solution 121 (a) (15 min.)
TRANSCRIPT
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8/14/2019 Solution 121 (a) (15 Min.)
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EXERCISES
Solution 121 (15 min.)
(a) STOVER COMPANY
Income StatementFor the Year Ended December 31, 2002
Service revenue ............................................................................................. $390,000Expenses ....................................................................................................... 239,800Net income ..................................................................................................... $150,200
(b) The accrual basis of accounting provides a better measure of income than the cash basis.The accrual basis is required under generally accepted accounting principles and recognizesrevenues when earned and expenses when incurred. Revenues and expenses recognizedunder the accrual basis are related to the economic environment in which they occur andthus allow trends to be more meaningfully interpreted.
The cash basis often fails to recognize revenue in the period when earned and expenseswhen incurred. Additionally, expenses are not matched with revenues when earned;therefore, the matching principle is violated.
Solution 122 (5 min.)
Net Income before Adjustments ($9,000 4,800) $ 4,200
Add: Unearned Revenues $3,500
Accrued Revenues 2,800 6,30010,500
Subtract: Depreciation Expense 1,300Interest Expense 900Insurance Expense 400 2,600
Net Income after Adjustments $ 7,900
Solution 127 (5 min.)
(a) Rent Expense ............................................................................... 15,000Prepaid Rent ....................................................................... 15,000
($90,000 6 = $15,000)
(b) Unearned Ticket Revenue ............................................................ 32,000Ticket Revenue ................................................................... 32,000
($160,000 20 = $8,000; $8,000 4 = $32,000)
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 128 (10 min.)
(a) June 1 Delivery Truck ............................................................... 36,000Cash ..................................................................... 8,000Notes Payable . ..................................................... 28,000
(To record acquisition of delivery truck andsigning of a 2-month, 12% note)
(b) June 30 Depreciation Expense ................................................... 750Accumulated DepreciationDelivery Truck .... ..... 750
(To record monthly depreciation)$9,000 12 = $750/month
30 Interest Expense ........................................................... 280Interest Payable ................................................... 280
(To accrue interest on notes payable)$28,000 12% 1/12 = $280
(c) AssetsDelivery Truck $36,000Less: Accumulated DepreciationDelivery Truck 750 $35,250
Solution 129 (10 min.)
1. Office Supplies Expense ................................................................ 1,200Office Supplies ...................................................................... 1,200
(To record the amount of office supplies used)
2. Insurance Expense ......................................................................... 250Prepaid Insurance .................................................................. 250
(To record insurance expired $6,000 24)
3. Depreciation Expense .................................................................... 200Accumulated DepreciationOffice Equipment ...................... 200
(To record monthly depreciation $2,400 12)
4. Unearned Rent Revenue ................................................................ 900Rent Revenue ........................................................................ 900
(To record rent revenue earned)
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 130 (10 min.)
Case 1December 31Office Supplies Expense ................................................... 7,100
Office Supplies ...................................................... 7,100(To record office supplies used during the year)
Case 2December 31Depreciation Expense ....................................................... 2,400
Accumulated DepreciationOffice Equipment...... . 2,400(To record depreciation expense for six months)$400 6 months = $2,400 Depreciation
Case 3August 31Rent Receivable ................................................................ 3,600
Rent Revenue ........................................................ 3,600(To accrue rent earned but not yet received)
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 131 (15 min.)
JORDAN INSURANCE AGENCYIncome Statement
For the Month Ended June 30____________________________________________________________________________
RevenuesPremium Commission Revenue ($40,000 + $4,000).................... $44,000
ExpensesSalary expense ($6,000 + $5,300) ............................................... $11,300
Advertising expense .................................................................... 800Rent expense .............................................................................. 4,200Depreciation expense ($2,800 + $300) ........................................ 3,100Utilities expense ($0 + $2,000) .................................................... 2,000Supplies expense ($0 + $4,500) .................................................. 4,500
Total expenses ................................................................... 25,900Net income ........................................................................................... $18,100
Solution 132 (5 min.)
1. Service Revenue 5. Utilities Payable2. Rent Expense 6. Interest Expense3. Service Revenue 7. Accounts Receivable or Unearned Revenue4. Accumulated Depreciation 8. Interest Revenue
Solution 134 (10 min.)
(a) June 30 Salaries Expense .......................................................... 9,700Salaries Payable .................................................. 9,700
(To accrue salaries incurred but not yet paid)
(b) July 2 Salaries Payable ........................................................... 9,700Salaries Expense .......................................................... 6,400
Cash ..................................................................... 16,100(To record payment of July 2 payroll)
Solution 135 (5 min.)
(a) Dec. 31 Wages Expense ............................................................ 24,000Wages Payable .................................................... 24,000
(b) Jan. 2 Wages Payable ............................................................. 24,000Wages Expense ............................................................ 16,000
Cash ..................................................................... 40,000
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 133 (15 min.)
(a) Journal EntryPrepaid Rent .......................................................................... 90,000
Cash ............................................................................. 90,000
Adjusting Entry
Rent Expense ........................................................................ 30,000Prepaid Rent . ................................................................ 30,000
(b) Journal EntryCash ...................................................................................... 600,000
Unearned Admissions Revenue..................................... 600,000
Adjusting EntryUnearned Admissions Revenue ............................................ 50,000
Admissions Revenue .................................................... 50,000($600,000 12 = $50,000)
(c) Journal EntryCash ...................................................................................... 200,000
Note Payable ................................................................ 200,000
Adjusting EntryInterest Expense .................................................................... 2,000
Interest Payable ............................................................ 2,000($200,000 .12 1 12 = $2,000)
(d) Journal EntryPrepaid Printing ..................................................................... 7,500
Cash ............................................................................. 7,500
Adjusting EntryPrinting Expense .................................................................... 2,500
Prepaid Printing ............................................................ 2,500($7,500 20 60 = $2,500)
(e) Journal EntryNone
Adjusting Entry
Accounts Receivable ............................................................. 14,000Concessions Revenue .................................................. 14,000
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 136 (15 min.)
Accounts Receivable ............................................................................ 1,000Service Revenue ......................................................................... 1,000
(To record revenue earned but not yet received)
Rent Expense ....................................................................................... 900
Prepaid Rent ............................................................................... 900(To record expiration of prepaid rent)
Supplies Expense ................................................................................ 400Supplies ....................................................................................... 400
(To record supplies used)
Depreciation ExpenseAutomobile Equipment ................................... 500Accumulated DepreciationAutomobile Equipment ................... 500
(To record depreciation expense)
Salaries Expense ................................................................................. 500
Salaries Payable .......................................................................... 500(To record salaries owed, not yet paid)
Interest Expense .................................................................................. 150Interest Payable .......................................................................... 150
(To record accrued interest payable)
Unearned Revenue .............................................................................. 100Service Revenue ......................................................................... 100
(To record revenue earned)
Utilities Expense ................................................................................... 500
Accounts Payable ........................................................................ 500(To record receipt of utility bill)
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 137 (15 min.)
(a) 1. $6,000. The $12,000 balance on the adjusted trial balance reflects two monthsremaining on the prepaid lease. This indicates that the monthly lease is $6,000.
2. The fencing is 11 months old. By dividing annual depreciation ($6,000) by 12, themonthly depreciation expense is $500. The accumulated depreciation account shows$5,500 which means that depreciation has been taken for 11 months.
3. 240 tickets were originally sold. Forty tickets were used in April at $4.00 each. Theadjusted trial balance shows a balance of $800 indicating that 200 tickets are stilloutstanding. By adding the 40 used in April to the 200 still remaining to be used, 240tickets must have been sold on April 1.
(b) 1. Rent Expense ........................................................................ 6,000Prepaid Rent ................................................................. 6,000
2. Depreciation Expense ............................................................ 500Accumulated DepreciationFencing ............................ 500
3. Unearned Ticket Revenue ..................................................... 160Ticket Revenue ............................................................. 160
(40 $4 = $160)
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8/14/2019 Solution 121 (a) (15 Min.)
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Solution 138 (20 min.)
1. PAYNE FINANCIAL PLANNERSIncome Statement
For the Month Ended December 31, 2002____________________________________________________________________________
RevenuesService Revenue ......................................................................... $4,300
ExpensesDepreciation expense .................................................................. $2,500Rent expense .............................................................................. 2,000Office supplies expense .............................................................. 600
Total expenses ...................................................................... 5,100Net loss ............................................................................................... $ (800)
2. PAYNE FINANCIAL PLANNERSOwner's Equity Statement
For the Month Ended December 31, 2002____________________________________________________________________________
Payne, Capital, December 1 ................................................................ $14,400Less: Net loss .................................................................................... $ 800
Drawings................................................................................... 2,500 3,300Payne, Capital, December 31 .............................................................. $11,100
3. PAYNE FINANCIAL PLANNERSBalance Sheet
December 31, 2002
____________________________________________________________________________
AssetsCash..................................................................................................... $ 5,300
Accounts receivable ............................................................................. 2,200Office supplies ...................................................................................... 1,800Office equipment .................................................................................. $15,000Less: Accumulated depreciationoffice equipment ........................... 4,000 11,000
Total assets ................................................................................. $20,300
Liabilities and Owner's EquityLiabilities
Accounts payable ........................................................................ $4,200Unearned revenue ....................................................................... 5,000Total liabilities ........................................................................ $ 9,200
Owner's EquityPayne, Capital ............................................................................. 11,100
Total liabilities and owner's equity .......................................... $20,300