s ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Retaine Ret ained d ear earning nings, s, Augu August st 31..... 31........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... ..
$ 0 5,400 5,4 00 5,400 2,000 2,0 00 $3,400 $3,4 00
NIGEL COMPANY Balance Sheet August 31, 2012 Assets Current Assets: Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Accounts Account s receiv receivable able .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Supplies Supp lies ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Total current assets ...................................................... Equi Eq uipm pmen entt ................................................................................. Tot otal al as asse sets. ts.......................................................................
$15 ,500 $15,50 0 4,950 750 21,200 5,00 5, 000 0 $26, $2 6,20 200 0
Liabilities and Stockholders’ Equity Current liabilities Accounts pa payable .......................................................... Stockholders’ equity Common stock .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Retain Ret ained ed ear earnin nings.. gs........................................................... Total liabilities and stockholders’ equity .. ......
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
$ 2,800 $20,00 0 $20,000 3,400 3,4 00
(For Instructor Use Only)
23,400 23,400 $26,200 3-15
EXERCISE 3-6 l e t a c ) m n i d d a e r ( r l o a C N B
t i b e D
t i d e r C
t i d e r C
t i b e D
t i b e D
t i b e D
t i b e D
t e c s e a e f f r c E I n
e s a e r c e D
e s a e r c n I
e s a e r c n I
e s a e r c e D
e s a e r c e D
e s a e r c e D
e s a e r c e D
h s a C
s e t n l u b o a c y a c P A
e e c u i n v r e e v e S R
h s a C
e s l t b n a u i v o e c c c e A R
h s a C
h s a C
t e s s A
y t i l i b a i L
’ s r e y d l t o i h u q k E c o t S
t e s s A
t e s s A
t e s s A
t e s s A
l e a c t ) m n i d a b e ( r l o a D N B
t i b e D
t i b e D
t i b e D
t i b e D
t i b e D
t i d e r C
t i b e D
t e c s e a e f f r c E I n
e s a e r c n I
e s a e r c n I
e s a e r c n I
e s a e r c n I
e s a e r c n I
e s a e r c e D
e s a e r c n I
t n e m p i u q E
s e i l p p u S
e s l t b n a u i v o e c c c e A R
g n e i s s i n t r e e p v x d E A
h s a C
s e t n l u b o a c y a c P A
s d n e d i v i D
t e s s A
t e s s A
s ’ r e y d t l i o h u q k E c o t S
t e s s A
y t i l i b a i L
’ s r e y d l t i o h u q k E c o t S
. . 2 3
. 4
. 5
. 6
. 7
. 8
) c d ( e t i d e r C c t t i n n k n ) f u o u b i c o m c o o ( e c m t c p o S c c S A C A c e ) i p a s ( a y B T
’ s r e y d l t o i h u q k E c o t S
) c d ( e t i b e D c t t i n n ) f i u h u b c o s o ( e c a c p c C c S A A
c e t e ) i s p s a ( a y s B T A
) a ( 3-16
- n s o . n i t 1 a r c T a
t e s s A
Copyr Co pyrigh ightt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
Kimm Ki mmel el Accounting, 4/e Sol Soluti utions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Onl Only) y)
EXERCISE 3-6 (Continued) (b) General Journal Trans. 1. 2. 3. 4. 5. 6. 7. 8.
Account Titles Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... ....
Debit 15,000
Equipment....... Equipment..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ...................... ................................................ ............................................... .....................
10,000
Supplies .... Supplies.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... ......... ....
300
Accounts Receivable.. Accounts Receivable.... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... Servic Ser vice e Rev R even enue ue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......
3,700
Advertising Advertisin g Expen Expense se .. .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... Cash Ca sh ...................... ................................................ ............................................... .....................
200
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts Receivable......................................
1,100
Accounts Payable.. Payable.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ...................... ............................................... ............................................... ......................
300
Dividends .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ...................... ............................................... ............................................... ......................
400
Credit 15,000 10,000 300 3,700 200 1,100 300 400
EXERCISE 3-7 Oct. Oc t. 1
Debits Debi ts in incr crea ease se as asse sets: ts: debit debit Ca Cash sh $3 $30, 0,00 000. 0. Credits increase stockholders’ equity: equity: credit Common Stock $30,000.
2
No accounting tr tra ansaction.
3
Debits Debi ts in incr crea ease se as asse sets ts:: de debi bitt Eq Equi uipm pmen entt $3 $3,8 ,800 00.. Credits increase liabilities: credit Accounts Payable $3,800.
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-17
EXERCISE 3-7 (Continued) Oct. Oc t. 6
Debits Debi ts in incr crea ease se as asse sets ts:: de debi bitt Ac Acco coun unts ts Re Rece ceiv ivab able le $1 $10, 0,80 800. 0. Credits increase revenues: credit Service Service Revenue $10,800.
10
Debits Debi ts in incr crea ease se as asse sets ts:: de debi bitt Ca Cash sh $1 $140 40.. Credits increase revenues: credit Service Service Revenue $140.
27
Debits Debi ts de decr crea ease se li liab abil ilit itie ies: s: de debi bitt Acc Accou ount nts s Pay Payab able le $7 $700 00.. Credits decrease decrease assets: credit Cash $700.
30
Debits Debi ts in incr crea ease se ex expe pens nses es:: de debi bitt Sa Sala lari ries es an and d Wa Wage ges s Expense $3,000. Credits decrease assets: credit Cash $3,000.
EXERCISE 3-8 General Journal Date Oct.. 1 Oct
Debit 30,000
No entry.
3
Equipmen t .. Equipment .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Acco Ac count unts s Pay Payab able le..... .......... .......... .......... .......... .......... .......... .......... ....... ..
3,800
Accounts Receivable. Receivable... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Servi Se rvice ce Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... ....
10,800
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Servi Se rvice ce Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... ....
140
Account s Payable.... Accounts Payable...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh .......................... ................................................... ......................................... ................
700
Salaries and Wages Expen Salaries Expense se .. .... .... .... .... .... ...... .... .... .... .... .... .... .... .. Cash Ca sh .......................... ................................................... ......................................... ................
3,000
10 27 30
Copyright © 2011 John Wiley & Sons, Inc.
Credit 30,000
2
6
3-18
Account Titles Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Comm Co mmon on St Stock ock ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... ..
3,800 10,800 140 700
Kimmel Accounting, 4/e Solutions Manual
3,000
(For Instructor Use Only)
EXERCISE 3-9 General Journal Date May 4 7 8 9 17 22 29
Account Titles Accounts Payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash....................................................................
Debit 700
Accounts Receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... .....
6,800
Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Acco Ac count unts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... ..
850
Equipment .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash....................................................................
1,000
Salaries and Wages Salaries Wages Expense. Expense... ...... .... .... .... ...... .... .... .... .... .... .... .... .... Cash....................................................................
530
Mainte Mai ntenan nance ce and and Repair Repair Expe Expense.. nse...................... Accou Ac count nts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... ..
900
Prepaid Insurance Insurance.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash....................................................................
1,200
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit 700 6,800 850 1,000 530 900
(For Instructor Use Only)
1,200
3-19
EXERCISE 3-10 (a) Oct. 1 10 Bal.
Cash 30,000 Oct. 27 140 30 26,440
700 3,000
Accounts Payable Oct. 27 700 Oct. 3 Bal.
Common Stock Oct. 1 30,000 Bal. 30,000
Accounts Receivable Oct. 6 10,800 Bal. 10,800
Oct. 3 Bal.
Equipment 3,800 3,800
3,800 3,100
Service Revenue Oct. 6 10,800 10 140 Bal. 10,940 Salaries and Wages Expense Oct. 30 3,000 Bal. 3,000
(b)
PLUNKETT REAL ESTATE AGENCY Trial Balance October 31, 2012 Ca sh ...................... Cash ............................................... .................................................. ................................. ........ Accounts Receivable................................................. Equi Eq uipm pmen entt ....................... ................................................. .............................................. .................... Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Salaries Sala ries and Wag Wages es Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...
3-20
Copyright © 2011 John Wiley & Sons, Inc.
Debit $26,440 10,800 3,800
Credit
$ 3,100 30,000 10,940 3,000 $44,040
Kimmel Accounting, 4/e Solutions Manual
$44,040
(For Instructor Use Only)
EXERCISE 3-11 (a)
Assets
= Liabilities + Accounts
Cash
+ Equipment =
Sept. 1
$20,000
5
–3,000
25
–4,000
30
–500 $ 12,500 +
Payable
Stockholders’ Equity Common
+
Stock
– Dividends
+$20,000 +$9,000
Issued stock
+$ 6,000 –4,000 –$500
$9,000
$21,500.. $21,500 ..
=
$ 2,000
+
+$20,000
–
Dividends
$500
$21,500
(b) General Journal Date Sept. 1 5
25 30
Account Titles Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Comm Co mmon on Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......
Debit 20,000
Equipmen t .. Equipment .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts Payable......................................... Cash Ca sh ........................ ................................................. .......................................... .................
9,000
Account s Payable Accounts Payable.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ........................ ................................................. .......................................... .................
4,000
Dividend s .. Dividends .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ........................ ................................................. .......................................... .................
500
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
J1 Credit 20,000 6,000 3,000 4,000
(For Instructor Use Only)
500
3-21
EXERCISE 3-11 (Continued) (c) 9/1
Bal.
9/5 Bal.
9/25
3-22
Cash 20,000 9/5 9/25 9/30 12,500
3,000 4,000 500
9/30 Bal.
Equipment 9,000 9,000 Accounts Payable 4,000 9/5 Bal.
Common Stock 9/1 Bal.
