CHAPTER SOLUTIONS TO B EXERCISES E3-1B (15–20 minutes) Apr Cash 73,600 Equipment 32,200 Owner's Capital 105,800 No entry—not a transaction Supplies 1,610 Accounts Payable 1,610 Rent Expense 1,380 Cash 1,380 11 Accounts Receivable 2,530 Service Revenue 2,530 12 Cash 7,360 Unearned Service Revenue 7,360 17 Cash 5,290 Service Revenue 5,290 21 Insurance Expense 253 Cash 253 30 Salaries and Wages Expense 2,668 Cash 2,668 30 Supplies Expense 276 Supplies 276 30 Equipment 14,030 Owner's Capital 14,030 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-1 E3-2B (10–15 minutes) VISTA COMPANY Trial Balance April 30, 2014 Debit Credit Cash $ 5,600 Accounts Receivable 1,840 Prepaid Insurance ($900 – $500) 400 Equipment 9,600 Accounts Payable ($6,000 + $500) $ 6,500 Property Tax Payable Owner's Capital ($4,900 + $2,000) Owner's Drawing Service Revenue Salaries and Wages Expense Advertising Expense ($600 – $500) Property Tax Expense ($1,350 – $380) 1,200 6,900 2,000 12,060 6,150 100 970 $26,660 $26,660 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-2 E3-3B (15–20 minutes) The ledger accounts are reproduced below, and corrections are shown in the accounts Bal (1) Cash 11,824 (4) 900 Accounts Payable Bal 14,088 380 Accounts Receivable Bal 10,480 (1) 900 Common Stock Bal 16,000 Bal Supplies 5,934 Retained Earnings Bal 4,000 Bal (2) Equipment 12,200 6,400 Service Revenue Bal 10,400 (3) 4,050 (5) 160 Bal Office Expense 8,640 (2) 6,400 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-3 E3-3B (Continued) CERVANTES CORPORATION Trial Balance (corrected) April 30, 2014 Debit Cash Accounts Receivable Supplies Equipment Accounts Payable Common Stock Retained Earnings Service Revenue Office Expense Credit $12,344 9,580 5,934 18,600 $14,088 16,000 4,000 14,610 2,240 $48,698 $48,698 E3-4B (15–20 minutes) VAIL CO Trial Balance June 30, 2014 Debit Cash ($1,650 + $450 + $540) $ 2,640 Accounts Receivable ($8,618 – $450 + $400) 8,568 Supplies ($1,200 – $850) 450 Equipment ($7,800 + $850) 8,650 Accounts Payable ($5,600 + $350 + $350) Unearned Service Revenue ($600 – $200) Common Stock Dividends 600 Retained Earnings Service Revenue ($7,950 + $200) Salaries and Wages Expense ($2,100 + $ 1,200 – $600) 2,700 Office Expense ($1,380 + $300) 1,680 $26,888 Credit $ 6,300 400 10,000 2,038 8,150 $26,888 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-4 E3-5B (10–15 minutes) Depreciation Expense ($188 X 3) 564 Accumulated Depreciation—Equipment 564 Unearned Rent Revenue ($6,975 X 1/3) 2,325 Rent Revenue 2,325 Interest Expense 375 Interest Payable 375 Supplies Expense 1,463 Supplies ($2,100 – $637) 1,463 Insurance Expense ($225 X 3) 675 Prepaid Insurance 675 E3-6B (10–15 minutes) Accounts Receivable 375 Service Revenue 375 Utility Expense 260 Utilities Payable 260 Depreciation Expense 200 Accumulated Depreciation—Equipment 200 Interest Expense 250 Interest Payable 250 Insurance Expense ($6,000 X 1/12) 500 Prepaid Insurance 500 Supplies Expense ($800 – $250) 550 Supplies 550 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-5 E3-7B (15–20 minutes) (a) Ending balance of supplies Add: Adjusting entry Deduct: Purchases Beginning balance of supplies (b) Total prepaid insurance Amount used (6 X $640) Present balance $1,120 1,520 1,360 $1,280 $7,680 ($640 X 12) 3,840 $3,840 The policy was purchased months ago (August 1, 2013) (c) The entry in January to record salary expense was: Salaries and Wages Expense Salaries and Wages Payable Cash 2,880 1,120 4,000 The “T” account for salaries payable is: Salaries and Wages Payable Beg Bal ? Paid in January 1,120 End Bal 1,280 The beginning balance is therefore: (d) Ending balance of salaries and wages payable Plus: Reduction of salaries and wages payable Beginning balance of salaries and wages payable $1,280 1,120 $2,400 Service revenue Cash received Unearned revenue reduced $3,200 2,560 $ 640 Ending unearned revenue January 31, 2014 Plus: Unearned revenue reduced Beginning unearned revenue December 31, 2013 $1,200 640 $1,840 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-6 E3-8B (10–15 minutes) August 31, 2014 Salaries and Wages Expense 2,280 Salaries and Wages Payable 2,280 (To record salaries and wages pay at 8/31) August 31, 2014 Utilities Expense 720 Utilities Payable (To