Solution manual intermediate accounting 15th kiesoch03

E3-7B 15–20 minutesThe policy was purchased 6 months ago August 1, 2013 The “T” account for salaries payable is: Salaries and Wages Payable Paid in The beginning balance is therefore: d

SOLUTIONS TO B EXERCISES

E3-1B (15–20 minutes)

Apr 2 Cash 73,600

Equipment 32,200 Owner's Capital 105,800

E3-2B (10–15 minutes)

VISTA COMPANY Trial Balance April 30, 2014

Debit Credit Cash $ 5,600

The ledger accounts are reproduced below, and corrections are shown in the accounts.

E3-3B (Continued)

CERVANTES CORPORATION Trial Balance (corrected)

April 30, 2014

Debit Credit Cash $12,344

Debit Credit Cash ($1,650 + $450 + $540) $ 2,640

1 Depreciation Expense ($188 X 3) 564

Accumulated Depreciation—Equipment 564

2 Unearned Rent Revenue ($6,975 X 1/3) 2,325 Rent Revenue 2,325 3 Interest Expense 375

Interest Payable 375

4 Supplies Expense 1,463 Supplies ($2,100 – $637) 1,463 5 Insurance Expense ($225 X 3) 675

Prepaid Insurance 675

E3-6B (10–15 minutes) 1 Accounts Receivable 375

Service Revenue 375

2 Utility Expense 260

Utilities Payable 260

3 Depreciation Expense 200

Accumulated Depreciation—Equipment 200

Interest Expense 250

Interest Payable 250

4 Insurance Expense ($6,000 X 1/12) 500

Prepaid Insurance 500

5 Supplies Expense ($800 – $250) 550

Supplies 550

E3-7B (15–20 minutes)

The policy was purchased 6 months ago (August 1, 2013)

The “T” account for salaries payable is:

Salaries and Wages Payable

Paid in

The beginning balance is therefore:

(d) Service revenue $3,200

Cash received 2,560

1 August 31, 2014

Salaries and Wages Expense 2,280

Salaries and Wages Payable 2,280 (To record salaries and wages pay at 8/31)

Utilities Expense 720

Utilities Payable 720 (To record utility expense for August)

Interest Expense ($30,000 X 6% X 1/12) 180

Interest Payable 180 (To record interest expense for August)

Utilities Expense 140

Utilities Payable 140 (To record telephone expense for August)

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)

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)

(a) 1 Aug 31 Insurance Expense ($440 X 3/12) 110

Prepaid Insurance 110

2 Aug 31 Supplies Expense ($260 – $45) 215

Supplies 215

3 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) 4 Aug 31 Unearned Rent Revenue 380

Rent Revenue 380

5 Aug 31 Salaries and Wages Expense 38

Salaries and Wages Payable 38

6 Aug 31 Accounts Receivable 80

Rent Revenue 80

7 Aug 31 Interest Expense 90

Interest Payable [($6,000 X 6%) X 1/4] 90

E3-10B (Continued)

Adjusted Trial Balance August 31, 2014

Debit Credit

Cash $ 1,960 Accounts Receivable 80

Prepaid Insurance ($440 – $110) 330

Supplies ($260 – $215) 45

Land 2,000 Buildings 12,000 Accumulated Depreciation—Buildings $ 270

Equipment 1,600 Accumulated Depreciation—Equipment 54

Accounts Payable 450

Unearned Rent Revenue ($460 – $380) 80

Salaries and Wages Payable 38

Interest Payable 90

Mortgage Payable 6,000 Common Stock 9,100 Retained Earnings 890

Dividends 500

Rent Revenue ($7,620 + $380 + $80) 8,080 Salaries and Wages Expense ($4,480 + $38) 4,518 Utilities Expense 920

Maintenance and Repairs Expense 360

Insurance Expense 110

Supplies Expense 215

Depreciation Expense—Buildings 270

Depreciation Expense—Equipment 54

Interest Expense 90

$25,052 $25,052

(a) DECIMAL CO.