20,000 20,000
Dividends 500 500
6,000 2,000
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
EXERCISE 3-12 (a) Date Apr. 1
4
7
12
15
25
29
30
General Journal Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. (Issued stock for cash)
Debit 15,000
15,000
Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Acco Ac count unts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... .. (Purchased supplies on account)
5,200
Accounts Receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Billed clients for services rendered)
3,400
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Received cash for revenue earned)
700
Salaries and Wages Salaries Wages Expense. Expense... ...... .... .... .... ...... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid salaries)
800
Accounts Payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid creditors on account)
3,500
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Acco Ac count unts s Re Rece ceiv ivabl able e ..... .......... .......... .......... .......... .......... .......... ....... (Received cash in payment of account)
800
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Unearned Unea rned Service Ser vice Revenu Re venue e ... ...... ...... ...... ...... ...... ...... ...... ... (Received cash for future services)
900
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
5,200
3,400
700
800
3,500
800
(For Instructor Use Only)
900
3-23
EXERCISE 3-12 (Continued) (b)
McGREGOR GARDENING COMPANY, INC. Trial Balance April 30, 2012 Ca sh ...................... Cash ............................................... .................................................. ................................. ........ Accounts Receivable................................................. Supp Su ppli lies es ....................... ................................................ .................................................. ......................... Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Unearne Unea rned d Serv Service ice Rev Revenue enue ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Salaries Sala ries and Wag Wages es Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...
3-24
Copyright © 2011 John Wiley & Sons, Inc.
Debit $13,100 2,600 5,200
Credit
$ 1,700 900 15,000 4,100 800 $21,700
Kimmel Accounting, 4/e Solutions Manual
$21,700
(For Instructor Use Only)
EXERCISE 3-13 (a) Aug. 1 10 31 Bal.
Cash 8,000 Aug. 12 1,700 600 9,100
Accounts Receivable Aug. 25 3,400 Au Aug. 31 Bal. 2,800
Aug. 12 Bal.
5,000 5,000
Common Stock Aug. 1 Bal.
8,000 8,000
Service Revenue Aug. 10 25 Bal.
1,700 3,400 5,100
1,200
600
Equipment 6,200 6,200
(b)
Notes Payable Aug. 12 Bal.
GALAXY INC. Trial Balance August 31, 2012 Cash................................................................................. Acco Ac count unts s Re Rece ceiv ivabl able e ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Equipment...................................................................... Notes Payable............................................................... Common Stock............................................................. Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ...
Debit $ 9,100 2,800 6,200
$18,100
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
Credit
$ 5,000 8,000 5,100 $18,100
3-25
EXERCISE 3-14 (a) Oct. 1
10
10
20
20
3-26
Cash....... Cash..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Common Com mon Sto Stock ck ............................................. (Issued stock for cash)
7,000
Cash.... Cas h....... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Servic Ser vice e Rev Revenu enue. e............................................ (Received cash for services provided)
980
Cash.... Cas h....... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Notes Not es Pay Payabl able e ............................................... (Obtained loan from bank)
8,000 8,0 00
Cash.... Cas h....... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Acco Ac coun unts ts Re Rece ceiv ivab able le................................... (Received cash in payment of account)
700
Account s Receiva Accounts Receivable ble .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servic Ser vice e Rev Revenu enue. e............................................ (Billed clients for services provided)
920
Copyright © 2011 John Wiley & Sons, Inc.
(For Instructor Use Only)
7,000 7,0 00
980
Kimmel Accounting, 4/e Solutions Manual
8,000 8,0 00
700 70 0
920
EXERCISE 3-14 (Continued) (b)
STAMPFER CO. Trial Balance October 31, 2012 Cash................................................................................. Acco Ac count unts s Re Rece ceiv ivabl able e ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Supplies.......................................................................... Equipment...................................................................... Notes Payable............................................................... Acco Ac count unts s Pay Payab able le ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Common Stock............................................................. Divi Di vide dend nds s ........................ ................................................. ............................................... ...................... Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Salarie Sala ries s and Wage Wages s Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Suppli Sup plies es Ex Expen pense se..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... Rent Expense................................................................
Debit $15,730 1,020 220 3,000
Credit
$ 8,000 1,500 9,000 300 2,700 500 180 250 $21,200
$21,200
EXERCISE 3-15 Error 1. 2. 3. 4. 5. 6.
(a) In Balance No Yes Yes No Yes No
Copyright © 2011 John Wiley & Sons, Inc.
(b) Difference $400 — — 300 — 36
(c) Larger Column Debit — — Credit — Credit
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-27
EXERCISE 3-16 (a)
ROSHEK DELIVERY SERVICE Trial Balance July 31, 2012 Debit Cash ($98,370 – Debit total without Cash $85, $8 5,94 946) 6) ....................... ................................................. ............................................... ..................... Accou Ac count nts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Prepa Pre paid id In Insur suran ance ce ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Equipment...................................................................... Accou Ac count nts s Pay P ayab able le ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Salaries Sala ries and Wag Wages es Pay Payable able ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Notes Not es Payabl Pay able e (d (due ue 2015) 201 5) ..... .......... .......... .......... .......... .......... .......... .......... ....... Common Stock............................................................. Reta Re taine ined d Ea Earni rnings ngs..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Divi Di vide dend nds s ........................ ................................................. ............................................... ...................... Servi Ser vice ce Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Salaries Sala ries and Wag Wages es Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Maintenance and Repairs Expense....................... Insura Ins uranc nce e Expe Ex pense nse ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ...
3-28
Copyright © 2011 John Wiley & Sons, Inc.
Credit
$12,424 13,400 2,200 59,360 $ 8,400 820 28,450 40,000 5,200 700 15,500 7,428 1,958 900 $98,370
Kimmel Accounting, 4/e Solutions Manual
$98,370
(For Instructor Use Only)
EXERCISE 3-16 (Continued) (b)
ROSHEK DELIVERY SERVICE Income Statement For the Month Ended July 31, 2012 Revenues Service revenue .......................................................... Expenses Salari Sal aries es and wage wages s expense expense................................... Main Ma inte tena nanc nce e and repa repair irs s expen expense. se......................... Insurance expense... expense..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Total expenses. s......................................................... Nett in Ne inco come. me.........................................................................
$15,500 $7,428 $7,428 1,95 1, 958 8 900 10,286 $ 5, 5,21 214 4
ROSHEK DELIVERY SERVICE Retained Earnings Statement For the Month Ended July 31, 2012 Retained earnings, July 1 ............................................ Add: Net income .......................................................... Less: Dividends ............................................................. Retained earnings, July 31. 1...........................................
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
$ 5,200 5,214 10,414 700 $ 9,714
3-29
EXERCISE 3-16 (Continued) ROSHEK DELIVERY SERVICE Balance Sheet July 31, 2012 Assets Current Assets Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Accoun ts receivable receivable .. .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... Prepaid insuranc insurance... e..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current assets .............................................. Equi Eq uip pme ment nt ........................................................................ Total assets..............................................................
$12,424 13,400 2,200 $28,024 59,3 59 ,360 60 $87,384
Liabilities and Stockholders’ Equity Current Liabilities Accounts payable payable.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Salaries Salar ies and wages payabl payable.. e...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... Total current liabilities. s.......................................... Notes payable ................................................................. Total liabilities......................................................... Stockholders’ Equity Common stock.. stock.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Retained earnings.. earnings.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Total stockholders’ equity. y................................... Total liabilities and stockholders’ equity.......
3-30
Copyright © 2011 John Wiley & Sons, Inc.
$ 8,400 820 $ 9,220 28,450 37,670 40,000 9,714
Kimmel Accounting, 4/e Solutions Manual
49,714 $87,384
(For Instructor Use Only)
EXERCISE 3-17
Account Accounts payable Accounts receivable Common stock Depreciation expense Interest expense Interest income Inventories Prepaid expenses Property and Equipment Revenues
(a) Normal Balance Debit or Credit Credit Debit Credit Debit Debit Credit Debit Debit Debit Credit
(b) Balance Sheet or Income Statement Balance sheet Balance sheet Balance sheet Income statement Income statement Income statement Balance sheet Balance sheet Balance sheet Income statement
EXERCISE 3-18 1. 2. 3. 4. 5. 6. 7. 8. 9.
Financing activity Operating activity Operating activity Non-cash ev event Financing activity Non-cash event Operating activity Investing activity Non-cash ev event
EXERCISE 3-19 1. 2. 3. 4. 5. 6. 7. 8. 9.
Financing activity Financing activity Investing activity Operating activity Non-cash ev event Operating activity Non-cash ev event Operating activity Financing activity
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-31
SOLUTIONS TO PROBLEM PROBLEM 3-1A e s n e p x E g n i s i t r e v d A
e s n e p x E t n e R
. C N I Y C N E G A L E V A R T D N O B A G A V
s d n e y t d i i u v i q E s D ’ g – s r i e n d l n r s o a e h E s k d n c e e o n p x t S i a E t e R – s e u n e v e R + n 0 o k 0 0 , m c o m t 0 3 S o $ + C
3-32
s d n e d i v i D
0 0 4 $ –
0 0 9 $ –
0 0 9 , 2 $
0 0 8 , 1 –
0 0 2 –
– 0 0 0 , 2 1 $ +
0 0 0 , 2 1 $
0 0 7 , 8 3 $
+ 0 0 0 , 0 3 $ + 0 0 2 –
0 0 2 $ +
0 $ =
= t n e m p i u q E + s e i l p p u S
0 0 4 , 3 $ +
0 0 4 , 3 $ + 0 0 5 $ +
s t e + s s e l s A t n b a u i v o e c c c e A R +
) a (
s e g a W d n a s e e s i r n a e l p a x S E
0 0 4 $ –
+ + s e s t e l i t n i u b l i o a b c y a a c P i L A =
e u n e v e R e c i v r e S
0 0 5 $ + 0 0 0 , 9 $ +
0 h 0 s 0 , a 0 C 3 $ +
0 0 9 –
0 0 4 , 3 –
. 1
. 2
. 3
. 4
0 0 0 0 , 9 – $
0 0 5 –
0 0 0 , 3 +
0 0 4 –
0 0 2 –
0 0 8 , 1 –
0 0 0 , 9 +
. 5
. 6
. 7
. 8
. 9
. 0 1
Copyri Cop yright ght © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
0 0 7 , 8 3 $
+ 0 0 8 , 4 3 $
Kimm Ki mmel el Accounting, 4/e Solu Soluti tions ons Manu Manual al
(For (F or Instr Instruct uctor or Use Use Only) Only)
PROBLEM 3-1A (Continued) (b) Service Service Revenu Revenue.. e...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... Expenses Salaries and Wages Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Rentt Expe Ren Expense..... nse........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Advertising Advert ising Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Net Inco Income.. me.... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ......
