Financial Accounting Fundamentals:
Financial Accounting Fundamentals:
5th Edition
ISBN: 9780078025754
Author: John Wild
Publisher: McGraw-Hill/Irwin
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Chapter 3, Problem 6BP

2.

To determine

Prepare the journal entries to record the each of the transactions and events for Corporation SS.

2.

Expert Solution
Check Mark

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare the journal entries.

DateAccount titles and ExplanationPost Ref.Debit ($)Credit ($)
July  1Cash10130,000
Buildings173150,000
Common stock307180,000
(To record the common stock in exchange for cash and building)
July  2Rent expense6402,000
Cash1012,000
(To record  the rent expense)
July  5Office supplies1242,400
Cash1012,400
(To record the office supplies)
July  10Prepaid insurance1287,200
Cash1017,200
(To record the prepaid insurance)
July  14Salaries expense6221,000
Cash1011,000
(To record the salaries expense)
July  28Cash1019,800
Storage fees earned4019,800
(To record the storage fees earned)
July  29Repairs expense684950
Cash101950
(To record the repairs expense)
July  30Telephone expense688400
Cash101400
(To record the telephone expense)
July  31Dividends3192,000
Cash1012,000
(To record the payment of dividends)

Table (1)

3.

To determine

Prepare the unadjusted trial balance as on July 31, 2015.

3.

Expert Solution
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Explanation of Solution

Unadjusted trial balance:

The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.

Prepare the unadjusted trial balance as on July 31, 2015.

Corporation SS
Unadjusted trial balance
For the year ended July 31, 2015
ParticularsDebit($)Credit ($)
Cash22,850 
Accounts receivable0 
Office supplies2,400 
Prepaid insurance7,200 
Building150,000 
Accumulated depreciation, Building 0
Salaries payable 0
Common stock 180,000
Retained earnings 0
Dividends2,000 
Storage fee earned 9,800
Depreciation expense, Building0 
Salaries expense2,000 
Insurance expense0 
Rent expense2,000 
Office supplies expense0 
Repairs expense950 
Telephone expense400 
Totals$189,800$189,800

Table (2)

4.

To determine

Prepare the adjusting entries as on 31st July 2015.

4.

Expert Solution
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Explanation of Solution

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Prepare the adjusting entries as on 31st July 2015.

DateAccount titles and ExplanationPost Ref.Debit ($)Credit ($)
July  31Insurance expense (23×$7,200×12)637400
Prepaid insurance128400
(To record  the adjusting entry for insurance expense)
July  31Office supplies expense ($2,400$1,525)650875
Office supplies124875
(To record the adjusting entry for office supplies expense)
July  31Depreciation expense-Buildings6061,500
Accumulated depreciation-Buildings1741,500
(To record the adjusting entry for depreciation expense, Buildings)
July  31Salaries expense622100
Salaries payable209100
(To record the adjusting entry for salaries expense)
July  31Accounts receivable1061,150
Storage fees earned4011,150
(To record the adjusting entry for storage fees earned)

Table (3)

5.

To determine

Prepare the adjusted trial balance as of 31st July 2015.

5.

Expert Solution
Check Mark

Explanation of Solution

Adjusted trial balance:

Adjusted trial balance is a summary of all the ledger accounts, and it contains the balances of all the accounts after the adjustment entries are journalized, and posted.

Prepare the adjusted trial balance as of 31st July 2015.

Corporation SS
Adjusted trial balance
For the year ended July 31, 2015
ParticularsDebit($)Credit ($)
Cash22,850 
Accounts receivable1,150 
Office supplies1,525 
Prepaid insurance6,800 
Building150,000 
Accumulated depreciation, Building 1,500
Salaries payable 100
Common stock 180,000
Retained earnings 0
Dividends2,000 
Storage fee earned 10,950
Depreciation expense, Building1,500 
Salaries expense2,100 
Insurance expense400 
Rent expense2,000 
Office supplies expense875 
Repairs expense950 
Telephone expense400 
Totals$192,550$192,550

Table (4)

Income statement:

Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.

Prepare the income statement for the year ended 31st July 2015.

Corporation SS
Income statement
For the three months ended July 31, 2015
ParticularsAmount ($)Amount ($)
Revenues  
Storage fee earned10,950 
Total revenue 10,950
Expenses  
Depreciation expense, Buildings1,500 
Salaries expense2,100 
Insurance expense400 
Rent expense2,000 
Office supplies expense875 
Repairs expense950 
Telephone expense400 
Total Expenses8,225
Net income $2,725

Table (5)

Statement of Retained Earnings:

Statement of retained earnings shows, the changes in the retained earnings, and the income left in the company after payment of the dividends, for the accounting period.

Prepare the statement of retained earnings for the year ended 31st July 2015.

Corporation SS
Statement of Retained Earnings
For the three months ended 31st July 2015
ParticularsAmount ($)Amount ($)
Retained earnings, Beginning0 
Add: Net income2,725 
Subtotal2,725 
Less: Dividends2,000 
Retained earnings, Ending $725

Table (6)

Balance sheet:

This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare the balance sheet as on 31st July 2015.

Corporation SS
Balance Sheet
As an July 31, 2015
ParticularsAmount($)Amount($)
ASSETS  
Current Assets:  
Cash22,850 
Accounts receivable1,150 
Office Supplies1,525 
Prepaid insurance6,800 
Total Current Assets 32,325
Buildings150,000 
Less: Accumulated depreciation, Buildings1,500148,500
Total assets $180,825
  
LIABILITIES  
Current Liabilities:  
Salaries payable100 
Total current liabilities 100
Long-liabilities: 0
Total liabilities 100
Stockholders’ equity  
Paid-in capital  
Common stock180,000 
Retained earnings725 
Total Stockholders’ Equity180,725
Total liabilities and Stockholders’ Equity $180,825

Table (7)

6.

