Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3SP

Requirement 1:

To determine

To prepare:

We have to prepare journal entries to record December month transactions and have to post the entries in ledger accounts.

Requirement 1:

Expert Solution
Check Mark

Answer to Problem 3SP

Solution:

Solution:

    Date Journal titlesDebit($)Credit($)
    dec.2Advertising expense

    1,025



    Cash



    1,025

    ( to record advertisment expenses- cash payment made)











    dec 3

    Computer repair expenses

    500





    Cash



    500



    ( to record cash payment made for computer expenses)













    dec.4

    Cash

    3,950





    Accounts receivable



    3,950



    ( to record cash receipt from Alex)













    dec 10

    Wages expense

    750





    Cash



    750



    ( to record wages paid in cash for six days)













    Dec 14

    Cash

    1,500





    Unearned service revenue



    1,500



    (to record advance receipt from alex)













    dec.15

    Computer supplies

    1,100





    Accounts payable



    1,100



    (to record expenses of computer supplies purchased)













    dec.20

    Accounts receivable

    5,625





    Computer service revenue



    5,625



    ( Due amount from Liu corporation recorded)













    dec.20

    Cash

    5,625





    Accounts receivable



    5,625



    ( Cash received from Liu corporation)













    dec.28

    Cash

    3,000





    Accounts receivable



    3,000



    ( Cash received from Gomez co.)













    Dec 29

    Mileage expenses

    192





    Cash



    192



    (To reimburse S.rey for automobile expenses)













    Dec 31

    Dividends

    1,500





    Cash



    1,500



    (Cash dividend paid recorded)













    Cash

    Bal.

    38,264

    Dec,2

    1,025

    Dec,4

    3,950

    Dec, 3

    500

    Dec, 14

    1,500

    Dec, 10

    750

    Dec, 20

    5,625

    Dec, 29

    192

    Dec, 20

    3,000

    Dec, 29

    1,500

    Balance Dec, 3148,372





















    Accounts receivable

    Bal.

    12,618

    Dec,4

    3,950

    Dec, 20

    5,625

    Dec, 20

    5,625

    Balance Dec, 315,668

    Dec, 20

    3,000

    Computer supplies

    Bal.

    2,545





    Dec, 15

    1,100





    Balance Dec, 31

    3,645





    Prepaid Insurance

    Bal.

    2,220





    Balance Dec, 312,220













    Prepaid rent

    Bal.

    3,300





    Balance Dec, 313,300













    Office equipment

    Bal.

    8,000





    Balance Dec, 318,000













    Accumulated depreciation- office equipment





    Bal.

    0





    Balance Dec, 310









    Computer equipment

    Bal.

    20,000





    Balance Dec, 3120,000













    Accumulated depreciation- Computer equipment





    Bal.

    0





    Balance Dec, 310









    Accounts payable





    Bal.

    0





    Dec, 15

    1,100





    Balance Dec, 31

    1,100

    Wages payable





    Bal.

    0





    Balance Dec, 310









    Unearned Computer service revenue





    Bal.

    0





    Dec, 14

    1,500





    Balance Dec, 311,500

    S.Rey Capital





    Bal.

    73,000





    Balance Dec, 3173,000









    S.Rey Withdrawal

    Bal.

    5,600





    Dec, 29

    1,500





    Balance Dec, 317,100





    Computer service revenue





    Bal.

    25,659





    Dec, 20

    5,625





    Balance Dec, 3131,284

    Depreciation expense- Office equipment

    Bal.

    0





    Balance Dec, 310













    Depreciation expense- Computer equipment

    Bal.

    0





    Balance Dec, 310













    Wages expense

    Bal.

    2,625





    Dec, 10

    750





    Balance Dec, 313,375





    Insurance expense

    Bal.

    0





    Balance Dec, 310













    Rent expense

    Bal.

    0





    Balance Dec, 310













    Computer supplies expense

    Bal.

    0













    Balance Dec, 310





    Advertising expense

    Bal.

    1,728





    Dec 2

    1,025





    Balance Dec, 312,753





    Mileage expenses

    Bal.

    704





    Dec, 29

    192





    Balance Dec, 31896





    Miscellaneous expenses

    Bal.

    250





    Balance Dec, 31250













    Repair expenses − computer

    Bal.

    805





    Dec ,3

    500





    Balance Dec, 311,305





Explanation of Solution

Explanation:

Dec, 2 − We paid to Hillside mall $1,025 for advertisement expenses. In this case, advertisement expenses will be debited and cash account will be credited.

Dec, 3 − In this case, computer repair expenses will be debited and cash account will be debited by $500.