Income Statement For the Year Ended December 31, 2014 Revenues

Expenses

Rent expense 7,800 Depreciation expense 392 Interest expense 211 24,003

Statement of Retained Earnings For the Year Ended December 31, 2014 Retained earnings, January 1 $3,619 Add: Net income* 3,597 Less: Dividends 6,000 Retained earnings, December 31 $ 1,216

*From part (a) above.

E3-11B (Continued)

Balance Sheet December 31, 2014 Assets

Current Assets

Cash $ 6,590 Accounts receivable 15,618 Prepaid rent 1,200

Property, plant, and equipment

*From part (b) above.

(a) COMP CORP.

Income Statement For the Year Ended December 31, 2014 Revenues

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

*From income statement above.

E3-12B (Continued)

Balance Sheet December 31, 2014

Assets Cash $ 2,500

Unearned service revenue 2,100

Salaries and wages payable 400

Interest payable 200

Total liabilities $30,300 Stockholders’ equity

Common stock $20,000

Retained earnings * 15,900 35,900

*From Statement of Retained Earnings above.

(b) 1 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.

2 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.

E3-16B (10–15 minutes)

Date Account Titles and Explanation Ref Debit Credit

Common Stock 62,500 (Investment of cash in business)

Service Revenue 1,500 (Received cash for services performed)

(Declared and paid a $625 cash dividend)

30 Salaries and Wages Expense 1,125

*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) $174,260

Net income on an accrual basis $190,356

Alternate solution:

JUNE MURRAY, M.D.

Conversion of Income Statement from Cash Basis to Accrual Basis

For the Year 2014

Cash Adjustments Accrual Basis Add Deduct Basis Revenue from fees: $285,200

–Accounts receivable, Jan 1 $18,500

+Accounts receivable, Dec 31 $31,854

+Unearned service revenue, Jan 1 5,680

–Unearned service revenue, Dec 31 8,222

Restated revenue from fees $296,012 Operating expenses: 110,940

–Accrued expenses, Jan 1 6,870

+Accrued expenses, Dec 31 4,216

+Prepaid expenses, Dec 31 3,834

–Prepaid expenses, Dec 31 6,464

Restated operating expenses 105,656 Net income—cash basis $174,260 Net income—accrual basis $190,356

(a) LETTERMAN CORP.

Income Statement (Cash Basis) For the Year Ended December 31,

*E3-20B (20–25 minutes)

1 Insurance Expense 1,500

Prepaid Insurance 1,500

2 Rent Revenue 500

Unearned Rent Revenue 500

3 Supplies 300

Advertising Expense 300

4 Interest Expense 850

Interest Payable 850

(b) Reversing Entries: 1 No reversing entry required 2 Unearned Rent Revenue 500

Rent Revenue 500

3 Advertising Expense 300

Supplies 300

4 Interest Payable 850

Interest Expense 850

*E3-21B (10–15 minutes) Adjusted Trial Balance

Income Statement Balance Sheet

Accounts Dr Cr Dr Cr Dr Cr

Sales Returns and

BERKELEY CO.

Worksheet (Partial) For the Month Ended April 30, 2014 Adjusted Trial

Balance

Income Statement Balance Sheet Account Titles Dr Cr Dr Cr Dr Cr

April 1, 2014 2,000 2,000 Dividends 12,000 12,000

*E3-22B (Continued)

BERKELEY CO.

Balance Sheet April 30, 2014 Assets

Current Assets

Cash $12,180 Accounts receivable 21,316 Prepaid rent 3,560

Property, plant, and equipment

*Beg Balance + Net Income - Dividends = Ending Balance

LENO CO.

Worksheet (Partial) For Month Ended February 28, 2014

Trial Balance Adjustments

Adjusted Trial Balance

Income Statement Balance Sheet Account Titles Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr