怀尔德会计学原理答案Chapter-03.doc

McGraw Hill Companies 2009 Solutions Manual Chapter 3119 Chapter 3 Adjusting Accounts and Preparing Financial Statements QUESTIONS 1 The cash basis of accounting reports revenues when cash is received while the accrual basis reports revenues when they are earned The cash basis reports expenses when cash is paid while the accrual basis reports expenses when they are incurred and matched with revenues they generated 2 The accrual basis of accounting generally provides a better indication of company performance and financial condition than does the cash basis Also the accrual basis increases the comparability of financial statements from one period to the next Thus business decision makers generally prefer the accrual basis 3 Businesses that have major seasonal variations in sales are most likely to select the natural business year as the fiscal year 4 A prepaid expense is an item paid for in advance of receiving its benefits As such it is reported as an asset on the balance sheet 5 Long term tangible plant assets such as equipment buildings and machinery lead to adjustments for depreciation Generally land is the only long term tangible plant asset that does not require depreciation 6 The Accumulated Depreciation contra account is used for depreciation It provides financial statement users with additional information about the relative age of the assets Without the contra account information the reader would not be able to tell whether the assets are new or in need of replacement 7 Unearned revenue refers to cash received in advance of providing products and services Another name for unearned revenue is deferred revenue It is reported as a liability on the balance sheet 8 Accrued revenue is revenue that is earned but is not yet received in cash and or other assets and the customer has not been billed prior to the end of the period Therefore end of period adjustments are made to record accrued revenue Examples are interest income that has been earned but not collected and revenues from services performed that are neither collected nor billed 9 AIf prepaid expenses are initially recorded with debits to expense accounts then the prepaid expenses asset accounts are debited in the adjusting entries McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition120 10 For Best Buy all of the accounts under the category of Property and Equipment except for Land require adjusting entries The expense related to the depreciation expense account would be understated on the income statement if Best Buy fails to adjust these asset accounts If the adjusting entries are not made net income would be overstated Note Students might also correctly identify accounts receivable goodwill and tradenames as needing adjustment 11 Circuit City must make adjusting entries to Prepaid expenses and other current assets Deferred income taxes Accrued expenses and other current liabilities Accrued income taxes and possibly other assets and liabilities such as Receivables for bad debts It is also possible that Circuit City would need to adjust Goodwill and Other intangible assets 12 RadioShack would need to debit interest receivable and credit interest revenue 13 The Accrued Wages Expense would be reported as part of Accrued Expenses on Apple s balance sheet QUICK STUDIES Quick Study 3 1 15 minutes Cash Accounting Revenues cash receipts 52 000 Expenses cash payments 37 500 6 000 3 250 34 750 Net income 17 250 Accrual Accounting Revenues earned 60 000 Expenses incurred 37 500 Net income 22 500 Quick Study 3 2 10 minutes a AE Accrued expenses b PE Prepaid expenses c UR Unearned revenues d PE Prepaid expenses Depreciation e AR Accrued revenues McGraw Hill Companies 2009 Solutions Manual Chapter 3121 Quick Study 3 3 20 minutes Accounts Debited and CreditedFinancial Statement a DebitUnearned RevenueBalance Sheet CreditRevenue EarnedIncome Statement b DebitWages ExpenseIncome Statement CreditWages PayableBalance Sheet c DebitAccounts ReceivableBalance Sheet CreditRevenue EarnedIncome Statement d DebitInsurance ExpenseIncome Statement CreditPrepaid InsuranceBalance Sheet e DebitDepreciation ExpenseIncome Statement CreditAccumulated DepreciationBalance Sheet Quick Study 3 4 15 minutes a Insurance Expense 3 000 Prepaid Insurance 3 000 To record 6 month insurance coverage expired b Supplies Expense 4 150 Supplies 4 150 To record supplies used during the year 900 4 000 750 Quick Study 3 5 15 minutes a Depreciation