FINANCIAL ACCOUNTING (LOOSELEAF)
FINANCIAL ACCOUNTING (LOOSELEAF)
10th Edition
ISBN: 9781260481358
Author: Libby
Publisher: MCG
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 3, Problem 10E

1 and 2

To determine

Prepare the T- account and enter the transaction into their respective accounts for calculating the ending balance.

1 and 2

Expert Solution
Check Mark

Explanation of Solution

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

Prepare the T-accounts:

Cash account:

Cash account
Beginning balance$6,400(g)$2,300
(a)$19,000(i)$16,500
(b)$600(j)$2,200
(c)$850(k)$960
(d)$7,200
Ending balance$12,090

Accounts receivable account:

Accounts receivable account
Beginning balance$32,000(d)$7,200
Ending balance$24,800

Supplies account:

Supplies account
Beginning balance$1,500
(k)$960
Ending balance$2,460

Equipment account:

Equipment account
Beginning balance$9,500
(h)$920
Ending balance$10,420

Land account:

Land account
Beginning balance$7,400
Ending balance$7,400

Building account:

Building account
Beginning balance$25,300
Ending balance$25,300

Accounts payable account:

Accounts payable account
Beginning balance$9,600
(g)$2,300(e)$400
Ending balance$7,700

Unearned revenue account:

Unearned revenue account
Beginning balance$3,840
(b)$600
Ending balance$4,440

Long-term note payable account:

Long-term note payable account
Beginning balance$48,500
Ending balance$48,500

Common stock account:

Common stock account
Beginning balance$1,600
(h)$100
Ending balance$1,700

Additional paid-in capital account:

Additional paid-in capital account
Beginning balance$7,000
(h)$820
Ending balance$7,820

Retained earnings account:

Retained earnings account
Beginning balance$11,560
(j)$2,200
Ending balance$9,360

Rebuilding fees revenue account:

Rebuilding fees revenue account
Beginning balance0
(a)$19,000
Ending balance$19,00

Rent revenue account:

Rent revenue account
Beginning balance0
(c)$850
Ending balance$850

Wages expense account:

Wages expense account
Beginning balance0
(i)$16,500
Ending balance$16,500

Utilities expense account:

Utilities expense account
Beginning balance0
(e)$400
Ending balance$400

Thus, the t-accounts are prepared and the ending balances are calculated.

3.

To determine

Determine the amount for the given equations at the end of the January.

3.

Expert Solution
Check Mark

Answer to Problem 10E

For the equationRevenuesExpenses=Net income:

RevenueExpenses=Net income$19,850$16,900=$2950

For the equationAssets=Liabilities+Stockholders' equity:

Assets=Liabilities+Stockholders' equity$82,470=$60,640+$21,830

Explanation of Solution

Accrual basis of accounting:

Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged.

Working note:

Calculate the revenues:

Revenues=Rebuilding fees revenue+Rent from revenue=$19,000+$850=$19,850 (1)

Calculate the expenses:

Expenses=Wages expenses+Utilities expenses=$16,500+$400=$16,900 (2)

Calculate the net income:

ParticularsAmount($)Amount ($)
Revenues(1)19,850
Less: Expenses(2)16,900
Net income$2,950

Table (1)

Accounting equation:

Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Stockholders' Equity

Calculate the amount for the accounting equation:

Assets=Liabilities+Stockholders’ Equity
$12,090$7,700$1,700
$24,800$4,440$7,820
$2,460$48,500$9,360
$10,420$2,950
$7,400
$25,300
$82,470=$60,640+$21,830

Table (2)

4.

To determine

Calculate the net income under cash basis of accounting and explain the reason in which manner the net income differ from accrual basis of accounting.

4.

Expert Solution
Check Mark

Answer to Problem 10E

Net income of Company SPR under cash basis of accounting is $7,890.

Explanation of Solution

Cash basis of accounting:

Cash basis of accounting refers to the recognition of financial transactions only when the cash is received or paid.

