Financial Accounting Fundamentals
Financial Accounting Fundamentals
6th Edition
ISBN: 9781259726910
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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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
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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 stock307 180,000
(To record the common stock in exchange for cash and building)   
    
July  2Rent expense6402,000 
Cash101 2,000
(To record  the rent expense)   
    
July  5Office supplies1242,400 
Cash101 2,400
(To record the office supplies)   
    
July  10Prepaid insurance1287,200 
Cash101 7,200
(To record the prepaid insurance)   
    
July  14Salaries expense6221,000 
Cash1011,000
(To record the salaries expense)   
    
July  28Cash1019,800 
Storage fees earned401 9,800
(To record the storage fees earned)   
    
July  29Repairs expense684950 
Cash101 950
(To record the repairs expense)   
    
July  30Telephone expense688400 
Cash101 400
(To record the telephone expense)   
    
July  31Dividends3192,000 
Cash101 2,000
(To record the payment of dividends)   

Table (1)

3.

To determine

Prepare the unadjusted trial balance as on July 31, 2017.

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, 2017.

Corporation SS
Unadjusted trial balance
For the year ended July 31, 2017
ParticularsDebit($)Credit ($)
Cash22,850
Accounts receivable0
Office supplies2,400
Prepaid insurance7,200
Building150,000
Accumulated depreciation, Building0
Salaries payable0
Common stock180,000
Retained earnings0
Dividends2,000
Storage fee earned9,800
Depreciation expense, Building0
Salaries expense2,000
Insurance expense0
Rent expense2,000
Office supplies expense0
Repairs expense950
Telephone expense400
Totals189,800189,800

Table (2)

4.

To determine

Prepare the adjusting entries as on 31st July 2017.

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 2017.

DateAccount titles and ExplanationPost Ref.Debit ($)Credit ($)
July  31Insurance expense (23×$7,200×12)637400 
Prepaid insurance128 400
(To record  the adjusting entry for insurance expense)   
    
July  31Office supplies expense ($2,400$1,525)650875 
Office supplies124 875
(To record the adjusting entry for office supplies expense)   
    
July  31Depreciation expense-Buildings6061,500 
Accumulated depreciation-Buildings174 1,500
(To record the adjusting entry for depreciation expense, Buildings)   
    
July  31Salaries expense622100 
Salaries payable209 100
(To record the adjusting entry for salaries expense)   
    
July  31Accounts receivable1061,150 
Storage fees earned401 1,150
(To record the adjusting entry for storage fees earned)   

Table (3)

5.

To determine

Prepare the adjusted trial balance as of 31st July 2017.

5.

Expert Solution
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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 2017.

Corporation SS
Adjusted trial balance
For the year ended July 31, 2017
ParticularsDebit($)Credit ($)
Cash22,850
Accounts receivable1,150
Office supplies1,525
Prepaid insurance6,800
Building150,000
Accumulated depreciation, Building1,500
Salaries payable100
Common stock180,000
Retained earnings0
Dividends2,000
Storage fee earned10,950
Depreciation expense, Building1,500
Salaries expense2,100
Insurance expense400
Rent expense2,000
Office supplies expense875
Repairs expense950
Telephone expense400
Totals192,550192,550

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 2017.

Corporation SS
Income statement
For the three months ended July 31, 2017
ParticularsAmount ($)Amount ($)
Revenues
Storage fee earned10,950
Total revenue10,950
Expenses
Depreciation expense, Buildings1,500
Salaries expense2,100
Insurance expense400
Rent expense2,000
Office supplies expense875
Repairs expense950
Telephone expense400
Total Expenses8,225
Net income2,725

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 2017.

Corporation SS
Statement of Retained Earnings
For the three months ended 31st July 2017
ParticularsAmount ($)Amount ($)
Retained earnings, Beginning0
Add: Net income2,725
Subtotal2,725
Less: Dividends2,000
Retained earnings, Ending725

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 2017.

Corporation SS
Balance Sheet
As an July 31, 2017
ParticularsAmount($)Amount($)
ASSETS
Current Assets:
Cash22,850
Accounts receivable1,150
Office Supplies1,525
Prepaid insurance6,800
Total Current Assets32,325
Buildings150,000
Less: Accumulated depreciation, Buildings1,500148,500
Total assets180,825
LIABILITIES
Current Liabilities:
Salaries payable100
Total current liabilities100
Long-liabilities:0
Total liabilities100
Stockholders’ equity
Paid-in capital
Common stock180,000
Retained earnings725
Total Stockholders’ Equity180,725
Total liabilities and Stockholders’ Equity180,825

Table (7)

6.

To determine

Record and post the necessary closing entries as of 31st July 2017.

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 summary90110,950
(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 summary9018,2250
Depreciation expense-Buildings6061,500
Salaries expense6222,100
Insurance expense637400
Rent expense6402,000
Office supplies expense650875
Repairs expense684950
Telephone expense688400
(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 Earnings3082,725
(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
Dividends2,000
(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 2017.

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 2017.

Corporation SS
Adjusted trial balance
For the year ended July 31, 2017
ParticularsDebit($)Credit ($)
Cash22,850
Accounts receivable1,150
Office supplies1,525
Prepaid insurance6,800
Buildings150,000
Accumulated depreciation, Buildings1,500
Salaries payable100
Common stock180,000
Retained earnings725
Totals182,325182,325

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. 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. 28QSCh. 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 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 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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