Expense Equipment 8 400 Accumulated Depreciation Equipment 8 400 To record depreciation expense for the year 45 000 3 000 5 years 8 400 b No depreciation adjustments are made for land as it is expected to last indefinitely McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition122 Quick Study 3 6 10 minutes Salaries Expense 400 Salaries Payable 400 To record salaries incurred but not yet paid One student earns 100 x 4 days Monday through Thursday Quick Study 3 7 15 minutes a Unearned Revenue 22 500 Legal Revenue 22 500 To recognize legal revenue earned 30 000 x 3 4 b Unearned Subscription Revenue 1 200 Subscription Revenue 1 200 To recognize subscription revenue earned 100 x 24 12 months x 6 months Quick Study 3 8 15 minutes Adjusting entry DebitCredit 1 Accrue salaries expenseeg 2 Adjust the Unearned Services Revenue account to recognize earned revenue af 3 Record the earning of services revenue for which cash will be received the following period bf Quick Study 3 9 10 minutes The answer is a Explanation The debit balance in Prepaid Insurance was reduced by 400 implying a 400 debit to Insurance Expense The credit balance in Interest Payable increased by 800 implying an 800 debit to Interest Expense McGraw Hill Companies 2009 Solutions Manual Chapter 3123 Quick Study 3 10 15 minutes The answer is 2 Explanation Insurance premium error Understates expenses and overstates assets by 1 600 Accrued salaries error Understates expenses and understates liabilities by 1 000 The collective effects from this company s errors follow Understates expenses by 2 600 Overstates assets by 1 600 Understates liabilities by 1 000 Quick Study 3 11 10 minutes Profit margin 78 750 630 000 12 5 Interpretation For each dollar that Miller Company records as revenue it earns 12 5 cents in net income Miller s 12 5 is markedly lower than competitors average profit margin of 15 it must improve performance Quick Study 3 12A 5 minutes The answer is c McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition124 EXERCISES Exercise 3 1 10 minutes 1 B4 A 2 F5 D 3 C6 E Exercise 3 2 25 minutes a Depreciation Expense Equipment 16 000 Accumulated Depreciation Equipment 16 000 To record depreciation expense for the year b Insurance Expense 5 360 Prepaid Insurance 5 360 To record insurance coverage that expired 6 000 640 c Office Supplies Expense 3 422 Office Supplies 3 422 To record office supplies used 325 3 480 383 d Unearned Fee Revenue 3 000 Fee Revenue 3 000 To record earned portion of fee received in advance 15 000 x 1 5 e Insurance Expense 6 160 Prepaid Insurance 6 160 To record insurance coverage that expired f Wages Expense 2 700 Wages Payable 2 700 To record wages accrued but not yet paid Notes Prepaid Insurance Office Supplies Bal Bal 6 000Beg Bal 325 Purch 3 480 Used Used End Bal 640End Bal 383 McGraw Hill Companies 2009 Solutions Manual Chapter 3125 Exercise 3 3 30 minutes a Unearned Fee Revenue 5 000 Fee Revenue 5 000 To record earned portion of fee received in advance 15 000 x 1 3 b Wages Expense 7 500 Wages Payable 7 500 To record wages accrued but not yet paid c Depreciation Expense Equipment 17 251 Accumulated Depreciation Equipment 17 251 To record depreciation expense for the year d Office Supplies Expense 5 682 Office Supplies 5 682 To record office supplies used 240 6 102 660 e Insurance Expense 2 700 Prepaid Insurance 2 700 To record insurance coverage expired 4 000 1 300 f Interest Receivable 1 400 Interest Revenue 1 400 To record interest earned but not yet received g Interest Expense 2 000 Interest Payable 2 000 To record interest incurred but not yet paid Notes Prepaid Insurance Office Supplies Beg Bal 4 000Beg Bal 240 Purch 6 102 Used Used End Bal 1 300End Bal 660 McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition126 Exercise 3 4 15 minutes a Adjusting entry 2009 Dec 31Wages Expense 825 Wages Payable 825 To record accrued wages for one day 5 workers x 165 b Payday entry 2010 Jan 4Wages Expense 2 475 Wages Payable 825 Cash 3 300 To record accrued and current wages Wages expense 5 workers x 3 days x 165 Cash 5 workers x 4 days x 165 Exercise 3 5 15 minutes a 2 000 b 6 607 c 11 987 d 1 375 Proof a b c d Supplies available prior year end 350 1 855 1 576 1 375 Supplies purchased in current year 2 450 6 307 11 987 6 907 Total supplies available 2 8008 16213 5638 282 Supplies available current year end 800 6 607 2 056 800 Supplies expense for current year 2 000 1 555 11 507 7 482 McGraw Hill Companies 