To determine

Record and post the necessary closing entries as of 31st July 2015.

6.

Expert Solution
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Explanation of Solution

Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Prepare the closing entry for revenue accounts.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

July 31Storage fees earned40110,950 
 Income summary901 10,950
 (To close the revenues account)   

Table (8)

In this closing entry, revenue accounts are closed by transferring the amount of revenue accounts to the income summary account in order to bring the revenue account balance to zero. Hence, debit the revenue accounts and credit income summary account.

Prepare the closing entry for expenses account.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

July 31Income summary9018,225 
 Depreciation expense-Buildings606 1,500
 Salaries expense622 2,100
 Insurance expense637 400
 Rent expense640 2,000
 Office supplies expense650 875
 Repairs expense684 950
 Telephone expense688 400
 (To close the expenses account)   

Table (9)

In this closing entry, expenses account is closed by transferring the amount of expenses to the income summary in order to bring the expenses account balance to zero. Hence, debit the income summary account and credit all expenses account.

Prepare closing entry for income summary account.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

July 31Income Summary9012,725 
 Retained Earnings308 2,725
 (To close the income summary account)   

Table (10)

Closing entry of income summary account:

In this closing entry, income summary account is closed by transferring the amount of income summary (profit) to the retained earnings in order to bring the income summary account balance to zero. Hence, debit the income summary account and credit retained earnings account.

Prepare closing entry for dividend account.


Date
Accounts title and explanationPost Ref.

Debit

($)

Credit

($)

July 31Retained Earnings3182,000 
 Dividends  2,000
 (To close the dividends account)   

Table (11)

In this closing entry, dividend account is closed by transferring the amount of dividend to the retained earnings in order to bring the dividend account balance to zero. Hence, debit the retained earnings account and credit dividend account.

7.

To determine

Prepare the post-closing trial balance as on 31st July 2015.

7.

Expert Solution
Check Mark

Explanation of Solution

Post-closing trial balance:

The post-closing trial balance is a summary of all ledger accounts, and it shows the debit and the credit balances after the closing entries are journalized and posted.  The post-closing trial balance contains only permanent (balance sheet) accounts, and the debit and the credit balances of permanent accounts should agree.

Prepare the post-closing trial balance as on 31st July 2015.

Corporation SS
Adjusted trial balance
For the year ended July 31, 2015
ParticularsDebit($)Credit ($)
Cash22,850 
Accounts receivable1,150 
Office supplies1,525 
Prepaid insurance6,800 
Buildings150,000 
Accumulated depreciation, Buildings 1,500
Salaries payable 100
Common stock 180,000
Retained earnings 725
Totals$182,325$182,325

Table (11)

1, 2, 4, and 6

To determine

Post the transactions to the general ledger.

1, 2, 4, and 6

Expert Solution
Check Mark

Explanation of Solution

Post the transactions to the general ledger.

Financial Accounting Fundamentals:, Chapter 3, Problem 6BP , additional homework tip  1

Financial Accounting Fundamentals:, Chapter 3, Problem 6BP , additional homework tip  2

Financial Accounting Fundamentals:, Chapter 3, Problem 6BP , additional homework tip  3

Financial Accounting Fundamentals:, Chapter 3, Problem 6BP , additional homework tip  4

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Chapter 3 Solutions

Financial Accounting Fundamentals:

Ch. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 9DQCh. 3 - Prob. 10DQCh. 3 - Prob. 11DQCh. 3 - Prob. 12DQCh. 3 - Prob. 13DQCh. 3 - Prob. 14DQCh. 3 - Prob. 15DQCh. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - Prob. 19DQCh. 3 - Prob. 20DQCh. 3 - Prob. 21DQCh. 3 - Prob. 22DQCh. 3 - Prob. 23DQCh. 3 - Prob. 24DQCh. 3 - Prob. 25DQCh. 3 - Prob. 26DQCh. 3 - Prob. 27DQCh. 3 - Prob. 28DQCh. 3 - Prob. 29DQCh. 3 - Prob. 1QSCh. 3 - Prob. 2QSCh. 3 - Prob. 3QSCh. 3 - Prob. 4QSCh. 3 - Prob. 5QSCh. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Prob. 12QSCh. 3 - Prob. 13QSCh. 3 - Prob. 14QSCh. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Prob. 17QSCh. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - QS 3-21 Preparing closing entries from the...Ch. 3 - Prob. 22QSCh. 3 - QS 3-23 Identifying the accounting cycle List the...Ch. 3 - Prob. 24QSCh. 3 - Prob. 25QSCh. 3 - Prob. 26QSCh. 3 - Prob. 27QSCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Exercise 3-8 Preparing closing entries Following...Ch. 3 - Exercise 3-7 Preparing financial statements Use...Ch. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Problem 3-7A Determining balance sheet...Ch. 3 - Prob. 8APCh. 3 - Prob. 1BPCh. 3 - Prob. 2BPCh. 3 - Prob. 3BPCh. 3 - Prob. 4BPCh. 3 - Prob. 5BPCh. 3 - Prob. 6BPCh. 3 - Prob. 7BPCh. 3 - Prob. 8BPCh. 3 - Prob. 3SPCh. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Prob. 3BTNCh. 3 - Prob. 4BTNCh. 3 - Prob. 5BTNCh. 3 - Prob. 7BTNCh. 3 - Prob. 9BTN
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