$12,000 $12,00 0 $1,800 900 200
2,900 $ 9,100
OR Revenues .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Less: Expen Expenses ses .. ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... Net Income. Income... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..
Copyright © 2011 John Wiley & Sons, Inc.
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(For Instructor Use Only)
$12,000 2,900 $ 9,100
3-33
PROBLEM 3-2A
y t i u q E ’ s r e d l o h k c o t S
. C N I G N I T L U S N O C E D A M R O L Y A T
+
s d n e d i v i s D g – n i n s r a e E s n d e e p n x i a E t e – R s e u n e v e R + n 0 o k 0 0 , m c o m t 5 1 S o $ + C + s e t n l u b o a c y c a A P
3-34
e s n e p x E t n e R
s e g a W d n a s e e s i r n a e l p a x S E
e s n e p x E s e i t i l i t U
0 0 2 $ –
0 0 2 $ –
0 5 1 –
0 0 6 $ –
s e i t i l i + b a e i l L s b e t a o y N a P = = t n e m p i u q E + s e i l p p u S s t e + s s e A s l t b n a u i v o e c c c e A R +
0 0 5 , 2 –
0 8 1 –
0 3 4 , 3 $ –
0 0 4 , 1 $ +
0 0 6 , 5 $
0 0 2 , 4 +
+ 0 0 0 , 5 1 $
0 7 7 , 3 2 $
+ 0 0 5 –
0 0 5 $ +
0 0 8 , 1 +
0 0 8 , 1 $ + 0 0 0 , 5 $
0 0 0 , 5 $ +
= 0 0 0 , 2 $ +
0 0 0 , 2 $ +
0 0 5 $ +
0 0 5 $ + 0 0 2 , 4 +
0 0 2 , 1 –
0 0 0 , 3 $
0 0 0 0 0 , 6 5 – 1 $ +
0 5 1 –
0 0 0 0 4 , 2 1 – +
0 0 5 , 2 –
0 0 5 –
0 0 2 , 1 +
1 2 e y t a a D M
3 5
9 2 1
5 7 1 1
0 2
3 6 2 2
h s a C
) a (
e s n e e e p u u x n n E e e v g v e s e n i R d R s e n e i t r i c e i c e v d v v r i r v d e i e A S D S
Copyr Co pyrigh ightt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
0 0 0 0 0 8 0 , 2 1 5 – – +
0 7 7 , 3 2 $
+ 0 7 2 , 8 1 $
9 0 2 3
Kimm Ki mmel el Accounting, 4/ 4/e e Soluti Solutions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Onl Only) y)
PROBLEM 3-2A (Continued) (b)
TAYLOR MADE CONSULTING INC. Income Statement For the Month Ended May 31, 2012 Revenues Service revenue ($1,400 + $4,200) .. ................... Expenses Salari Sal aries es and wag wages es exp expens ense e ............................. Rent expense expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Utilities Utili ties expen expense se .. .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .. Advertisin Adver tising g expens expense e .. .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .. Total expenses. s............................................... Net income me.........................................................................
(c)
$5,600 $2,500 $2,500 600 180 150 3,430 $2,170
TAYLOR MADE CONSULTING INC. Balance Sheet May 31, 2012 Assets Current assets Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current assets .................................... Equipment ............................................................... Total assets. s.....................................................
$18,27 0 $18,270 3,000 500 $21,770 2,000 $23,770
Liabilities and Stockholders’ Equity Current liabilities Notes payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current liabilities................................ Stockholders’ Equity Common stock.. stock.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Retained earnings ($0 + $2,170 – $200). ).......... Total liabilities and stockholders’ equity ...........................................................
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
$ 5,000 1,800 $ 6,800 15,000 1,970
(For Instructor Use Only)
16,970 $23,770
3-35
PROBLEM 3-3A
y t i u q E ’ s r e d l o h k c o t S
. C N I R E B E R K C I D
) a (
3-36
+
e u n e v e R e c i v r e S
s d n e d i v i D – s e s n e p x E – e u n e v e R + d s e g 0 n 0 n i i a r , n 6 t e a 1 $ R E + + n o k 0 0 m c o 2 , m t 6 o S $ C + + s e t n l 0 u b 0 2 o a y , c a 4 c P $ A +
s e i t i l i b a e i l L s b e t a o y N a p = = = n e 0 m 0 p 0 , i u 5 $ q E + + s e 0 i l p 0 p 5 s u $ t S e s + + s A e 0 s l t 0 n b a 5 , u i v 2 o e $ c c c e A R + + h 0 s 0 a 0 , C 4 $
s e g a W d n a s e e s i r n a e l p a x S E
e s n e p x E t n e R
e s n e p x E g n i s i t r e v d A
e s n e p x E s e i t i l i t U
s d n e d i v i D 0 0 7 $ –
0 0 7 $ –
0 0 4 , 1 $ –
0 0 0 5 7 3 – –
0 8 3 –
0 3 8 , 2 $ – 0 0 4 , 5 $
0 0 4 , 5 $ +
+ 0 0 6 , 1 $
0 5 8 , 9 1 $
+ 0 0 2 , 6 $ + 0 0 7 , 2 –
0 0 3 , 3 +
0 8 3 +
0 8 1 , 5 $ + 0 0 0 , 5 $
0 0 0 , 5 $ +
= 0 0 0 , 4 +
0 0 0 , 9 $ + 0 0 5 $ +
0 0 1 , 1 –
0 0 1 , 1 +
. 1 l 3 a 1 . y B g l u u A J
0 0 2 , 3 $
0 0 8 , 1 +
0 0 7 , 2 –
0 0 6 , 3 +
0 0 7 –
0 5 4 , 2 –
0 0 7 –
0 0 0 , 5 +
4
9
5 1
9 1
3 2
6 2
Copyri Cop yrigh ghtt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
0 5 8 , 9 1 $
+ 0 5 1 , 7 $ 1 3
Kimm Ki mmel el Accounting, 4/e Sol Soluti utions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Only Only))
PROBLEM 3-3A (Continued) (b)
ROBIN KLANN INC. Income Statement For the Month Ended August 31, 2012 Revenues Service revenue ........................................................ Expenses Salaries Salar ies and wages expen expense se.. .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... Rent expense expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Utilit Uti lities ies expen expense se ....................................................... Advertisin Advert ising g expens expense e .. .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... Total expenses. s.................................................. Nett in Ne inco come me............................................................................
$5,400 $1,400 700 380 350 2,830 $2,5 $2 ,570 70
ROBIN KLANN INC. Retained Earnings Statement For the Month Ended August 31, 2012 Retaine d earnings, Retained earnings , August 1 .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Add: Net income income.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Less : Divi Less: Dividend dends s ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Retained Retaine d earnings, earnings , August 31.. 31 .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ....
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$1,600 2,570 4,170 700 $3,470
3-37
PROBLEM 3-3A (Continued) ROBIN KLANN INC. Balance Sheet August 31, 2012 Assets Current assets Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total cu current as assets. s....................................... Office equipment..................................................... Total assets .....................................................
$7,150 3,200 500 $10,850 9,000 $19,850
Liabilities and Stockholders’ Equity Current liabilities Notes payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts payable payable.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current liabilities ................................. Stockholders’ equity Common stock ... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... .... Retai Re taine ned d ea earn rnin ings gs .................................................. Total liabilities and stockholders’ equity ty..............................................................
3-38
Copyright © 2011 John Wiley & Sons, Inc.
$5,000 5,180 $10,180 6,200 3,47 3, 470 0
Kimmel Accounting, 4/e Solutions Manual
9,67 9, 670 0 $19,850
(For Instructor Use Only)
PROBLEM 3-4A
Date Mar. 1
3
5
6
10
18
19
25
Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. (Issued stock for cash)
Debit 50,000
Land ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Buildings.................................................................... Equip Equ ipme ment nt ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Cash.................................................................... (Purchased Arnie’s Golf Land)
23,000 9,000 6,000
Advertising Expense... Expense..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid for advertising)
1,200
Prepaid Insurance Insurance.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid for one-year insurance policy)
2,400
Equipment .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accou Ac count nts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... .. (Purchased equipment on account)
5,500
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Servi Ser vice ce Re Reve venue nue..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Received cash for revenue earned)
1,600
Cash (100 X $25) .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Unearne Unea rned d Service Servic e Revenue Reven ue ... ...... ...... ...... ...... ...... ...... ...... ... (Received cash for coupon books sold)
2,500
Dividend s .. Dividends .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Payment of cash dividend)
500
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit 50,000
38,000
1,200
2,400
5,500
1,600
2,500
(For Instructor Use Only)
500
3-39
PROBLEM 3-4A (Continued) Date Mar. 30
30
31
3-40
Account Titles and Explanation Salaries Salar ies and Wages Expen Expense se .. .... .... .... ...... .... .... .... .... .... .... .... .... .... .. Cash Ca sh .......................... ................................................... ......................................... ................ (Paid salaries expense)
Debit 800
Account s Payable.... Accounts Payable...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh .......................... ................................................... ......................................... ................ (Paid creditor on account)
5,500
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for revenue earned)
900
Copyright © 2011 John Wiley & Sons, Inc.
Credit 800
5,500
Kimmel Accounting, 4/e Solutions Manual
900
(For Instructor Use Only)
PROBLEM 3-5A (a) Date Apr. 1
Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. (Issued shares of stock for cash)
Debit 18,000
18,000
1
No entry—not a transaction.
2
Rent Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid monthly office rent)
900
Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accou Ac count nts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... .. (Purchased supplies on account from Spring Green Company)
1,300
Accounts Receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venue nue..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Billed clients for services rendered)
1,900
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Unearne Unea rned d Service Servic e Revenue Reven ue ... ...... ...... ...... ...... ...... ...... ...... ... (Received cash advance for future service)
700
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Received cash for revenue earned)
2,800
Salaries and Wages Salaries Wages Expense. Expense... ...... .... .... .... ...... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid monthly salary)
1,500
Accounts Payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid Spring Green Company on account)
300
3
10
11
20
30
30
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
900
1,300
1,900
700
2,800
1,500
(For Instructor Use Only)
300
3-41
PROBLEM 3-5A (Continued) (b) 4/1 4/11 4/20 Bal.
