Exercise 3-1 (10 minutes)
1. B 4. A 2. F
5. D
EXERCISES 3. C 6. E
Exercise 3-2 (25 minutes)
a. Depreciation Expense—Equipment ................................ 16,000 Accumulated Depreciation—Equipment.....................
b.
To record depreciation expense for the year.
Insurance Expense ........................................................... Prepaid Insurance* ....................................................... To record insurance coverage that expired ($6,000 - $640).
c. Office Supplies Expense .................................................. Office Supplies** ............................................................ To record office supplies used ($325 + $3,480 - $383).
d. Unearned Fee Revenue .................................................... Fee Revenue .................................................................. To record earned portion of fee received in advance
($15,000 x 1/5).
e. Insurance Expense ........................................................... Prepaid Insurance ......................................................... To record insurance coverage that expired.
f. Wages Expense ................................................................. Wages Payable .............................................................. To record wages accrued but not yet paid.
5,360
16,000
5,360
3,422
3,000
6,160
2,700
3,422
3,000
6,160
2,700
Notes: Prepaid Insurance* Bal. Bal. 6,000 ? End. Bal. 640 Used
Office Supplies** Beg. Bal. 325 Purch. 3,480 ? End. Bal. 383 Used ?McGraw-Hill Companies, 2009 124
Fundamental Accounting Principles, 19th Edition
Exercise 3-3 (30 minutes)
a. Unearned Fee Revenue .................................................... Fee Revenue ..................................................................
To record earned portion of fee received in advance
($15,000 x 1/3).
5,000
5,000
b. Wages Expense ................................................................. Wages Payable ..............................................................
To record wages accrued but not yet paid.
7,500
7,500
c. Depreciation Expense—Equipment ................................ 17,251 Accumulated Depreciation—Equipment.....................
To record depreciation expense for the year.
17,251
d. Office Supplies Expense .................................................. Office Supplies* .............................................................
To record office supplies used ($240 + $6,102 - $660).
5,682
5,682
e. Insurance Expense ........................................................... Prepaid Insurance? ........................................................
To record insurance coverage expired ($4,000 - $1,300).
2,700
2,700
f. Interest Receivable ......................................................... Interest Revenue ........................................................
To record interest earned but not yet received.
1,400
1,400
g. Interest Expense ............................................................. Interest Payable...........................................................
To record interest incurred but not yet paid.
Notes: 2,000
2,000
Prepaid Insurance Beg. Bal. 4,000 ? Used End. Bal. 1,300 ?
Beg. Bal. Purch. End. Bal. Office Supplies* 240 6,102 ? 660 Used ?McGraw-Hill Companies, 2009
Solutions Manual, Chapter 3
125
Exercise 3-4 (15 minutes)
a. Adjusting entry
2009 Dec. 31
Wages Expense....................................................... Wages Payable ....................................................
To record accrued wages for one day. (5 workers x $165)
b. Payday entry
2010 Jan. 4 Wages Expense....................................................... Wages Payable ........................................................ Cash ..................................................................... To record accrued and current wages.
Wages expense = 5 workers x 3 days x $165 Cash = 5 workers x 4 days x $165
825
2,475 825
825
3,300
Exercise 3-5 (15 minutes) a. b. c. d.
$ 2,000 $ 6,607 $11,987 $ 1,375
(a)
(b)
(c) $ 1,576 11,987 13,563
(d) $1,375 6,907 8,282
Proof:
Supplies available – prior year-end ......... Supplies purchased in current year ........ Total supplies available ............................
$ 350 $1,855 2,450 2,800
6,307 8,162
Supplies available – current year-end ..... (800) (6,607) Supplies expense for current year...........
$2,000 $1,555 (2,056) (800) $11,507 $7,482 ?McGraw-Hill Companies, 2009 126
Fundamental Accounting Principles, 19th Edition
Exercise 3-6 (25 minutes)
a.
Apr. 30 Legal Fees Expense ........................................... Legal Fees Payable .....................................
To record accrued legal fees.
4,500
4,500
4,500
May 12 Legal Fees Payable ............................................ Cash .............................................................
To pay accrued legal fees.
4,500
b.
Apr. 30 Interest Expense ................................................. Interest Payable ..........................................
To record accrued interest expense ($5,700 x 10/30).
1,900
1,900
May 20 Interest Payable .................................................. Interest Expense ................................................. Cash .............................................................
To record payment of accrued and current
interest expense ($5,700 x 20/30).
1,900 3,800
5,700
c.
Apr. 30 Salaries Expense ................................................ Salaries Payable..........................................
To record accrued salaries ($12,000 x 2/5 week).
4,800
4,800
May 3 Salaries Payable ................................................. 4,800 Salaries Expense ................................................ 7,200 Cash .............................................................
To record payment of accrued and
current salaries ($12,000 x 3/5 week).
12,000
?McGraw-Hill Companies, 2009
Solutions Manual, Chapter 3
127
Exercise 3-7 (20 minutes) Balance Sheet Prepaid Insurance Asset using Insurance Expense using Accrual Basis* Cash Basis $0 0 0 0
Accrual Basis**
Cash Basis $15,300
0 0
0 $15,300 Dec. 31, 2007 ........$14,450 Dec. 31, 2008 ........9,350 Dec. 31, 2009 ........4,250 Dec. 31, 2010 ........
Explanations:
2007 ..........$ 850 2008 ..........
5,100
2009 .......... 5,100 2010 .......... 4,250 Total .........$15,300
0
*
Accrual asset balance equals months left in the policy x $425 per month (monthly
cost is computed as $15,300 / 36 months). Months Left Balance 12/31/2007 .. 12/31/2008 .. 12/31/2009 ..
34 22 10
$14,450 9,350 4,250
12/31/2010 .. 0 0 **
Accrual insurance expense equals months covered in the year x $425 per month. Months Covered Expense 2007 ............2008 ............2009 ............2010 ............
2 12 12 10
$ 850 5,100 5,100 4,250 $15,300 ?McGraw-Hill Companies, 2009 128
Fundamental Accounting Principles, 19th Edition