2009 Solutions Manual Chapter 3127 Exercise 3 6 25 minutes a Apr 30 Legal Fees Expense 4 500 Legal Fees Payable 4 500 To record accrued legal fees May 12Legal Fees Payable 4 500 Cash 4 500 To pay accrued legal fees b Apr 30 Interest Expense 1 900 Interest Payable 1 900 To record accrued interest expense 5 700 x 10 30 May 20 Interest Payable 1 900 Interest Expense 3 800 Cash 5 700 To record payment of accrued and current interest expense 5 700 x 20 30 c Apr 30 Salaries Expense 4 800 Salaries Payable 4 800 To record accrued salaries 12 000 x 2 5 week May 3 Salaries Payable 4 800 Salaries Expense 7 200 Cash 12 000 To record payment of accrued and current salaries 12 000 x 3 5 week McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition128 Exercise 3 7 20 minutes Balance Sheet Prepaid Insurance Asset usingInsurance Expense using Accrual Basis Cash Basis Accrual Basis Cash Basis Dec 31 2007 14 450 0 2007 850 15 300 Dec 31 2008 9 350 0 2008 5 100 0 Dec 31 2009 4 250 0 2009 5 1000 Dec 31 2010 0 0 2010 4 250 0 Total 15 300 15 300 Explanations Accrual asset balance equals months left in the policy x 425 per month monthly cost is computed as 15 300 36 months Months LeftBalance 12 31 2007 34 14 450 12 31 2008 229 350 12 31 2009 104 250 12 31 2010 00 Accrual insurance expense equals months covered in the year x 425 per month Months CoveredExpense 2007 2 850 2008 125 100 2009 125 100 2010 10 4 250 15 300 McGraw Hill Companies 2009 Solutions Manual Chapter 3129 Exercise 3 8 25 minutes Dec 31 Accounts Receivable 1 980 Fees Earned 1 980 To record earned but unbilled fees 30 x 6 600 31 Unearned Fees 4 620 Fees Earned 4 620 To record earned fees collected in advance 70 x 6 600 31 Depreciation Expense Computers 1 650 Accumulated Depreciation Computers 1 650 To record depreciation on computers 31 Depreciation Expense Office Furniture 1 925 Accumulated Depreciation Office Furniture 1 925 To record depreciation on office furniture 31 Salaries Expense 2 695 Salaries Payable 2 695 To record accrued salaries 31 Insurance Expense 1 430 Prepaid Insurance 1 430 To record expired prepaid insurance 31 Rent Expense 700 Rent Payable 700 To record accrued rent expense 31 Office Supplies Expense 528 Office Supplies 528 To record use of office supplies 31 Advertising Expense 500 Advertising Payable 500 To record accrued advertising expense 31 Utilities Expense 77 Utilities Payable 77 To record incurred and unpaid utility costs McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition130 Exercise 3 9 10 minutes a 6 039 52 970 11 4 b 100 890 471 430 21 4 c 106 880 301 920 35 4 d 67 140 1 721 520 3 9 e 84 780 513 800 16 5 Analysis and Interpretation Company c has the highest profitability according to the profit margin ratio Company c earns 35 4 cents in net income for every one dollar of net sales earned Exercise 3 10A 30 minutes a Dec 1Supplies Expense 2 000 Cash 2 000 Purchased supplies b Dec 2Insurance Expense 1 540 Cash 1 540 Paid insurance premiums c Dec 15 Cash 13 000 Remodeling Fees Earned 13 000 Received fees for work to be done d Dec 28 Cash 3 700 Remodeling Fees Earned 3 700 Received fees for work to be done e Dec 31 Supplies 1 840 Supplies Expense 1 840 Adjust expenses for unused supplies f Dec 31 Prepaid Insurance 1 200 Insurance Expense 1 200 Adjust expenses for unexpired coverage 1 540 340 g Dec 31 Remodeling Fees Earned 11 130 Unearned Remodeling Fees 11 130 Adjusted revenues for unfinished projects 13 000 3 700 5 570 McGraw Hill Companies 2009 Solutions Manual Chapter 3131 Exercise 3 11A 25 minutes a Initial credit recorded in the Unearned Fees account July 1Cash 2 800 Unearned Fees 2 800 Received fees for work to be done for Solana 6Cash 8 100 Unearned Fees 8 100 Received fees for work to be done for Haru 12Unearned Fees 2 800 Fees Earned 2 800 Completed work for Solana 18Cash 7 300 Unearned Fees 7 300 Received fees for work to be done for Jordan 27Unearned Fees 8 100 Fees Earned 8 100 Completed work for customer Haru 31No adjusting entries required b Initial credit recorded in the Fees Earned account July 1Cash 2 800 Fees Earned 2 800 Received fees for work to be done for Solana 6Cash 8 100 Fees Earned 8 100 Received fees for work to be done for Haru 12No entry required 18Cash 7 300 Fees Earned 7 300 Received fees for work to be done for Jordan 27No entry required 31 Fees Earned 7 300 Unearned Fees 7 300 Adjusted to reflect unearned fees for unfinished job for Jordan McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition132 