4/10 Bal.
4/3 Bal.
4/30
Cash 18,000 4/2 700 4/30 2,800 4/30 18,800
900 1,500 300
Salaries and Wages Expense 4/30 1,500 Bal. 1,500
4/2 Bal.
Accounts Receivable 1,900 1,900
Rent Expense 900 900
Supplies 1,300 1,300 Accounts Payable 300 4/3 Bal.
1,300 1,000
Unearned Service Revenue 4/11 700 Bal. 700
3-42
Common Stock 4/1 Bal.
18,000 18,000
Service Revenue 4/10 4/20 Bal.
1,900 2,800 4,700
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-5A (Continued) (c)
TOWNE ARCHITECTS INC. Trial Balance April 30, 2012 Cash................................................................................. Acco Ac count unts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Supplies.......................................................................... Acco Ac count unts s Pay Payab able le ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Unearned Service Revenue...................................... Common Stock............................................................. Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Salarie Sala ries s and Wage Wages s Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Rent Expense................................................................
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Debit $18,800 1,900 1,300
Credit
$ 1,000 700 18,000 4,700 1,500 900 $24,400
(For Instructor Use Only)
$24,400
3-43
PROBLEM 3-6A
(a) & (c) 10/1 Ba Bal. 10/5
Bal.
Cash 8,200 10/15 1,300 10/20 10/29 10/31 5,700
Common Stock 10/1 10 /1 Ba Ball. 15,0 15,000 00 Bal. 15,000
1,200 1,900 300 400 10/29 Bal.
Accounts Receivable 10/1 Ba Bal. 2,600 10/5 1,300 10/10 5,100 Bal. 6,400
10/1 Ba Bal. Bal.
Supplies 2,100 2,100
10/1 Ba Bal. Bal.
Equipment 8,000 8,000
10/20
Accounts Payable 1,900 10 1 0/1 Bal. Bal.
Dividends 300 300 Service Revenue 10/10 10/17 Bal.
5,100 600 5,700
Salaries and Wages Expense 10/15 1,200 Bal. 1,200
10/31 Bal.
Utilities Expense 400 400
4,800 2,900
Unearned Service Revenue 10/17 600 10/1 Bal. 1,000 Bal. 500
3-44
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-6A (Continued) (b) Date Oct.. 5 Oct
10
15
17
20
29
31
Account Titles and Explanation Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Acco Ac count unts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... ....... (Received collections from customers on account)
Debit 1,300
Accounts Receivable Receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Billed customers for services performed)
5,100
Salaries and Wages Expens Salaries Expense.. e.... .... .... .... .... ...... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid employee salaries)
1,200
Unearned Servic Unearned Service e Revenue Revenue .. ...... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Performed services for customers who paid in advance)
600
Accounts Payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid creditors on account)
1,900
Dividend s .. Dividends .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Payment of cash dividend)
300
Utilitie s Expense Utilities Expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash.................................................................... (Paid utilities)
400
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit 1,300
5,100
1,200
600
1,900
300
(For Instructor Use Only)
400
3-45
PROBLEM 3-6A (Continued) (d)
MIMOSA COMPANY Trial Balance October 31, 2012 Ca sh ...................... Cash ............................................... .................................................. ................................. ........ Accounts Receivable................................................. Supp Su ppli lies es ....................... ................................................ .................................................. ......................... Equi Eq uipm pmen entt ....................... ................................................. .............................................. .................... Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Unearne Unea rned d Serv Service ice Rev Revenue enue ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Dividends....................................................................... Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Salaries Sala ries and Wag Wages es Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Utili Ut iliti ties es Exp Expens ense e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... ..
3-46
Copyright © 2011 John Wiley & Sons, Inc.
Debit $ 5,700 6,400 2,100 8,000
Credit
$ 2,900 500 15,000 300 5,700 1,200 400 $24,100
Kimmel Accounting, 4/e Solutions Manual
$24,100
(For Instructor Use Only)
PROBLEM 3-7A
MICHELS CO. Trial Balance June 30, 2012 Cash ($3,090 – $780 + $870)..................................... Accounts Receivable*................................................ Supplies ($800 – $340)............................................... Equipm Equ ipmen entt ($ ($3,0 3,000 00 + $3 $340 40)) ..... .......... .......... .......... .......... .......... .......... ......... .... Accounts Account s Payable ($3,686 ($ 3,686 – $206 $20 6 – $260) .. .... .... .... .... .... Unearned Service Revenue...................................... Common Stock............................................................. Divid Di viden ends ds ($800 ($8 00 + $600) $600 ) ..... .......... .......... .......... .......... .......... .......... .......... ......... .... Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Salaries and Wages Expense ($3, ($ 3,60 600 0 + $700 $70 0 – $600) $60 0) ..... .......... .......... .......... .......... .......... .......... .......... ......... .... Utili Ut iliti ties es Exp Expen ense se ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ...
Debit $ 3,180 3,910 460 3,340
Credit
$ 3,220 1,200 9,000 1,400 3,480 3,700 910 $16,900
$16,900
*$3,190 + $780 – $870 – $90 + $900
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-47
PROBLEM 3-8A
(a) & (c) 3/1 Ba Bal. 3/9 3/20 3/31 3/31 Bal.
3/31 Bal.
3/1 Ba Bal. Bal.
3/1 Ba Bal. Bal.
3-48
2,000 10,900 500 5,000 3,800
Accounts Receivable 750 750
3/1 Ba Bal. Bal.
3/10
Cash 16,000 3/2 9,900 3/10 8,300 3/12 750 3/20 20,000 3/31 32,750
Land 38,000 38,000 Buildings 22,000 22,000 Equipment 16,000 16,000 Accounts Payable 10,900 3/ 3/1 Bal. 12,000 3/2 8,000 Bal. 9,100
Copyright © 2011 John Wiley & Sons, Inc.
Common Stock 3/1 Bal. Bal.
80,000 80,000
Service Revenue 3/9 3/20 3/31 Bal.
9,900 8,300 20,000 38,200
Sales Revenue 3/31 Bal.
1,500 1,500
3/12 Bal.
Advertising Expense 500 500
3/2 3/20 Bal.
Rent Expense 10,000 5,000 15,000
Salaries and Wages Expense 3/31 3,800 Bal. 3,800
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-8A (Continued) (b) Date Mar. 2
Account Titles and Explanation Rent Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Payable.......................................... Cash Ca sh ......................... .................................................. .......................................... ................. (Rented films for cash and on account)
Debit 10,000
8,000 2,000
3
No entry—not a transaction.
9
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Serv Se rvice ice Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for admissions)
9,900
Accoun Acc ounts ts Pay Payabl able e ($8 ($8,00 ,000 0 + $2,9 $2,900). 00).................. Cash Ca sh ......................... .................................................. .......................................... ................. (Paid creditors on account)
10,900
10
9,900
10,900
11
No entry—not a transaction.
12
Advertising Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Paid advertising expenses)
500
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Serv Se rvice ice Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for admissions)
8,300
Rent Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ........................ .................................................. ........................................... ................. (Paid film rental)
5,000
Salaries and Wages Expen Salaries Expense se .. ...... .... .... .... .... .... ...... .... .... .... .... .... .... Cash Ca sh ........................ .................................................. ........................................... ................. (Paid salaries expense)
3,800
20
20
31
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
500
8,300
5,000
(For Instructor Use Only)
3,800
3-49
PROBLEM 3-8A (Continued) Date Mar. 31
31
(d)
Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accou Ac count nts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... .......... ......... .... Sales Reve Revenue nue (15% ( 15% X $10,00 $10,000) 0) .. .... .... .... .... .... .... .... .... .... (Received cash and balance on account for concession revenue)
Debit 750 750
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Servi Ser vice ce Re Reve venu nue e..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for admissions)
20,000
1,500
20,000
SCIFI THEATER INC. Trial Balance March 31, 2012 Ca sh ...................... Cash ............................................... .................................................. .............................. ..... Accounts Receivable.............................................. Land.............................................................................. Buildings..................................................................... Equi Eq uipm pmen entt ....................... ................................................. ........................................... ................. Accou Ac count nts s Pa Paya yabl ble e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Sales Sal es Re Reve venu nue e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Adver Adv erti tisin sing g Ex Expen pense se ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... Rent Re nt Exp Expen ense se ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Salaries Sala ries and Wag Wages es Expen E xpense se ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...
3-50
Credit
Copyright © 2011 John Wiley & Sons, Inc.
Debit $ 32,750 750 38,000 22,000 16,000
Credit
$
500 15,000 3,800 $128,800
Kimmel Accounting, 4/e Solutions Manual
9,100 80,000 38,200 1,500
$128,800
(For Instructor Use Only)
PROBLEM 3-9A
Error 1.
(a) In Balance No
(b) Difference $600
(c) Larger Column Debit
2.
Yes
None
N/A
3.
Yes
None
N/A
4.
No
$680
Credit
5.
Yes
None
N/A
6.
Yes
None
N/A
7.
No
$900
Debit
8.
Yes
None
N/A
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-51
PROBLEM 3-1B
e s n e p x E g n i s i t r e v d A
e s n e p x E t n e R
. C N I G N I H S A W W O D N I W N W A D W E N
s d n y e t i d u i v q i E D ’ s – s r g n e i d l n r s o a e h E s k d n c e e o n p x t E S i a t – e R s e u n e v e R + n o k 0 0 0 m c , o m t 0 2 o S $ C + + +
s d n e d i v i D
s e g a W d n a s e e s i r n a e l p a x S E
e s n e p x E s e i t i l i t U
0 0 5 $ –
0 0 7 $ –
0 5 7 –
0 0 7 , 1 –
0 4 1 –
0 0 2 , 7 $ +
0 0 2 , 8 $
0 0 0 , 1 +
+ 0 5 7 $ +
= t n e m p i u q E +
0 6 1 , 5 2 $
+ 0 0 0 , 0 2 $
0 5 7 $ =
0 0 0 , 9 $ +
0 0 0 , 9 $ + 0 0 3 $ +
0 0 3 $
s t e + s s l s e A t n b a u i v o e c c c e A R +
3-52
0 9 2 , 3 $ –
s e i l p p u S
) a (
e u n e v e R e c i v r e S
0 0 5 $ –
s e s t e l i t n i u b l i o a b c y a a c P i L A =
e u n e v e R e c i v r e S
+ 0 0 0 , 1 $ +
0 0 5 5 6 3 – $
0 6 1 , 5 2 $
+
0 h 0 , s 0 a 0 C 2 $ +
0 0 0 , 9 –
0 0 7 –
0 0 3 –
. 1
. 2
. 3
. 4
. 5
0 0 2 , 7 +
0 0 5 –
0 0 7 , 1 –
0 4 1 –
. 6
. 7
. 8
. 9
Copyri Cop yrigh ghtt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
0 5 6 +
. 0 1
0 1 5 , 5 1 $
. 1 1
Kimm Ki mmel el Accounting, 4/e Sol Soluti utions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Only Only))
PROBLEM 3-1B (Continued) (b)) S (b Ser ervi vice ce Re Reve venu nue e ($ ($7, 7,20 200 0 + $1 $1,0 ,000 00). )............................... Expenses Salaries and Wages Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Advertising Advert ising Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Rentt Expe Ren Expense..... nse........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Utilities Utilitie s Expense Expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Net Inco Income.. me.... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ......
$8,2 $8 ,200 00 $1,700 750 700 140
3,290 $4,910 $4,91 0
OR Revenues .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Less: Expen Expenses ses .. ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... Net Income. Income... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
$8,200 3,290 $4,910
3-53
PROBLEM 3-2B
. C N I E C I V R E S H C I R D L A
) a (
3-54
s d n e y t d i i u v i q D E s g ’ n – s r i e n s d r a e l o E s h d n k e e c n p x o i E t a S t e – R s e u n e v e R + n o k 0 0 0 m c o , m t 5 o S 1 C $ + + s t l e n b u a o y a s c c P e A i t i l + i b a e i s l L e b t a o y N a P = = t n e m p i u q E + s e i l p p u s t S e + s s e A t s l n b a u i v o e c c c e A R + h 0 s 0 , a 0 C 5 1 $
e u e n s e n v e e s p R d x e n E i c e t d n v r i v e e i R S D
e u n e v g e n R i e s s e i t r n i c e e v v p r d x e A E S
e s n e p x E s e i t i l i t U
e s n d e n p a x s E e s i r e a g l a a S W
0 0 3 $ –
0 0 3 $ – 0 0 2 –
0 0 6 $ –
0 8 1 –
0 5 7 –
0 3 7 , 1 $ –
0 0 4 , 2 $ +
0 0 9 , 3 $
0 0 5 , 1 +
+ 0 0 0 , 5 1 $
0 7 5 , 9 2 $
+ 0 0 2 +
0 4 2 $ +
0 4 2 –
+ 0 0 5 , 2 1 $
0 0 5 –
0 0 0 , 3 1 $ +
0 0 2 $
0 0 0 , 5 1 $ +
0 0 0 , 5 1 $ + 0 4 2 $
0 4 2 $ +
+ 0 0 4 , 2 $ + 0 0 0 , 2 –
1 2 e e t a n u D J
0 5 7 –
0 5 6 , 1 $
0 0 6 –
0 0 3 –
0 5 7 +
0 0 0 0 0 8 5 , 5 1 1 – – +
0 0 4 5 2 7 – –
3 5
9 2 1
5 7 1 1
0 2
9 0 2 3
Copyri Cop yrigh ghtt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
3 6 2 2
0 7 5 , 9 2 $
+ 0 8 6 , 2 1 $
Kimm Ki mmel el Accounting, 4/e Sol Soluti utions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Only Only))
PROBLEM 3-2B (Continued) (b)
ALDRICH SERVICE INC. Income Statement For the Month Ended June 30, 2012 Revenues Service revenue ($2,400 + $1,500) .. ................... Expenses Sala Sa lari ries es an and d wag wages es ex expe pens nse e ............................. Rent expens expense e .. .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .. Adve Ad vert rtis isin ing g exp expen ense se ............................................ Utilit Uti lities ies exp expens ense e .................................................... Total expenses. s............................................... Net income me.........................................................................
(c)
$3,900 $750 $750 600 200 20 0 180 1,730 $2,170
ALDRICH SERVICE INC. Balance Sheet June 30, 2012 Assets Current Assets Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts receivable.. receivable.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Supplies.. Supplies .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Total cur current ass assets..................................... Equ quiipm pmen entt ........................................................................ Total assets. ts..............................................................
$12,68 0 $12,680 1,650 240
Liabilities and Stockholders’ Equity Current Liabilities Notes payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... $12,500 $12,50 0 Accounts payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... 200 Total li liabilities ............................................... Stockholders’ equity Common stock .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... 15,000 Reta Re tain ined ed ea earn rnin ings gs** ............................................... 1,87 1, 870 0 Total liabilities and stockholders’ equity ...........................................................
$14,570 15,0 15 ,000 00 $29,570
$12,700 16,8 16 ,870 70 $29,570
*($0 + $2,170 – $300) Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-55
PROBLEM 3-3B
Y N A P M O C E D E I T
) a (
3-56
s d n e d i v i D y t i – u q s E e ’ s s n r e e p d l x o E h k – c s o e t u S n e v e R + d s e g 0 n 0 n i i 7 a n t r $ e a R E + + n o k 0 0 0 m c , o 2 m t o S 1 $ C + + + s e t n l 0 u b 0 o a 6 y , c a 3 s c $ P e i A t i l + i b a e i l L s e b t a o y N a P = = = t n e 0 m 0 , p 0 i u 5 $ q E + + s e 0 i l p 0 p 6 u $ s t e S s + + s e A s l t b 0 n a 0 u i v 7 , o e 1 c c $ c e A R + + 0 h 0 s 0 a , C 9 $
e u n e v e R e c i v r e S
s d n e d i v i D
e s s e n g e a p x W e E s d n g n e i n a p s s e x i s t e n E r i r e t e a p n v l a x e d S E R A
e s n e p x E s e i t i l i t U
0 0 6 $ –
0 0 6 $ – 0 0 9 $ –
0 0 1 , 1 –
0 5 2 –
0 2 2 –
0 7 4 , 2 $ –
0 0 6 , 0 1 $ +
0 0 6 , 0 1 $ + 0 0 7 $
0 5 7 , 9 2 $
+ 0 0 0 , 2 1 $ + 0 0 4 , 3 –
0 2 2 +
0 0 1 , 4 +
0 2 5 , 4 $ + 0 0 0 0 0 , 0 , 5 5 $ $ + = 0 0 1 , 0 1 $
0 0 1 , 5 +
+ 0 0 6 $ + 0 0 2 , 1 –
0 0 3 , 8 +
0 0 8 , 8 $
0 0 4 , 3 –
0 0 2 , 1 +
0 0 0 , 1 –
0 0 3 , 2 +
0 0 6 –
0 5 2 , 2 –
. . l a 2 . B t p e S
. 5
. 8
. 3 1
. 7 1
. 2 2
Copyri Cop yrigh ghtt © 2011 2011 John John Wil Wiley ey & Sons Sons,, Inc. Inc.
0 5 7 , 9 2 $
+
. 6 2
0 0 0 5 0 , 2 , 5 0 + 1 $ . 0 3
Kimm Ki mmel el Accounting, 4/e Sol Soluti utions ons Manu Manual al
(For (F or Inst Instruc ructor tor Use Use Only Only))
PROBLEM 3-3B (Continued) (b)
TIEDE COMPANY Income Statement For the Month Ended September 30, 2012 Revenues Serv Se rvic ice e rev reven enue ue............................................................. Expenses Rentt exp Ren expens ense e ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Salaries and wages expense expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Advertisin Advert ising g expense .. .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... Utiliti Uti lities es exp expense ense ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Total expenses ..................................................... Nett in Ne inco come me................................................................................
$10, $1 0,60 600 0 $1,100 $1, 100 900 250 220 2,470 $8,1 $8 ,130 30
TIEDE COMPANY Retained Earnings Statement For the Month Ended September 30, 2012 Retaine d earning Retained earnings, s, Septemb September er 1 .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Add: Net inco income me ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Less : Divi Less: Dividend dends s ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Retained earnings, September 30 .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ....
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
$ 700 8,130 8,1 30 8,830 600 $8,230
3-57
PROBLEM 3-3B (Continued) TIEDE COMPANY Balance Sheet September 30, 2012 Assets Current assets Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current assets. s..................................... Equipment. t................................................................ Total assets ...................................................
$10,250 8,800 600 $19,650 10,100 $29,750
Liabilities and Stockholders’ Equity Current liabilities Notes payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts payable payable.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Total current liabilities .. ............................... Stockholders’ equity Common stock ... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... Retai Re taine ned d ea earn rnin ings gs ................................................ Total liabilities and stockholders’ equity. y............................................................
3-58
Copyright © 2011 John Wiley & Sons, Inc.
$ 5,000 4,520 $ 9,520 12,000 8,23 8, 230 0
Kimmel Accounting, 4/e Solutions Manual
20,2 20 ,230 30 $29,750
(For Instructor Use Only)
PROBLEM 3-4B
Date Apr. 1
4
8
11
Account Titles and Explanation Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Comm Co mmon on Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. (Issued stock for cash)
Debit 70,000
Land ...... Land... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Cash Ca sh ......................... .................................................. .......................................... ................. (Purchased land for cash)
50,000
Advertising Expense. Expense... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Payable.......................................... (Incurred advertising expense on account)
1,200
Salaries and Wages Expen Salaries Expense se .. ...... .... .... .... ...... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Paid salaries)
2,700
70,000
50,000
1,200
2,700
12
No entry—not a tr transaction.