Dec, 4 − In case of receipt from customers, Cash account will be debited and accounts receivable account will be credited

Dec, 10 − The wages has been calculated as below: 125 per day*6 days = $750

Dec, 14 − there will be no entry for bidding. For advance paid for projects cash account will be debited and unearned service revenue will be credited by $1,500.

Dec, 15 − In case of credit supplies, computer supplies will be debited and trade payable account will be credited by $1,100.

Dec, 16 − There will be no entry for reminders sent for the payment.

Dec, 20- In this case, firstly computer service revenue will be credited and cash account will be debited on realization basis.

Dec22-26 − There is no entry for weekly off holidays.

Dec, 28 − In case of receipt from customers, Cash account will be debited and accounts receivable account will be credited. In this case, cash will be debited by $3,000.

Dec, 29 − The reimbursement amount will be calculated as below: 600miles * 0.32 miles = $192.

Dec, 31 − In case of withdrawal, $1,500 withdrawal account will be debited and cash account will be credited by $1,500.

Requirement-2:

To determine

To prepare:

We have to prepare adjustment journal entries at year end “a to f ” and have to post journal entries to ledger accounts.

Requirement-2:

Expert Solution
Check Mark

Answer to Problem 3SP

Solution:

    Date Journal titlesDebit($)Credit($)
    a.dec.31Computer supplies expenses

    3,065



    Computer supplies



    3,065

    ( to record computer supplies expenses)











    b.dec 31

    Insurance expenses

    555





    Prepaid insurance



    555



    ( to record insurance expenses)













    c. dec31

    Wages expenses

    500





    Wages payable



    500



    ( to accrue wages expenses)













    d. dec.31

    Depreciation on computer equipment

    1,250





    Accumulated depreciation-computer equipment



    1,250



    ( to record depreciation on computer equipment)













    e. dec 31

    Depreciation on office equipment

    400





    Accumulated depreciation-office equipment



    400



    ( to record depreciation on office equipment)













    f. Dec 31

    Rent expenses

    2,475





    Prepaid rent



    2,475



    (to record rent expenses)





    Cash

    Bal.

    38,264

    Dec,2

    1,025

    Dec,4

    3,950

    Dec, 3

    500

    Dec, 14

    1,500

    Dec, 10

    750

    Dec, 20

    5,625

    Dec, 29

    192

    Dec, 20

    3,000

    Dec, 29

    1,500

    Balance Dec, 3148,372





















    Accounts receivable

    Bal.

    12,618

    Dec,4

    3,950

    Dec, 20

    5,625

    Dec, 20

    5,625

    Balance Dec, 315,668

    Dec, 20

    3,000

    Computer supplies

    Bal.

    2,545

    a.

    3,065

    Dec, 15

    1,100





    Balance Dec, 31

    580





    Prepaid Insurance

    Bal.

    2,220

    b.

    555

    Balance Dec, 311,665













    Prepaid rent

    Bal.

    3,300

    f.

    2,475

    Balance Dec, 31 825













    Office equipment

    Bal.

    8,000





    Balance Dec, 318,000













    Accumulated depreciation- office equipment





    Bal.

    0





    e.400





    Balance Dec, 31400









    Computer equipment

    Bal.

    20,000





    Balance Dec, 3120,000













    Accumulated depreciation- Computer equipment





    Bal.

    0





    d.1,250





    Balance Dec, 311,250









    Accounts payable





    Bal.

    0





    Dec, 15

    1,100





    Balance Dec, 31

    1,100

    Wages payable





    Bal.

    0





    c.500





    Balance Dec, 31500









    Unearned Computer service revenue





    Bal.

    0





    Dec, 14

    1,500





    Balance Dec, 311,500

    S.Rey Capital





    Bal.

    73,000





    Balance Dec, 3173,000









    S.Rey Withdrawal

    Bal.

    5,600





    Dec, 29

    1,500





    Balance Dec, 317,100





    Computer service revenue





    Bal.

    25,659





    Dec, 20

    5,625





    Balance Dec, 3131,284

    Depreciation expense- Office equipment

    Bal.

    0





    e.400





    Balance Dec, 31400













    Depreciation expense- Computer equipment

    Bal.

    0





    d.1,250





    Balance Dec, 311,250













    Wages expense

    Bal.

    2,625





    Dec, 10

    750





    c.500





    Balance Dec, 313,875





    Insurance expense

    Bal.

    0





    b.555





    Balance Dec, 31555













    Rent expense

    Bal.

    0





    f.2,475





    Balance Dec, 312,475













    Computer supplies expense

    Bal.

    0





    a.

    3,065





    Balance Dec, 313,065





    Advertising expense

    Bal.

    1,728





    Dec 2

    1,025





    Balance Dec, 312,753





    Mileage expenses

    Bal.

