Exercise 3-8 (25 minutes)
Dec. 31 Accounts Receivable ............................................. 1,980 Fees Earned .....................................................
To record earned but unbilled fees (30% x $6,600).
1,980
31 Unearned Fees ........................................................ 4,620
Fees Earned .....................................................
To record earned fees collected in advance (70% x $6,600).
4,620
31 Depreciation Expense—Computers ..................... 1,650
Accumulated Depreciation-Computers ........
To record depreciation on computers.
1,650
31 Depreciation Expense—Office Furniture ............. . 1,925
Accumulated Depreciation—Office Furniture ...
To record depreciation on office furniture.
1,925
31 Salaries Expense .................................................... 2,695 Salaries Payable..............................................
To record accrued salaries.
2,695
31 Insurance Expense.................................................. 1,430 Prepaid Insurance ...........................................
To record expired prepaid insurance.
1,430
31 Rent Expense ............................................................ Rent Payable ...................................................
700
528
500
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700
31 Office Supplies Expense ........................................ Office Supplies ................................................
To record use of office supplies.
To record accrued rent expense.
528
31 Advertising Expense ................................................ Advertising Payable ........................................
To record accrued advertising expense.
500
31 Utilities Expense ...................................................... Utilities Payable ..............................................
To record incurred and unpaid utility costs.
77
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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. 1 Supplies Expense ................................................... 2,000 Cash ................................................................. 2,000
Purchased supplies.
b.
Dec. 2 Insurance Expense ................................................. 1,540 Cash .................................................................
Paid insurance premiums.
1,540
c.
Dec. 15 Cash ......................................................................... 13,000 Remodeling Fees Earned ...............................
Received fees for work to be done.
13,000
d.
Dec. 28 Cash ......................................................................... 3,700 Remodeling Fees Earned ...............................
Received fees for work to be done.
3,700
e.
Dec. 31 Supplies .................................................................. 1,840 Supplies Expense ...........................................
Adjust expenses for unused supplies.
1,840
f.
Dec. 31 Prepaid Insurance .................................................. 1,200 Insurance Expense .........................................
Adjust expenses for unexpired coverage
($1,540 - $340).
1,200
g.
Dec. 31 Remodeling Fees Earned ..................................... 11,130 Unearned Remodeling Fees ..........................
Adjusted revenues for unfinished projects ($13,000 + 3,700 - $5,570).
11,130
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Fundamental Accounting Principles, 19th Edition
Exercise 3-11A (25 minutes) a. Initial credit recorded in the Unearned Fees account July 1 Cash ....................................................................... 2,800 Unearned Fees ..............................................
Received fees for work to be done for Solana.
2,800
6 Cash ....................................................................... 8,100 Unearned Fees ..............................................
Received fees for work to be done for Haru.
8,100
12 Unearned Fees ...................................................... 2,800 Fees Earned ...................................................
Completed work for Solana.
2,800
18 Cash ....................................................................... 7,300 Unearned Fees ..............................................
Received fees for work to be done for Jordan.
7,300
27 Unearned Fees ...................................................... 8,100 Fees Earned ...................................................
Completed work for customer Haru.
8,100
31 No adjusting entries required.
b. Initial credit recorded in the Fees Earned account July 1 Cash ....................................................................... 2,800 Fees Earned ...................................................
Received fees for work to be done for Solana.
2,800
6 Cash ....................................................................... 8,100 Fees Earned ...................................................
Received fees for work to be done for Haru.
8,100
12 No entry required.
18 Cash ....................................................................... 7,300 Fees Earned ...................................................
Received fees for work to be done for Jordan.
7,300
27 No entry required.
7,300
31 Fees Earned .......................................................... 7,300
Unearned Fees ..............................................
Adjusted to reflect unearned fees for unfinished
job for Jordan.
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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.]
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Fundamental Accounting Principles, 19th Edition
PROBLEM SET A
Problem 3-1A (10 minutes)
1. I 5. G 2. D 6. C 3. F 7. I 4. B 8. A
Problem 3-2A (35 minutes)
Part 1
9. 10. 11. 12. H E H B
Adjustment (a) Dec. 31 Office Supplies Expense ................................ 12,325 Office Supplies .........................................
To record cost of supplies used ($2,900 + $11,977 - $2,552).
12,325
Adjustment (b) 31 Insurance Expense .......................................... 12,280 Prepaid Insurance ....................................
To record annual insurance coverage cost.
Policy Cost per Month A $485 ($11,640/24 mo.) B 290 ($10,440/36 mo.) C 770 ($ 9,240 /12 mo.) Total
Months Active in 2009 12 9 5
12,280
2009 Cost $ 5,820 2,610 3,850 $12,280
Adjustment (c) 31 Salaries Expense ............................................. 3,660 Salaries Payable.......................................
To record accrued but unpaid wages
(2 days x $1,830).
3,660
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