Calculate the net income under cash basis accounting:

ParticularsAmount($)Amount ($)
Cash receipts(3) 27,650
Less: Cash payments(4) 19,760
Net income$7,890

Table (3)

Calculate the cash receipts:

Cash receipts=(Rebuilding fees revenue)+(Deposits received)+(Rent revenue)+(Accounts receivable)=$19,000+$600+$850+$7,200=$27,650 (3)

Calculate the cash payments:

Cash payments=Accounts payable+Wages expenses+Payments for supplies=$2,300+$16,500+$960=$19,760 (4)

  • According to the cash basis of accounting, the net income is higher than the accrual basis of accounting.
  • The recording of the expenses and revenues differ from the accrual basis of accounting.
  • Hence, the net income is different for the accrual basis of accounting and cash basis of accounting.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 3 Solutions

FINANCIAL ACCOUNTING (LOOSELEAF)

Ch. 3 - 10. Complete the following matrix by entering...Ch. 3 - Prob. 12QCh. 3 - 13. State the equation for the net profit margin...Ch. 3 - 1. Which of the following is not a specific...Ch. 3 - 2. Which of the following is not one of the...Ch. 3 - 3. The expense recognition principle...Ch. 3 - Prob. 4MCQCh. 3 - Prob. 5MCQCh. 3 - During 2019, CliffCo Inc. incurred operating...Ch. 3 - 7. Which of the following is the entry to be...Ch. 3 - 8. You have observed that the net profit margin...Ch. 3 - Prob. 9MCQCh. 3 - 10. This period a company collects SI00 cash on an...Ch. 3 - Prob. 1MECh. 3 - Reporting Cash Basis versus Accrual Basis...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following transactions are July activities of...Ch. 3 - The following data are from annual reports of...Ch. 3 - Prob. 11MECh. 3 - Matching Definitions with Terms Match each...Ch. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Amazon.com, Inc., headquartered in Seattle, WA,...Ch. 3 - Wolverine World Wide, Inc., manufactures military,...Ch. 3 - Sysco Corporation, formed in 1969, is the largest...Ch. 3 - Vail Resorts, Inc., owns and operates 11 premier...Ch. 3 - Recording Journal Entries Blaine Air Transport...Ch. 3 - Prob. 10ECh. 3 - Stacey’s Piano Rebuilding Company has been...Ch. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 3 - Kate’s Kite Company (a corporation) sells and...Ch. 3 - Prob. 18ECh. 3 - Prob. 19ECh. 3 - Prob. 20ECh. 3 - The following is a list of accounts for Sanjeev...Ch. 3 - Ryan Terlecki organized a new Internet company,...Ch. 3 - According to its annual report, The Wendy’s...Ch. 3 - Prob. 4PCh. 3 - Kaylee James, a connoisseur of fine chocolate,...Ch. 3 - Prob. 6PCh. 3 - Cedar Fair, L.P. (Limited Partnership), is one of...Ch. 3 - The following is a series of accounts for Kruger &...Ch. 3 - Jimmy Langenberger is the president of TemPro,...Ch. 3 - Barnes & Noble is the nation’s largest bookseller...Ch. 3 - Alpine Stables, Inc., is established in Denver,...Ch. 3 - Alpine Stables, Inc., is established in Denver,...Ch. 3 - Prob. 6APCh. 3 - Penny’s Pool Service & Supply, Inc. (PPSS), had...Ch. 3 - Prob. 1CPCh. 3 - Refer to the financial statements of Express, Inc....Ch. 3 - Refer to the financial statements of American...Ch. 3 - Prob. 4CPCh. 3 - Prob. 5CPCh. 3 - Prob. 6CP
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
The ACCOUNTING EQUATION For BEGINNERS; Author: Accounting Stuff;https://www.youtube.com/watch?v=56xscQ4viWE;License: Standard Youtube License