record utility expense for August) August 31, 2014 Interest Expense ($30,000 X 6% X 1/12) 180 Interest Payable (To record interest expense for August) August 31, 2014 Utilities Expense 140 Utilities Payable (To record telephone expense for August) 720 180 140 E3-9B (15–20 minutes) (a) 8/15 Salaries and Wages Expense 2,600 Cash 2,600 (To record payment of August 15 payroll) 8/17 Accounts Receivable 12,100 Service Revenue 12,100 (To record revenue for services performed for which payment has not yet been received) 8/20 Cash 3,200 Unearned Service Revenue 3,200 (To record receipt of cash for services not yet performed) Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-7 E3-9B (Continued) (b) 8/31 Supplies Expense 712 Supplies 712 (To record the use of supplies during August) 8/31 Accounts Receivable 3,600 Service Revenue 3,600 (To record revenue for services performed for which payment has not yet been received) 8/31 Salaries and Wages Expense 2,100 Salaries and Wages Payable 2,100 (To record liability for accrued payroll) 8/31 Unearned Service Revenue 2,000 Service Revenue 2,000 (To reduce the Unearned Service Revenue account for service that has been performed) Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-8 E3-10B (25–30 minutes) (a) Aug 31 Insurance Expense ($440 X 3/12) 110 Prepaid Insurance 110 Aug 31 Supplies Expense ($260 – $45) 215 Supplies 215 Aug 31 Depreciation Expense—Buildings 270 Accumulated Depreciation— Buildings 270 ($12,000 – $1,200 = $10,800; $10,800 X 10% = $1,080 per year; $1,080 X 1/4 = $270) Aug 31 Depreciation Expense—Equipment 54 Accumulated Depreciation— Equipment 54 ($1,600 – $160 = $1,440; $1,440 X 15% = $216; $216 X 1/4 = $54) Aug 31 Unearned Rent Revenue 380 Rent Revenue 380 Aug 31 Salaries and Wages Expense 38 Salaries and Wages Payable 38 Aug 31 Accounts Receivable 80 Rent Revenue 80 Aug 31 Interest Expense 90 Interest Payable [($6,000 X 6%) X 1/4] 90 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-9 E3-10B (Continued) (b) GONZALEZ RESORT Adjusted Trial Balance August 31, 2014 Debit Cash Accounts Receivable Prepaid Insurance ($440 – $110) Supplies ($260 – $215) Land Buildings Accumulated Depreciation—Buildings Equipment Accumulated Depreciation—Equipment Accounts Payable Unearned Rent Revenue ($460 – $380) Salaries and Wages Payable Interest Payable Mortgage Payable Common Stock Retained Earnings Dividends Rent Revenue ($7,620 + $380 + $80) Salaries and Wages Expense ($4,480 + $38) Utilities Expense Maintenance and Repairs Expense Insurance Expense Supplies Expense Depreciation Expense—Buildings Depreciation Expense—Equipment Interest Expense Credit $ 1,960 80 330 45 2,000 12,000 $ 270 1,600 54 450 80 38 90 6,000 9,100 890 500 8,080 4,518 920 360 110 215 270 54 90 $25,052 $25,052 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-10 E3-11B (20–25 Minutes) (a) DECIMAL CO Income Statement For the Year Ended December 31, 2014 Revenues Service revenue Expenses Salaries and wages expense $15,600 Rent expense 7,800 Depreciation expense 392 Interest expense 211 Net Income (b) $27,600 24,003 $ 3,597 DECIMAL CO Statement of Retained Earnings For the Year Ended December 31, 2014 Retained earnings, January $3,619 Add: Net income* 3,597 Less: Dividends 6,000 Retained earnings, December 31 $ 1,216 *From part (a) above Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-11 E3-11B (Continued) (c) DECIMAL CO Balance Sheet December 31, 2014 Assets Current Assets Cash $ 6,590 Accounts receivable 15,618 Prepaid rent 1,200 Total current assets Property, plant, and equipment Equipment 31,800 Less: Accumulated depreciation (9,680) Total assets Liabilities and Stockholders’ Equity Current liabilities Notes payable Accounts payable Interest payable Total current liabilities Stockholders’ equity Common Stock $20,000 Retained Earnings* 1,216 Total liabilities and stockholders’ equity $23,408 22,120 $45,528 $12,500 11,601 211 24,312 21,216 $45,528 *From part (b) above Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-12 E3-12B (20–25 Minutes) (a) COMP CORP Income Statement For the Year Ended December 31, 2014 Revenues Service revenue Expenses Salaries and wages expense $25,600 Rent expense 8,000 Supplies expense 7,100 Depreciation expense 2,500 Interest expense 960 