    704





    Dec, 29

    192





    Balance Dec, 31896





    Miscellaneous expenses

    Bal.

    250





    Balance Dec, 31250













    Repair expenses − computer

    Bal.

    805





    Dec ,3

    500





    Balance Dec, 311,305





Explanation of Solution

Explanation:

  1. In this case, the balance of computer supplies is $3,645 in unadjusted trial balance and in adjustment the actual balance is $580. The computer supplies expenses will be calculated as below:
  2. Computer supply expenses = Unadjusted balance- actual balance 

    Computer supply expenses = $3,645 - $580 = $3,065

  3. In this case, the period of Insurance policies of 3 months has been expired and insurance expenses will be booked so, insurance expenses will be debited and prepaid insurance will be credited by $555 as per below details:
  4. Insurance expenses =  fee per month &*#x00A0;no. of months till dec 31/ 12

    Insurance expenses =  $2,220*3/12 = $555

  5. In this adjustment entry expenditures on wages account will be debited and wages payable account will be credited with their respective amount.
  6. Calculation of salary expenses:

      Particulars

      Amount($)

      wages expense for 1 day per employee

      125

      Wages expense for 1 employees for 4 days (125*1 employee*4 days)

      500

  7. When depreciation is to be recorded then depreciation on computer equipment will be debited with the respective account and accumulated depreciation account will be credited. The depreciation will be calculated as below:
  8. Depreciation on computer equipment =

     total purchase cost_ salvage value_ &*#x00A0;No. of monthNo. of years useful life &*#x00A0;12

    Depreciation on computer equipment = (20000_0_*3 months_        (4 years&*#x00A0;12)

    Depreciation on computer equipment =$1,250

    1. When depreciation is to be recorded then depreciation on office equipment will be debited with the respective account and accumulated depreciation account will be credited. The depreciation will be calculated as below:

    Depreciation on office equipment =

     total purchase cost_ salvage value_ &*#x00A0;No. of monthNo. of years useful life &*#x00A0;12

    Depreciation on office equipment = (8,000_0_*3 months_        (5 years&*#x00A0;12)

    Depreciation on office equipment =$400

  9. In this case, rent expenses will be debited and prepaid rent account will be credited. The rent expenses will be calculated as below:
  10. Rent expenses =  total prepaid &*#x00A0;no. of months till dec / 4 months

    Rent expenses =  $3,300*3/4= $2,475

Requirement 3:

To determine

To prepare:

We have to prepare the updated trial balance after all adjustments as on December 31.

Requirement 3:

Expert Solution
Check Mark

Answer to Problem 3SP

Solution:

Adjusted trial balance- December 31, 2015

    ParticularsDebitCredit
    Cash

    48,372



    Accounts receivable

    5,668



    Computer supplies

    580



    Prepaid insurance

    1,665



    Prepaid rent

    825



    Office equipment

    8,000



    Accumulated depreciation- Office equipment



    400

    Computer Equipment

    20,000



    Accumulated depreciation- Computer equipment



    1,250

    Accounts payable



    1,100

    Wages payable



    500

    Unearned computer service revenue



    1,500

    S.Rey, Capital



    73,000

    S.Rey, Withdrawal

    7,100



    Computer service revenue



    31,284

    Depreciation expense- office equipment

    400



    Depreciation expense- Computer equipment

    1,250



    Wages expenses

    3,875



    Insurance expenses

    555



    Rent expenses

    2,475



    Computer supplies expenses

    3,065



    Advertising expenses

    2,753



    Mileage expenses

    896



    Miscellaneous expenses

    250



    Repair expenses- computer

    1,305



    Total109,034109,034

Explanation of Solution

Explanation:

  1. Cash account- the balance of cash is given in unadjusted trial balance and all adjustment related to cash account has shown in above accounts. Thus the adjusted balance of cash will be $48,372.
  2. Accounts receivable − accrued revenue ** cash receipts has been adjusted and adjusted balance of accounts receivable will be $5,668 after all adjustments.
  3. The adjusted closing balance in computer supplies after supplies expenses will be $580.
  4. Prepaid Insurance: the balance of prepaid insurance after adjustment is $1,665.
  5. Prepaid rent: the prepaid rent for 3 months has booked as an expenses and adjusted balance in prepaid rent expenses is $825.
  6. The balance in Office equipment will remain same as there is no adjustment.
  7. Accumulated depreciation: depreciation on office equipment has been charged $400 and the adjusted closing balance is $400.
  8. The balance in computer equipment will remain same as there is no adjustment.
  9. Accumulated depreciation on computer equipment has been charged $1,250 and the adjusted closing balance is $1,250.
  10. Accounts payable- the balance of accounts payable is $1,100 after adjustment.
  11. Wages payable- adjustment of $500 is recorded therefore its balance will be $500.
  12. Unearned computer service revenue: The adjustment of $1,500 has been made and the adjusted balance is 1,500.
  13. S.rey, Capital: There is no adjustment and balance will remain same.
  14. S.Rey, Withdrawal: There dividend paid of $1,500 has been adjusted in withdrawal account and the balance after adjustment is $7,100.
  15. Computer service revenue: accrued revenue has been adjusted $5,625 and adjusted balance will be $31,284.
  16. Accumulated depreciation on Office equipment has been charged $400 and the adjusted closing balance is $400.
  17. Depreciation on computer equipment has been charged $1,250 and the adjusted closing balance is $1,250.
  18. Wages expenses- adjustment of $750 and $500 is recorded therefore its balance will be $3,875.
  19. Insurance expenses- adjustment of $555 is recorded therefore its balance will be $555.
  20. Rent expenses- adjustment of $2,475 is recorded therefore its balance will be $2,475.
  21. Computer supplies expenses- adjustment of $3,065 is recorded therefore its balance will be $3,065.
  22. Advertising expenses-The balance after adjustment is $2,753.
  23. Mileage expenses-The balance after adjustment is $896.
  24. Miscellaneous expenses- there is no adjustment and balance will remain same.
  25. Repair expenses computer-The balance after adjustment is $1,305.

Requirement 4:

To determine

To prepare:

We have to prepare Income statement after all adjustments and adjusted trial balance for the period ended December 31, 2015.

Requirement 4:

Expert Solution
Check Mark

Answer to Problem 3SP

Solution:

Income statement for December 31, 2015

    Particulars
    Computer service revenue

    31,284



    Total revenue



    31,284

    Expenses



    Depreciation expense- office equipment

    400



    Depreciation expense- Computer equipment

    1,250



    Wages expenses

    3,875



    Insurance expenses

    555



    Rent expenses

    2,475



    Computer supplies expenses

    3,065



    Advertising expenses

    2,753



    Mileage expenses

    896



    Miscellaneous expenses

    250



    Repair expenses- computer

    1,305



    Total expenses



    16,824

    Net income14,460

Explanation of Solution

Explanation:

  1. Income statement: Total revenue is $31,284 and total expenses are $16,824 and the net income is $14,460 calculated as below:
  2. Net income = Total revenue - total expenses

    Net income = 31,284-16,824 = $14,460

Requirement-5:

To determine

To prepare:

We have to prepare Statement of Owner’s equity after all adjustments and adjusted trial balance for the period ended December 31, 2015.

Requirement-5:

Expert Solution
Check Mark

Answer to Problem 3SP

Solution:

Statement of Owner’s equity for year ended December 31, 2015

    S.Rey Capital 73,000

    Add: Net income

    14,460

    Less: Withdrawal (net balance)

    7,100

    S.Rey capital as on December 31,201580,360

Explanation of Solution

Explanation:

Statement of Owners equity shows the total owner’s funds invested in the company. The net fund invested by owner is $80,360. Owner’s equity = Opening balance + net income - owner withdrawal

Owner’s equity = 73,000+14,4607,100=$80,360

    S.Rey Withdrawal

    Bal.

    5,600





    Dec, 29

    1,500





    Balance Dec, 317,100





Requirement-6:

To determine

To prepare:

We have to prepare balance sheet after Statement of Owner’s equity, income statement and after all adjustments and adjusted trial balance for the period ended December 31, 2015.

Balance sheet as on December 31, 2015

    Assets
    Cash



    48,372

    Accounts receivable



    5,668

    Computer supplies



    580

    Prepaid insurance



    1,665

    Prepaid rent



    825

    Office equipment

    8,000



    Less: Accumulated depreciation- Office equipment

    400

    7,600

    Computer Equipment

    20,000



    Less: Accumulated depreciation- Computer equipment

    1,250

    18,750

    Total assets83,460
    Liabilities



    Accounts payable



    1,100

    Wages payable



    500

    Unearned computer service revenue



    1,500

    Total liabilities3,100
    Equity

    S.Rey, capital

    80,360

    Total liability and equity83,460

Requirement-6:

Expert Solution
Check Mark

Explanation of Solution

Explanation:

Balance sheet represents the financial position of a company on a particular date.

The accounting equation of balance sheet is as below:

Total assets = total equity + total liabilities

$83,460 = $80,360 + $3,100$83,460= $83,460

Calculation of S.Rey equity:

    S.Rey Capital 73,000

    Add: Net income

    14,460

    Less: Withdrawal (net balance)

    7,100

    S.Rey capital as on December 31,201580,360

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