Exercise 3 11A concluded c Under the first method and using entries from a Unearned Fees 2 800 8 100 2 800 7 300 8 100 7 300 Fees Earned 2 800 8 100 10 900 Under the second method and using entries from b Unearned Fees 7 300 Fees Earned 2 800 8 100 7 300 7 300 10 900 Note Both procedures yield identical results in the financial statements McGraw Hill Companies 2009 Solutions Manual Chapter 3133 PROBLEM SET A Problem 3 1A 10 minutes 1 I5 G 9 H 2 D6 C10 E 3 F7 I11 H 4 B8 A12 B Problem 3 2A 35 minutes Part 1 Adjustment a Dec 31 Office Supplies Expense 12 325 Office Supplies 12 325 To record cost of supplies used 2 900 11 977 2 552 Adjustment b 31 Insurance Expense 12 280 Prepaid Insurance 12 280 To record annual insurance coverage cost PolicyCost per Month Months Active in 20092009 Cost A 485 11 640 24 mo 12 5 820 B290 10 440 36 mo 92 610 C770 9 240 12 mo 5 3 850 Total 12 280 Adjustment c 31 Salaries Expense 3 660 Salaries Payable 3 660 To record accrued but unpaid wages 2 days x 1 830 McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition134 Problem 3 2A concluded Adjustment d Dec 31 Depreciation Expense Building 18 875 Accumulated Depreciation Building 18 875 To record annual depreciation expense 800 000 45 000 40 years 18 875 Adjustment e 31 Rent Receivable 3 000 Rent Earned 3 000 To record earned but unpaid Dec rent Adjustment f 31 Unearned Rent 5 436 Rent Earned 5 436 To record the amount of rent earned for November and December 2 x 2 718 Part 2 Cash Payment for c Jan 6Salaries Payable 3 660 Salaries Expense 5 490 Cash 9 150 To record payment of accrued and current salaries 3 days x 1 830 Cash Payment for e 15Cash 6 000 Rent Receivable 3 000 Rent Earned 3 000 To record past due rent for two months McGraw Hill Companies 2009 Solutions Manual Chapter 3135 Problem 3 3A 90 minutes Parts 1 and 2 CashEquipment Unadj Bal 28 064 Unadj Bal 75 800 Accounts Receivable Accumulated Depreciation Equipment Unadj Bal 0 Unadj Bal 15 000 f 4 000 c 10 000 Adj Bal 4 000 Adj Bal 25 000 Teaching SuppliesAccounts Payable Unadj Bal 11 000 Bal 39 500 b 9 000 Adj Bal 2 000Salaries Payable Unadj Bal 0 Prepaid Insurance g 480 Unadj Bal 16 000 Adj Bal 480 a 3 000 Adj Bal 13 000Unearned Training Fees Unadj Bal 12 500 Prepaid Rent e 5 000 Unadj Bal 2 178 Adj Bal 7 500 h 2 178 Adj Bal 0T Wells Capital Bal 71 000 Professional Library Bal 33 000T Wells Withdrawals Bal 44 000 Accumulated Depreciation Professional Library Unadj Bal 10 000 d 5 000 Adj Bal 15 000 McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition136 Problem 3 3A Continued Tuition Fees EarnedRent Expense Unadj Bal 111 000 Unadj Bal 23 958 f 4 000 h 2 178 Adj Bal 115 000 Adj Bal 26 136 Training Fees EarnedTeaching Supplies Expense Unadj Bal 41 000 Unadj Bal 0 e 5 000 b 9 000 Adj Bal 46 000 Adj Bal 9 000 Depreciation Expense Professional LibraryAdvertising Expense Unadj Bal 0 Bal 8 000 d 5 000 Adj Bal 5 000 Depreciation Expense EquipmentUtilities Expense Unadj Bal 0 Bal 6 000 c 10 000 Adj Bal 10 000 Salaries Expense Unadj Bal 52 000 g 480 Adj Bal 52 480 Insurance Expense Unadj Bal 0 a 3 000 Adj Bal 3 000 McGraw Hill Companies 2009 Solutions Manual Chapter 3137 Problem 3 3A Continued Part 2 Adjustment a Dec 31Insurance Expense 3 000 Prepaid Insurance 3 000 To record the insurance expired Adjustment b 31Teaching Supplies Expense 9 000 Teaching Supplies 9 000 To record supplies used 11 000 2 000 Adjustment c 31Depreciation Expense Equipment 10 000 Accumulated Depreciation Equipment 10 000 To record equipment depreciation Adjustment d 31Depreciation Expense Profess Library 5 000 Accumul Depreciation Profess Library 5 000 To record professional library depreciation Adjustment e 31Unearned Training Fees 5 000 Training Fees Earned 5 000 To record 2 months training fees earned that were collected in advance Adjustment f 31Accounts Receivable 4 000 Tuition Fees Earned 4 000 To record tuition earned 1 600 x 2 1 2 months Adjustment g 31Salaries Expense 480 Salaries Payable 480 To record accrued salaries 2 days x 120 x 2 employees Adjustment h 31Rent Expense 2 178 Prepaid Rent 2 178 To record expiration of prepaid rent McGraw Hill Companies 2009 Fundamental Accounting Principles 19th Edition138 Problem 3 3A Continued Part 3 WELLS TEACHING INSTITUTE Adjusted Trial Balance December 31 2009 DebitCredit Cash 28 064 Accounts receivable 4 000 Teaching supplies 2 000 Prepaid insurance 13 000 Prepaid rent 0 Professional library 33 000 Accumulat