Insurance expense 600 Total expenses Net income $53,600 44,760 $ 8,840 COMP CORP Statement of Retained Earnings For the Year Ended December 31, 2014 Retained earnings, January $ 7,060 Add: Net income* 8,840 Retained earnings, December 31 $15,900 *From income statement above Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-13 E3-12B (Continued) (a) (Continued) COMP CORP Balance Sheet December 31, 2014 Assets Cash Accounts receivable Supplies Prepaid insurance Equipment $30,000 Less: Accumulated depreciation—equipment (12,000) Total assets $ 2,500 35,600 7,100 3,000 18,000 $66,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $10,000 Accounts payable 17,600 Unearned service revenue 2,100 Salaries and wages payable 400 Interest payable 200 Total liabilities Stockholders’ equity Common stock $20,000 Retained earnings * 15,900 Total liabilities and stockholders’ equity $30,300 35,900 $66,200 *From Statement of Retained Earnings above (b) Based on interest payable at December 31, 2014, interest is $100 per month or 1.0% of the note payable 1.0% X 12 = 12.0% interest per year Salaries Expense, $25,600 less Salaries Payable 12/31/2014, $400 = $25,200 Total Payments, $26,400 – $25,200 = $1,200 Salaries Payable 12/31/2013 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-14 E3-13B (10–15 minutes) (a) (b) Sales Less: Sales returns and allowances Sales discount Net sales Sales Income Summary Income Summary Sales Returns and Allowances Sales Discounts $320,000 $ 9,600 6,000 15,600 $304,400 320,000 320,000 15,600 9,600 6,000 E3-14B (10–15 minutes) Sales Sales Returns and Allowances Sales Discounts Income Summary 812,000 Income Summary Cost of Goods Sold Freight-out Insurance Expense Rent Expense Salary and Wages Expense 628,500 Income Summary Retained Earnings 131,000 21,500 31,000 759,500 361,000 22,500 12,000 32,000 201,000 185,500 E3-15B (10–15 minutes) (a) $3,000 (b) $8,400 (c) $3,400 (d) $33,200 (e) $19,000 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-15 E3-16B (10–15 minutes) Sales Cost of Goods Sold Sales Returns and Allowances Sales Discounts Selling Expenses Administrative Expenses Income Tax Expense Income Summary 164,000 90,280 4,800 6,000 6,400 15,200 12,000 29,320 OR Sales Income Summary 164,000 Income Summary Cost of Goods Sold Sales Returns and Allowances Sales Discounts Selling Expense Administrative Expense Income Tax Expense 134,680 Income Summary Retained Earnings Retained Earnings Dividends 164,000 90,280 4,800 6,000 6,400 15,200 12,000 29,320 29,320 7,200 7,200 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-16 E3-17B (10–15 minutes) J1 Date Mar Account Titles and Explanation Cash Ref Debit Credit 62,500 Common Stock (Investment of cash in business) Land Building Equipment Cash (Purchased Moises Moreno’s Golf Land) 62,500 12,500 27,500 7,500 47,500 Advertising Expense Cash (Paid for advertising) 2,000 Prepaid Insurance Cash (Paid for one-year insurance policy) 1,850 10 Equipment Accounts Payable (Purchased equipment on account) 3,125 18 Cash 1,500 2,000 1,850 3,125 Service Revenue (Received cash for services performed) 25 Dividends Cash (Declared and paid a $625 cash dividend) 1,500 625 625 30 Salaries and Wages Expense Cash (Paid wages expense) 1,125 30 Accounts Payable Cash (Paid creditor on account) 3,125 31 Cash 1,125 3,125 950 Service Revenue (Received cash for services performed) Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 950 3-17 *E3-18B (15–20 minutes) JUNE MURRAY, M.D Conversion of Cash Basis to Accrual Basis For the Year 2014 Excess of cash collected over cash disbursed ($285,200 – $110,940) Add increase in accounts receivable ($18,500 – $31,854) Deduct increase in unearned service revenue ($5,680 – $8,222) Add decrease in accrued expense ($6,870 – $4,216) Add increase in prepaid expenses ($3,834 – $6,464) Net income on an accrual basis $174,260 13,354 (2,542) 2,654 2,630 $190,356 Alternate solution: JUNE MURRAY, M.D Conversion of Income Statement from Cash Basis to Accrual Basis For the Year 2014 Cash Basis Revenue from fees: Adjustments Add Deduct $285,200 –Accounts receivable, Jan $18,500 +Accounts receivable, Dec 31 $31,854 +Unearned service revenue, Jan 5,680 –Unearned service revenue, Dec 31 8,222 Restated revenue from fees Operating expenses: $296,012 110,940 –Accrued expenses, Jan 6,870 +Accrued expenses, Dec 31 4,216 +Prepaid expenses, Dec 31 3,834 –Prepaid expenses, Dec 31 6,464 Restated operating expenses Net income—cash basis Net income—accrual basis Accrual Basis 105,656 $174,260 $190,356 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-18 *E3-19B (10–15 minutes) (a) LETTERMAN CORP Income Statement (Cash Basis) For the Year Ended December 31, Sales Expenses Net income (b) 2013 $600,000 370,000 $230,000 2014 $902,000 469,000 $433,000 LETTERMAN CORP Income Statement (Accrual Basis) For the Year Ended December 31, Sales* Expenses** Net income *2013: 2014: **2013: 2014: 2013 $876,000 427,000 $449,000 2014 $862,000 487,000 $375,000 $600,000 + $201,000 + $75,000 = $876,000 $701,000 + $161,000 = $862,000 $360,000 + $42,000 + $25,000 = $427,000 $10,000 + $406,000 + $71,000 = $487,000 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-19 *E3-20B (20–25 minutes) (a) (b) Adjusting Entries: Insurance Expense 1,500 Prepaid Insurance 1,500 Rent Revenue 500 Unearned Rent Revenue 500 Supplies 300 Advertising Expense 300 Interest Expense 850 Interest Payable 850 Reversing Entries: No reversing entry required Unearned Rent Revenue 500 Rent Revenue 500 Advertising Expense 300 Supplies 300 Interest Payable 850 Interest Expense 850 *E3-21B (10–15 minutes) Adjusted Trial Balance Accounts Cash Inventory Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Dr 2,600 112,000 Cr Income Statement Dr 801,000 8,000 21,000 468,500 Cr Balance Sheet Dr 2,600 112,000 Cr 801,000 8,000 21,000 468,500 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-20 *E3-22B (20–25 minutes) BERKELEY CO Worksheet (Partial) For the Month Ended April 30, 2014 Adjusted Trial Balance Account Titles Cash Accounts Receivable Prepaid Rent Equipment Accum DepreciationEquipment Notes Payable Accounts Payable Common Stock Retained Earnings April 1, 2014 Dividends Service Revenue Salaries and Wages Expense Rent Expense Depreciation Expense Interest Expense Interest Payable Totals Net Income Totals Dr 12,180 21,316 3,560 36,510 Cr Income Statement Dr Cr Dr 12,180 21,316 3,560 36,510 Cr 12,611 21,000 9,654 26,610 12,611 21,000 9,654 26,610 2,000 2,000 12,000 12,000 37,591 15,600 7,100 1,200 1,050 110,516 Balance Sheet 37,591 15,600 7,100 1,200 1,050 1,050 110,516 24,950 12,641 37,591 37,591 37,591 85,566 1,050 72,925 85,566 12,641 85,566 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-21 *E3-22B (Continued) BERKELEY CO Balance Sheet April 30, 2014 Assets Current Assets Cash $12,180 Accounts receivable 21,316 Prepaid rent 3,560 Total current assets Property, plant, and equipment Equipment 36,510 Less Accumulated depreciation (12,611) Total assets Liabilities and Owner’s Equity Current liabilities Notes payable Accounts payable Interest payable Total current liabilities Stockholders' Equity Common Stock 26,610 Retained Earnings 2,641* Total liabilities and owner’s equity $37,056 23,899 $60,955 $21,000 9,654 1,050 31,704 29,251 $60,955 *Beg Balance + Net Income - Dividends = Ending Balance $2,000 + $12,641 - $12,000 = $2,641 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-22 *E3-23B (10–15 minutes) LENO CO Worksheet (Partial) For Month Ended February 28, 2014 Trial Balance Account Titles Dr Supplies 3,700 Accumulated Depreciation Interest Payable Adjusted Trial Balance Adjustments Cr Dr Cr Dr Cr Income Statement Dr 2,150 Cr Balance Sheet Dr Cr (a) 1,550 2,150 14,710 (b) 2,100 16,810 16,810 700 (c) 100 800 800 Supplies Expense (a) 1,550 1,550 1,550 Depreciation Expense (b) 2,100 2,100 2,100 Interest Expense (c) 100 100 100 The following accounts and amounts would be shown in the February income statement: Supplies expense Depreciation expense Interest expense $1,550 2,100 100 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-23 ... 6,150 100 970 $26,660 $26,660 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-2 E3-3B (15–20 minutes) The ledger... Office Expense 8,640 (2) 6,400 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-3 E3-3B (Continued) CERVANTES CORPORATION... 10,000 2,038 8,150 $26,888 Copyright © 2013 John Wiley & Sons, Inc Kieso, Intermediate Accounting, 15/e, Exercise B Solutions (For Instructor Use Only) 3-4 E3-5B (10–15 minutes) Depreciation