Financial Accounting Connect Access Card
Financial Accounting Connect Access Card
5th Edition
ISBN: 9781260159622
Author: J. David Spiceland
Publisher: Mcgraw-Hill
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Chapter 11, Problem 20E

1.

To determine

Calculate cash paid for operating expense.

1.

Expert Solution
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Explanation of Solution

Operating expenses: The expenses which are incurred in day-to-day business activities but not directly allied with the production of goods and service are called operating expenses. They are classified under three big categories: “administrative expenses, selling expenses, and general expenses”.

Calculate cash paid for operating expenses.

SituationOperating expensesPrepaid insurance Increase (Decrease)Salaries payable Increase (Decrease)Cash paid for operating expenses
1$100$15$10(1) $105
2$100($15)$10(2) $75
3$100$15($10)(3) $125
4$100($15)($10)(4) $95

Table (1)

Working note:

Calculate amount of cash for operating expenses in each situation:

Situation 1:

Cash paid for operating expenses=(Operating expenses+Increase in prepaid insuranceIncrease in salaries payable)=$100+$15$10=$105 (1)

Situation 2:

Cash paid for operating expenses=(Operating expensesDecrease in prepaid insuranceIncrease in salaries payable)=$100$15$10=$75 (2)

Situation 3:

Cash paid for operating expenses=(Operating expenses+Increase in prepaid insurance+Decrease in salaries payable)=$100+$15+$10=$125 (3)

Situation 4:

Cash paid for operating expenses=(Operating expensesDecrease in prepaid insurance+Decrease in salaries payable)=$100$15+$10=$105 (4)

2.

To determine

Prepare the summary journal entry for each situation.

2.

Expert Solution
Check Mark

Explanation of Solution

Prepare the summary journal entry for each situation.

Situation 1:

DateAccounts title and explanationDebit ($)Credit ($)
 Operating expenses100 
 Prepaid insurance15 
 Salaries payable 10
 Cash 105
 (To record the summary journal entry)  

Table (1)

  • Operating expenses is an expense account and it decreases the stockholders’ equity. Hence, debit Operating expenses with $100.
  • Prepaid insurance is an asset account and it is increased. Hence, debit prepaid insurance with $15.
  • Salaries payable is a liability account and it is increased. Hence, credit salaries payable with $10.
  • Cash is an asset account and it is decreased. Therefore, credit cash with $105.

Situation 2:

DateAccounts title and explanationDebit ($)Credit ($)
 Operating expenses100 
 Prepaid insurance 15
 Salaries payable 10
 Cash 75
 (To record the summary journal entry)  

Table (2)

  • Operating expenses is an expense account and it decreases the stockholders’ equity. Hence, debit Operating expenses with $100.
  • Prepaid insurance is an asset account and it is decreased. Hence, credit prepaid insurance with $15.
  • Salaries payable is a liability account and it is increased. Hence, credit salaries payable with $10.
  • Cash is an asset account and it is decreased. Therefore, credit cash with $75.

Situation 3:

DateAccounts title and explanationDebit ($)Credit ($)
 Operating expenses100 
Prepaid insurance15
 Salaries payable10 
 Cash 125
 (To record the summary journal entry)  

Table (3)

  • Operating expenses is an expense account and it decreases the stockholders’ equity. Hence, debit Operating expenses with $100.
  • Prepaid insurance is an asset account and it is increased. Hence, debit prepaid insurance with $15.
  • Salaries payable is a liability account and it is decreased. Hence, debit salaries payable with $10.
  • Cash is an asset account and it is decreased. Therefore, credit cash with $125.

Situation 4:

DateAccounts title and explanationDebit ($)Credit ($)
 Operating expenses100 
 Salaries payable10 
 Prepaid insurance 15
 Cash 95
 (To record the summary journal entry)  

Table (4)

  • Operating expenses is an expense account and it decreases the stockholders’ equity. Hence, debit Operating expenses with $100.
  • Salaries payable is a liability account and it is decreased. Hence, debit salaries payable with $10
  • Prepaid insurance is an asset account and it is decreased. Therefore, credit prepaid insurance with $15.
  • Cash is an asset account and it is decreased. Therefore, credit cash with $95.

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Chapter 11 Solutions

Financial Accounting Connect Access Card

Ch. 11 - Prob. 11SSQCh. 11 - Prob. 12SSQCh. 11 - Prob. 13SSQCh. 11 - Prob. 14SSQCh. 11 - Prob. 15SSQCh. 11 - Applying Excel #11-1 A company reports net income...Ch. 11 - Prob. 2AECh. 11 - Prob. 1RQCh. 11 - Prob. 2RQCh. 11 - Prob. 3RQCh. 11 - 4. Why is it necessary to use an income statement,...Ch. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - Prob. 10RQCh. 11 - Prob. 11RQCh. 11 - Prob. 12RQCh. 11 - Prob. 13RQCh. 11 - Prob. 14RQCh. 11 - Prob. 15RQCh. 11 - Prob. 16RQCh. 11 - Prob. 17RQCh. 11 - Prob. 18RQCh. 11 - Prob. 19RQCh. 11 - Prob. 20RQCh. 11 - BE11-1 Classify each of the following items as an...Ch. 11 - BE11-2 The following selected transactions occur...Ch. 11 - BE11-3 Place the following items in the correct...Ch. 11 - BE11-4 Laser World reports net income of $650,000....Ch. 11 - BE11-5 Macrosoft Company reports net income of...Ch. 11 - BE11-6 Hi-Tech, Inc., reports net income of $70...Ch. 11 - BE11-7 Engineering Wonders reports net income of...Ch. 11 - BE11-8 Creative Sound Systems sold investments,...Ch. 11 - Prob. 9BECh. 11 - BE11-10 Technologies Worldwide purchased land for...Ch. 11 - Prob. 11BECh. 11 - Prob. 12BECh. 11 - BE11-13 A-2-Z Design Services engaged in the...Ch. 11 - Prob. 14BECh. 11 - Prob. 15BECh. 11 - Prob. 16BECh. 11 - Prob. 17BECh. 11 - Prob. 18BECh. 11 - Prob. 19BECh. 11 - Prob. 20BECh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - E11-3 Analysis of an income statement, balance...Ch. 11 - E11-4 Wi-Fi, Inc., has the following selected...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - E11-9 Software Distributors reports net income of...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Calculate operating activities—direct method...Ch. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 1PACh. 11 - Prob. 2PACh. 11 - Prob. 3PACh. 11 - Prob. 4PACh. 11 - Prob. 5PACh. 11 - Prob. 6PACh. 11 - Prob. 7PACh. 11 - Prob. 8PACh. 11 - Prob. 1PBCh. 11 - Prob. 2PBCh. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Prob. 7PBCh. 11 - Prepare an income statement using operating cash...Ch. 11 - Great Adventures (This is a continuation of the...Ch. 11 - Prob. 2APCh. 11 - Prob. 3APCh. 11 - Prob. 4APCh. 11 - Prob. 5APCh. 11 - Prob. 7APCh. 11 - Prob. 8AP
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