13
Prepaid Insuran Insurance... ce..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ......................... .................................................. .......................................... ................. (Paid for one-year insurance policy)
7,200
Dividend s...... Dividends.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Payment of cash dividend)
600
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Servi Ser vice ce Reven Rev enue ue ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for services provided)
6,000
Cash (100 X $90)... $90)..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Unearne Une arned d Service Ser vice Rev Revenue enue ... ...... ...... ...... ...... ...... ...... ...... ... (Received advance for future services)
9,000
17
20
25
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
7,200
600
6,000
(For Instructor Use Only)
9,000
3-59
PROBLEM 3-4B (Continued) Date Apr. 30
30
3-60
Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for services provided)
Debit 7,900
Accounts Payable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash................................................................... (Paid creditor on account)
400
Copyright © 2011 John Wiley & Sons, Inc.
Credit 7,900
Kimmel Accounting, 4/e Solutions Manual
400
(For Instructor Use Only)
PROBLEM 3-5B (a) Date May 1
Account Titles and Explanation Cash.. Cash .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. (Issued stock for cash)
Debit 40,000
40,000
2
No entry—not a transaction.
3
Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Acco Ac count unts s Payable Paya ble ..... .......... .......... .......... .......... .......... .......... .......... ....... .. (Purchased supplies on account)
800
Rent Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.................................................................... (Paid office rent)
1,400
Accounts Receivable .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Re Reve venue nue..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Billed client for services provided)
1,500
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Unearne Unea rned d Service Servic e Revenue Reven ue ... ...... ...... ...... ...... ...... ...... ...... ... (Received an advance for future services)
4,200
Cash..... Cas h........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Servi Ser vice ce Re Reve venue nue..... .......... .......... .......... .......... .......... .......... .......... .......... ..... (Received cash for revenue earned)
3,300
Salaries and Salaries and Wages Wages Expense. Expense... ...... .... .... .... .... .... ...... .... .... .... .... .... .... Cash.................................................................... (Paid salaries)
2,000
Accoun Acc ounts ts Payable Payable ($800 ($800 X 50% 50%). ).......................... Cash.................................................................... (Paid creditor on account)
400
7
11
12
17
31
31
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
800
1,400
1,500
4,200
3,300
2,000
(For Instructor Use Only)
400
3-61
PROBLEM 3-5B (Continued) (b) 5/1 5/12 5/17 Bal.
Cash 40,000 5/7 4,200 5/31 3,300 5/31 43,700
5/11 Bal.
Accounts Receivable 1,500 1,500
5/3 Bal.
Supplies 800 800
5/31
Accounts Payable 400 5/3 Bal.
1,400 2,000 400
Salaries and Wages Expense 5/31 2,000 Bal. 2,000
5/7 Bal.
Rent Expense 1,400 1,400
800 400
Unearned Service Revenue 5/12 4,200 Bal. 4,200
3-62
Common Stock 5/1 Bal.
40,000 40,000
Service Revenue 5/11 5/17 Bal.
1,500 3,300 4,800
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-5B (Continued) (c)
RIDGELL CONSULTING Trial Balance May 31, 2012 Cash................................................................................. Acco Ac count unts s Re Rece ceiv ivabl able e ..... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Supplies.......................................................................... Acco Ac count unts s Pay Payab able le ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Unearned Service Revenue...................................... Common Stock............................................................. Serv Se rvice ice Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Salarie Sala ries s and Wage Wages s Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Rent Expense................................................................
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Debit $43,700 1,500 800
Credit
$
400 4,200 40,000 4,800
2,000 1,400 $49,400
(For Instructor Use Only)
$49,400
3-63
PROBLEM 3-6B
(a) & (c) 7/1 Ba Bal. 7/8 7/11 Bal.
Cash 12,532 7/9 5,189 7/14 7,320 7/30 7/31 7,464
Common Stock 7/1 Bal. Bal.
2,100 9,810 5,267 400 7/31 Bal.
Accounts Receivable 7/1 Ba Bal. 10,536 7/8 5,189 7/22 4,700 Bal. 10,047
7/1 Bal. 7/17 Bal.
Supplies 3,592 720 4,312
7/1 Ba Bal. Bal.
Equipment 25,950 25,950
7/14
Accounts Payable 9,810 7/1 Bal. 15,800 7/17 720 Bal. 6,710
35,000 35,000
Dividends 400 400 Service Revenue 7/11 7/22 Bal.
7,320 4,700 12,020
Maintenance and Repairs Expense 7/30 386 Bal. 386 Salaries and Wages Expense 7/9 2,100 7/30 3,114 Bal. 5,214
7/30 Bal.
Utilities Expense 1,767 1,767
Unearned Service Revenue 7/1 Bal. 1,810 Bal. 1,810
3-64
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-6B (Continued) (b) Date July 8
9
11
14
17
22
30
31
Account Titles and Explanation Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Accounts Receivable.................................... (Received cash on account)
Debit 5,189
Salaries and Wages Expen Salaries Expense se .. ...... .... .... .... ...... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Paid salaries)
2,100
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Servi Ser vice ce Reven Rev enue ue ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for services provided)
7,320
Accounts Payable... Payable..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ......................... .................................................. .......................................... ................. (Paid creditors)
9,810
Supplies .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Payable.......................................... (Purchased supplies on account)
720
Accounts Receivable.. Receivable .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Servi Ser vice ce Reven Rev enue ue ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Billed for services provided)
4,700
Salaries and Wages Expen Salaries Expense se .. ...... .... .... .... .... .... ...... .... .... .... .... .... .... Utili Ut iliti ties es Exp Expens ense e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Maintenance Maintena nce and Repairs Expense .. .... .... .... .... .... .... .... .... .. Cash Ca sh ........................ .................................................. ........................................... ................. (Paid for various expenses)
3,114 1,767 386
Dividend s..... Dividends... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash Ca sh ........................ .................................................. ........................................... ................. (Payment of cash dividend)
400
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit 5,189
2,100
7,320
9,810
720
4,700
5,267
(For Instructor Use Only)
400
3-65
PROBLEM 3-6B (Continued) (d)
KINNEAR DRY CLEANERS Trial Balance July 31, 2012 Ca sh ...................... Cash ............................................... .................................................. ................................. ........ Accounts Receivable................................................. Supp Su ppli lies es ....................... ................................................ .................................................. ......................... Equi Eq uipm pmen entt ....................... ................................................. .............................................. .................... Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Unearne Unea rned d Serv Service ice Rev Revenue enue ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Dividends....................................................................... Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Mainten Main tenanc ance e and Repairs Repa irs Expense Expen se ... ...... ...... ...... ...... ...... ...... ..... Salaries Sala ries and Wag Wages es Expe Expense nse ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Utili Ut iliti ties es Exp Expens ense e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... ..
3-66
Copyright © 2011 John Wiley & Sons, Inc.
Debit $ 7,464 10,047 4,312 25,950
Credit
$ 6,710 1,810 35,000 400 12,020 386 5,214 1,767 $55,540
Kimmel Accounting, 4/e Solutions Manual
$55,540
(For Instructor Use Only)
PROBLEM 3-7B
LAGERSTROM COMPANY Trial Balance May 31, 2012 Cash ($6, Cash ($ 6,34 340 0 + $350 $35 0 – $441) $44 1) ..... .......... .......... .......... .......... .......... .......... .......... .......... ..... Accounts Receivable ($2,750 – $180 – $240).............. Prepaid Prep aid Insu Insuranc rance e ($7 ($700 00 + $10 $100)..... 0)........ ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Suppli Sup plies es ($ ($0 0 + $3 $350 50)) ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Equipment ($8,000 – $350)................................................ Accounts Payable ($4,100 – $100 + $350 – $240).. $240) .... .... .. Incom Inc ome e Taxe Ta xes s Paya Pa yable ble ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Common Stock ($5,700 + $600)....................................... Reta Re taine ined d Ear Earnin nings gs ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Divid Di vidend ends s ($0 ($0 + $6 $600 00)) ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Service Serv ice Rev Revenu enue e ($7 ($7,69 ,690 0 + $27 $270) 0) ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ... Salaries and Wages Expense ($4,200 + $500)............ Advert Adv ertisin ising g Expense Expe nse ($1,1 ($ 1,100 00 + $441) $44 1) ... ...... ...... ...... ...... ...... ...... ...... ...... ..... Income Inco me Tax Expe Expense nse ($9 ($900 00 + $10 $100)..... 0)........ ...... ...... ...... ...... ...... ...... ...... ...... ...
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Debit $ 6,249 2,330 800 350 7,650
Credit
$ 4,110 750 6,300 6,000 600 7,960 4,700 1,541 1,000 $25,220
(For Instructor Use Only)
$25,220
3-67
PROBLEM 3-8B
(a) & (c) 4/1 Bal. 4/9 4/25 4/30 Bal.
Cash 6,300 4/2 4,700 4/10 3,000 4/12 170 4/29 4/30 6,660
800 3,200 410 1,900 1,200
4/10
4/10 4/30 Bal.
Accounts Receivable 170 170
4/30 Bal.
4/1 Ba Bal. Bal.
4/1 Bal. Bal.
4/1 Bal. Bal.
3-68
Prepaid Rent 1,200 1,200 Land 10,000 10,000
Copyright © 2011 John Wiley & Sons, Inc.
2,300 750 1,850
Mortgage Payable 2,000 4/ 4/1 Bal. Bal.
8,000 6,000
Common Stock 4/1 Bal. Bal.
20,000 20,000
Service Revenue 4/9 4/25 Bal.
4,700 3,000 7,700
Sales Revenue 4/30 Bal.
Buildings 8,000 8,000 Equipment 6,000 6,000
Accounts Payable 1,200 4/ 4/1 Bal. 4/20 Bal.
4/12 Bal.
340 340
Advertising Expense 410 410
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
PROBLEM 3-8B (Continued) Rent Expense 800 750 1,550
4/2 4/20 Bal.
Salaries and Wages Expense 4/29 1,900 Bal. 1,900
(b) Date Apr. 2
Account Titles and Explanation Rent Expense Expense.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Paid film rental)
Debit 800
800
3
No entry—not a transaction.
9
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Serv Se rvice ice Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for admissions)
4,700
Mortgage Payable Payable.. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Acco Ac count unts s Pay Payab able le..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... Cash Ca sh ......................... .................................................. .......................................... ................. (Made payments on mortgage and accounts payable)
2,000 1,200
10
4,700
3,200
11
No entry—not a transaction.
12
Advertising Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash Ca sh ......................... .................................................. .......................................... ................. (Paid advertising expenses)
410
Rent Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Payable.......................................... (Rented film on account)
750
Cash Cas h ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... Serv Se rvice ice Rev R evenu enue e ..... .......... .......... .......... .......... .......... .......... .......... ......... .... (Received cash for admissions)
3,000
20
25
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
Credit
410
750
(For Instructor Use Only)
3,000
3-69
PROBLEM 3-8B (Continued) Date Apr.. 29 Apr
30
30
(d)
Account Titles and Explanation Salari Sal aries es and Wag Wages es Expense. Expense.............................. Cash................................................................... (Paid salaries expense)
Debit 1,900
Cas h........ Cash..... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ..... .. Accou Ac count nts s Re Rece ceiva ivable ble ..... .......... .......... .......... .......... .......... .......... .......... ......... .... Sales Reve Revenue nue (17% ( 17% X $2,000 $2,000)) .. .... .... .... .... .... .... .... .... .... .... (Received cash and balance on account for concession revenue)
170 170
Prepaid Rent .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Cash................................................................... (Paid cash for future film rental)
1,200
1,900
340
1,200
RIVIERA THEATER INC. Trial Balance April 30, 2012 Ca sh ...................... Cash ............................................... .................................................. .............................. ..... Accounts Receivable.............................................. Prepaid Rent.............................................................. Land.............................................................................. Buildings..................................................................... Equi Eq uipm pmen entt ....................... ................................................. ........................................... ................. Accou Ac count nts s Pa Paya yable ble..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Mortga Mor tgage ge Pay Payab able le ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Common Com mon Sto Stock ck ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Servic Ser vice e Re Reve venue nue ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... .... Sales Sal es Re Reve venu nue e ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Adver Adv erti tisin sing g Ex Expen pense se ..... .......... .......... .......... .......... .......... .......... .......... .......... ....... Rent Re nt Exp Expen ense se ..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... Salaries Sala ries and Wag Wages es Expen E xpense se ... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...
3-70
Credit
Copyright © 2011 John Wiley & Sons, Inc.
Debit $ 6,660 170 1,200 10,000 8,000 6,000
Credit
$ 1,850 6,000 20,000 7,700 340 410 1,550 1,900 $35,890
Kimmel Accounting, 4/e Solutions Manual
$35,890
(For Instructor Use Only)
PROBLEM 3-9B (a) Correct: 2, 7 Incorrect: 1, 3, 4, 5, 6, 8 (b)
Error
(1) In Balance
(2) Difference
(3) Larger Column
1.
No
$270
Credit
3.
No
$880
Credit
4.
Yes
None
N/A
5.
Yes
None
N/A
6.
Yes
None
N/A
8.
No
$5,000
Credit
Copyright © 2011 John Wiley & Sons, Inc.
Kimmel Accounting, 4/e Solutions Manual
(For Instructor Use Only)
3-71
CCC3
CONTINUING COOKIE CHRONICLE
(a) General Journal Date Nov.
8
Account Titles No journal entry required.
8
No jo jour urna nall en entr try y req requi uirred ed..
8
Cash Cas h ........................................................................ Common Stock............................................
500
Supp Su ppli lies.. es.................................................................. Cash .. ................................................................
95
Supp Su ppli lies.. es.................................................................. Cash. h.................................................................
125 12 5
Equi Eq uipm pmen ent. t.............................................................. Common Stock............................................
300 30 0
Cash .... Cash.. .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... Notes Payable ..............................................
2,000
Equi Eq uipm pmen ent. t.............................................................. Cash. h.................................................................
900 90 0
11 14 15 16 17
95 125 300 2,000 900
No jo jour urna nall en entr try y re requ quir ired ed..
25
Cash.. Ca sh......................................................................... Unearned Service Revenue.....................
60
Cash Cas h ........................................................................ Service Revenue .........................................
100
Copyright © 2011 John Wiley & Sons, Inc.
Credit
500
18
29
3-72
Debit
60
Kimmel Accounting, 4/e Solutions Manual
100
(For Instructor Use Only)
CONTINUING COOKIE CHRONICLE (Continued) Date Nov. No v. 30 30 30 30
Account Titles Webs We bsit ite.. e................................................................... Accounts Pa Payable ........................................
Debit 600 60 0
Credit 600
Prep Pr epai aid d In Insu sura ranc nce.. e............................................... Cash ...............................................................
1,20 1, 200 0
Acco Ac coun unts ts Re Rece ceiiva vabl ble e ........................................ Service Revenue ........................................
300 30 0
Utiili Ut liti ties es Exp Expen ense se.................................................. Accounts Payable ........................................
50
1,200 300 50
(b) Cash Nov. 8 500 No Nov. Nov. 16 16 2,000 Nov. Nov. 25 60 No N ov. Nov. 29 29 100 Nov. Nov.30 Ba Bal. 340
11 14 17 17 30
95 125 900 1,200
Equipment Nov. 15 300 Nov. 17 900 Nov. 30 Ba Bal. 1,200 Website Nov. 30 600 Nov. 30 Bal. 600
Accounts Receivable Nov. 30 300 Nov. 30 Ba Bal. 300 Supplies Nov. 11 95 Nov. 11 125 Nov. 30 Bal. 220
Accounts Payable Nov. 30 Nov. 30 Nov. 30 Bal.
Unearned Service Revenue Nov. 25 60 Nov. 30 3 0 Bal. 60
Prepaid Insurance Nov. 30 30 1,200 Nov. 30 Bal. 1,200
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CONTINUING COOKIE CHRONICLE (Continued)
(c)
Common Stock Nov. 8 Nov. 15 Nov. 30 Bal.
500 300 800
Service Revenue Nov. 29 Nov. 30 Nov. 30 Bal.
100 300 400
Utilities Expense Nov. 30 50 Nov. 30 Bal. 50
COOKIE CREATIONS INC. Trial Balance November 30, 2012 Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Account Acco unts s Rec Receiv eivabl able.. e....................................................... Supplies Suppl ies .. .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .. Prepaid Prepa id Insur Insurance. ance... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... Equipment .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Website.. Websi te.... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .. Acco cou unts Payable. e............................................................. Unearned Se Service Re Revenue .. .......................................... Notes Payable ................................................................... Common Stock. k.................................................................. Service Re Revenue .............................................................. Utilities Expense .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..
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Credit
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BYP 3-1
FINANCIAL REPORTING PROBLEM
(a) Account Common Stock Accounts Payable Accounts Receivable Selling, Marketing, and Administrative Expenses Prepaid Expenses Net Property, Plant, and Equipment Net Product Sales
1. Inc Increa rease se 2. De Decr crea ease se 3. No Norm rmal al Side Side Balance Right/Credit Left/Debit Credit Right/Credit Left/Debit Credit Left/Debit Right/Credit Debit Left/Debit Left/Debit
Right/Credit Right/Credit
Debit Debit
Left/Debit Right/Credit
Right/Credit Left/Debit
Debit Credit
(b) 1. 2. 3.
Cash is increased. Cash is decreased. Cash is decreased.
(c)) 1. (c 2.
Cash is de Cash decr crea ease sed d or or In Inte tere rest st Pay ayab able le is in incr crea ease sed. d. Cash Cas h is is decr decreas eased ed or Not Notes es (or (or Mor Mortga tgage) ge) Pay Payabl able e is is incr increas eased. ed.
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BYP 3-2
(a) 1. 2. 3. 4. 5.
COMPARATIVE ANALYSIS PROBLEM
Tootsie Roll Accounts Receivable: Net Property, Plant, and Equipment: Accounts Payable: Retained Earnings: Net Product Sales:
debit debit credit credit credit
1. 2. 3. 4. 5.
Hershey Foods Inventories: Provision for Income Taxes: Accrued Liabilities: Common Stock: Interest Expense:
debit debit credit credit debit
(b) The follo followin wing g other other account accounts s are ordin ordinari arily ly invol involved ved::
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1.
Increase Increas e in Acc Accoun ounts ts Rece Receiva ivable ble:: Ser Servic vice e Reve Revenue nue or Sal Sales es Reve Reve-nue is increased (credited).
2.
Decr De crea ease se in No Note tes s Pay Payab able le:: Ca Cash sh is de decr crea eased sed (c (cre redi dite ted) d)..
3.
Increase Increas e in Mac Machi hine nery: ry: Not Notes es Paya Payabl ble e is in increa creased sed (cre (credit dited ed)) or or Cash Cash is decreased (credited).
4.
Increase Incre ase in in Inter Interest est Reve Revenu nue: e: Cash Cash or Inte Interes restt Receiv Receivab able le is inincreased (debited).
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BYP 3-3
RESEARCH CASE
(a) There are 15 15 items items listed listed in in this this section. section. Stude Students nts rankin ranking g of the top top three will vary. Their explanations for giving particular items high rankings should provide a basis for good classroom discussion. An additional activity would be to apply these criteria to an actual annual report. (b) The answe answers rs to this this questi question on will will vary vary depend depending ing on on the year. year. In In 2006 the companies with the highest ranked annual reports were: Tellabs, Inc., Manitowoc Co., Inc., Tyson Foods, TD Bank Financial Group, MDU Resources, Scotiabank, F. Hoffmann-La Roche. (c)) The annual (c annual repo report rt is the the primary primary mech mechani anism sm for a compa company ny to co communicate its operating results and financial position to outsiders. If outsiders think that the company has made its best effort to communicate this information effectively they may have more confidence in the results, and may feel more comfortable relying on it to make decisions. On the other hand, if outsiders feel that the company did not do its best to communicate its results in an understandable fashion, or even tried to conceal things, then they will be reluctant to rely on the annual report as an information source.
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BYP 3-4
INTERPRETING FINANCIAL STATEMENTS
CHIEFTAIN INTERNATIONAL, INC. (a) One of the the primary primary advanta advantages ges to Chief Chieftain tain of having having no lon long-ter g-term m debt is that there is room for growth through the use of debt and the company’s financial risk is greatly reduced. Another advantage is that profitability is enhanced when there is no interest expense. A possible disadvantage is that the company could expand more and earn a greater return if the growth had been financed with long-term debt. (b)) An advanta (b advantage ge to Chie Chieftai ftain n from from having having a large large cash cash balanc balance e is that that cash is available to finance such things as the drilling of new wells and the investment in new technology. New opportunities may be seized and expansions may be undertaken at the time most advantageous for the business. A disadvantage is that cash earns little or no interest. A higher rate of return might be generated on excess cash by some other type of investment. (c) Account Accounts s payabl payable, e, as purch purchase ases s on credit credit,, represent represent inte interestrest-free free loans loans.. Business enterprises don’t pay cash unless the supplier requires immediate payment. Nearly all exchange transactions are conducted on 30-day or more credit.
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BYP 3-5
FINANCIAL ANALYSIS ON THE WEB
(a)) CPA stands (a stands for for Certified Certified Publ Public ic Accoun Accountan tant. t. CPAs CPAs work in in public public accounting, business and industry, government, and education. (b) “Publi “Public c accounti accounting” ng” is a term term that that describe describes s accounta accountants nts who who provide provide audit services. Auditors review company financial records for accuracy and accountability. Public accountants also provide advice to clients regarding taxation laws, computer technology, and management operations. (c) A CPA needs: strong communication and leadership skills, critical thinking and big-picture perspectives, strong analytical and computer skills, well-rounded academic background that combines liberal arts & science courses with accounting and business classes, strong sense of ethics and integrity, a professional manner to interact well with a variety of people. (d) Salary Salary ranges ranges are: are: $52,00 $52,000 0 – $62,25 $62,250 0 during during the the first first three three years for for a CPA at a large firm; $252,500 – $358,750 for Chief Financial Officer (CFO) & Treasurer at a large corporation.
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BYP 3-6
DECISION MAKING ACROSS THE ORGANIZATION
(a) May 1
Cash Cas h .......................................................................... Common Sto Stoc ck .............................................
15,000 15, 000 15,000
5
Correct.
7
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Unearned Revenue. e.......................................
500
Hay Ha y and Feed Feed Supp Suppli lies es ....................................... Accounts Payable. e.........................................
1,50 1, 500 0
Office Off ice Equ Equipm ipment ent .................................................. Cash Ca sh .................................................................
800
Dividends... Dividends. .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... Cash Ca sh .................................................................
400
Cash .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Riding Revenue ............................................
154
Vete Ve teri rina nary ry Ex Expe pens nse e .............................................. Accounts Payable. e.........................................
75
9 14 15 20 31
500 1,500 800 80 0 400 40 0 154 75
(b) The error error in in the entri entries es of May May 14 and and May May 20 would would preven preventt the trial trial balance from balancing. (c) Net income as reported ................................................. Add: Ad d: 5/ 5/9, 9, Hay Hay and and feed feed expe expens nse.. e................................ 5/15, Salaries expense (dividends paid)) .. paid .... .... .... ...... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ...... .... .... .... .... .... .... .... .... .... ....
$ 4,500 $1,5 $1 ,500 00 400
Less: 5/7, Unearned boarding revenue .. ................... Correct net income me........................................................... (d) Cash as reported ............................................................. Add: Ad d: 5/ 5/9, 9, Pur Purch chas ase e on ac acco coun untt ................................ 5/20 5/ 20,, Tr Tran ansp spos osit itio ion n er erro ror. r...................................
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BYP 3-7
COMMUNICATION ACTIVITY
To:
Accounting Instructor
From:
Accounting Student
Re:
Steps in Recording Process
In the first transaction, bills totaling $6,000 were sent to customers for services provided. Therefore, the asset Accounts Receivable is increased $6,000 and the revenue Service Revenue is increased $6,000. Debits increase assets and credits increase revenues, so the journal entry is: Account s Receiv Accounts Receivable able .. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Serv Se rvic ice e Re Reve venu nue. e......................................................................... (Billed customers for services provided)
6,000 6,00 6, 000 0
The $6,000 amount is then posted to the debit side of the general ledger account Accounts Receivable and to the credit side of the general ledger account Service Revenue. In the second transaction, $2,000 was paid in salaries to employees. Therefore, the expense Salaries and Wages Expense is increased $2,000 and the asset Cash is decreased $2,000. Debits increase expenses and credits decrease assets, so the journal entry is: Salaries and Wages Wag es Expense.. Expense .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Cash.. Cas h................................................................................................ (Salaries paid)
2,000 2,000 2,0 00
The $2,000 amount is then posted to the debit side of the general ledger account Salaries and Wages Expense and to the credit side of the general ledger account Cash.
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BYP 3-8
ETHICS CASE
(a)) Th (a The e stak stakeh ehol olde ders rs in in this this sit situa uati tion on are are:: • • •
Courtney Delacey, assistant chief accountant. Users of the company’s financial statements. BIT Company.
(b) By adding adding $1,00 $1,000 0 to the Equipm Equipment ent accou account, nt, that that account account total total is intenintentionally misstated. By not locating the error causing the imbalance, some other account may also be misstated by $1,000. If the amount of $1,000 is determined to be immaterial, and the intent is not to commit fraud (cover up an embezzlement or other misappropriation of assets), Courtney’s action might not be considered unethical in the preparation of interim financial statements. However, if Courtney is violating a company accounting policy by her action, then she is acting unethically. (c)) Co (c Cour urtn tney ey’s ’s al alte tern rnat ativ ives es ar are: e:
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1.
Miss Mis s the the dea deadli dline ne but fin find d the the err error or cau causin sing g the the imb imbala alance nce..
2.
Telll her Tel her supe supervi rvisor sor of the the imb imbala alance nce and suf suffer fer the con conseq sequen uences ces..
3.
Do as as she she did did and and loca locate te the the err error or late later, r, maki making ng the the adj adjust ustmen mentt in the next quarter.
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BYP 3-9
ETHICS CASE
(a)) Employ (a Employees ees in the the rail rail unit unit acceler accelerated ated reve revenue nue in in each of of the fourth fourth quarters from 2000 to 2003. That is, revenue that should have been reported in the first quarter of a year was instead reported in the fourth quarter of the previous year. (b) One possib possible le motivati motivation on for for engaging engaging in this this activity activity is that that bonuses bonuses are frequently based on annual results. If it appeared that the rail unit was not going to meet the performance level required for bonuses, the employees may have shifted the revenue recognition forward on these sales in order to boost annual results to meet performance targets. (c) The emplo employee yees s were fired. fired. In In additi addition, on, the the matter matter was bein being g invest investigat igated ed by the Securities and Exchange Commission (SEC). (d) To restate restate finan financial cial statem statements ents means to actuall actually y issue issue new new financi financial al statements to replace those that were previously issued. We are told that, for example, 2002 revenue was overstated by $158 million, and net income was overstated by $22 million. While these numbers seem large, to GE they are immaterial. $22 million was less than 0.2% of the company’s net income. As a percentage of GE’s total results the errors are not large enough to change investors’ evaluation of the company.
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BYP 3-10
ALL ABOUT YOU ACTIVITY
We address the issue of contingent liabilities in greater detail in Chapter 10. Our primary interest in this exercise is to engage students in a discussion regarding the general nature of the financial statement elements (assets, liabilities, equity, revenues and expenses). (a)
By taking taking out out the the bank bank loan loan your your friend friend has has incurr incurred ed a liab liabili ility. ty. You do do not have a liability unless your friend defaults, or unless it becomes clear that he will default. The loan application may, however, require you to disclose any guarantees that you have signed, since they represent potential liabilities.
(b) Accoun Accounting ting stand standards ards have speci specific fic requ requireme irements nts regar regarding ding accou accountnting for situations where there is uncertainty regarding whether a liability has been incurred. Those standards require an evaluation of the probability of an amount being owed. Without going into detail regarding those standards, the basic idea is that if it is probable that you will owe money, then you should accrue a liability. If it is not probable, but it is possible that you will owe money, then you should disclose facts regarding the situation. The most important point is that this event has the potential to materially impact your finances, and therefore you have a responsibility to disclose it to the bank in some form. (c)
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Losing your Losing your job would would not not create create a financi financial al liabil liability, ity, alth althoug ough h it would would most certainly reduce your revenues. You are obviously concerned that you might lose your job, but you don’t have specific information that would suggest that it will happen. Therefore, you probably don’t have an obligation to disclose this information to the bank. However, unless you are relatively certain that you would be able to find suitable employment relatively quickly, you might want to wait until your job situation has stabilized before pursuing a loan of this size.
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IFRS 3-1
CONCEPTS AND APPLICATION
In deciding whether the U.S. should adopt IFRS, the SEC should consider the following. • • • • • •
•
Whether IFRS is sufficiently developed and consistent in application Whether the IASB is sufficiently independent Whether IFRS is established for the benefit to investors The issues involved in educating investors about IFRS The impact of a switch to IFRS on U.S. laws and regulations The impact on companies including changes to their accounting systems, contractual arrangements, corporate governance, and litigation The issues involved in educating accountants, so they can prepare statements under IFRS
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IFRS IF RS 33-2 2
INTE IN TERN RNAT ATIO IONA NAL L FI FINA NANC NCIA IAL L RE REPO PORT RTIN ING G PR PROB OBLE LEM M
Account Share ca capital
Financial Statement Consolidated Balance Sheet Goodwill Consolidated Balance Sheet Borrowings and Consolidated overdrafts Balance Sheet Amortisation of Consolidated intangible Income Statement assets Derivative Consolidated financial asset Balance Sheet
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Position in Financial Statement Equity Non-current assets Current and Non-current Non-current liabilities liabilitie s After Gross profit and before Operating profit Current assets
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