Financial Accounting Connect Access Card
Financial Accounting Connect Access Card
5th Edition
ISBN: 9781260159622
Author: J. David Spiceland
Publisher: Mcgraw-Hill
Question
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Chapter 3, Problem 9PA

1.

To determine

Prepare the T-accounts and enter the beginning balance from the trial balance.

1.

Expert Solution
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Explanation of Solution

T-account:

T-account refers to an individual account, where the increasesor decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.

This account is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.’ An account consists of the three main components which are as follows:

  1. (a) The title of the account
  2. (b) The left or debit side
  3. (c) The right or credit side

The T-accounts of given item in trial balance are as follows:

Cash
$24,600
Bal.$20,000
Accounts payable
$6,700
Bal.$6,700
Common stock
$143,000
Bal.$143,000

Accounts receivables

$15,400
Bal.$15,400
Prepaid Insurance
$12,000
Bal.$12,000
Deferred revenue
$5,800
Bal.$5,800
Land
148,000 
Bal.148,000 
Retained earnings
$44,500
Bal.$44,500

2.

To determine

Record the journal entries for given transactions.

2.

Expert Solution
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Explanation of Solution

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

The journal entries for given transactions of Company Z are as follows:

DateAccount Title and ExplanationDebit($)Credit($)
2021Accounts receivable52,200 
January 9Cash134,100 
 Service revenue 186,300
 (To record the recognized service revenue on account and cash)  
 
2021Cash51,500 
February,  12Accounts receivable 51,500
 (To record cash collection from customer)  
 
2021Cash12,900 
April 25Deferred revenue 12,900
 (To record the cash received in advance from customers)  
 
2021Supplies9,200 
May 6Accounts payable 9,200
 (To record the purchase of supplies on account)  
 
2021Property tax expense8,500 
July 15Cash 8,500
 (To record the payment of repairs and maintenance expense)  
 
2021Accounts payable11,400 
September 10Cash 11,400
 (To record the payables on account )  
 
2021Salaries expense123,600 
October 31    Cash 123,600
 (To record the payment of salaries for the current year)  
 
2021Cash27,000 
November 20    Common stock 27,000
 (To record the payment of issuing shares of common stock)  
 
2021Dividends2,800 
December 30    Cash 2,800
 (To record the payment of dividends)  

Table (1)

3.

To determine

Post the transactions to T-accounts.

3.

Expert Solution
Check Mark

Explanation of Solution

T-account:

T-account refers to an individual account, where the increasesor decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.

This account is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.’ An account consists of the three main components which are as follows:

  1. (a) The title of the account
  2. (b) The left or debit side
  3. (c) The right or credit side

T-accounts of above transactions are as follows:

Cash
$24,600$8,500
$134,100$11,400
$51,500$123,600
$12,900$2,800
$27,000
Bal.$103,800
Supplies
$0
 $9,200
$9,200
Deferred revenue
$5,800
$12,900
$18,700
Dividends
$0
$2,800
$2,800

Salaries expense

       $0
$123,600
Bal.$123,600
Accounts receivable
$15,400
$52,200$51,500
Bal.$16,100
Land
$148,000
Bal.$148,000
Common stock
$143,000
$27,000
Bal.$170,000
Service revenue
$0
Bal.$186,300
Insurance expense
 $0  
    
 $0  
Prepaid Insurance
 $12,000  
    
 $12,000  
Accounts payable
   $6,700
 $11,400 $9,200
   $4,500
Retained earnings
   44,500
  Bal.$44,500
Property Tax Expense
 $0  
 $8,500  
Supplies expense
 $0  
 $0  

4.

To determine

Prepare the unadjusted trial balance of Company Z.

4.

Expert Solution
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Explanation of Solution

Unadjusted trial balance:

The unadjusted trial balance is the summary of all the ledger accounts before making adjusting journal entries at the end of the period.

Company Z
Unadjusted Trial Balance
December 31, 2021
AccountsDebitCredit
Cash$103,800
Accounts Receivable16,100
Prepaid Insurance12,000
Supplies9,200
Land148,000
Accounts Payable4,500
Deferred Revenue18,700
Common stock170,000
Retained earnings44,500
Dividends2,800
Service Revenue186,300
    Property Tax expense8,500
Salaries expense123,600
Insurance expense0
Supplies Expense0 
Totals$424,000$424,000

Table (2)

Therefore, the total of debit, and credit columns of unadjusted trial balance is $424,000 and agree.

5.

To determine

Record the given adjusting entries of Company Z.

5.

Expert Solution
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Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Adjusting entries of Company R are as follows:

Accrued salaries:

DateAccounts title and explanationPost Ref.Debit ($)Credit ($)
December 31, 2021Deferred Revenue11,800
Service revenue11,800
(To record the salaries expense incurred at the end of the accounting year)

Table (3)

Following is the rule of debit and credit of above transaction:

  • Deferred revenue is a liability, and it decreases the value of stockholder’s equity. Therefore, it is debited.
  • Service revenue is a component of stockholders’ equity. There is an Increase in stockholders’ equity, therefore it is credited.

Depreciation expense:

DateAccounts title and explanationPost Ref.Debit ($)Credit ($)
December 31, 2021Insurance Expense7,000
Prepaid Insurance7,000
(To record the amount of Reduced prepaid insurance due to passage of time)

Table (4)

Following is the rule of debit and credit of above transaction:

  • Insurance expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
  • Prepaid Insurance is a contra-asset account. There is a decrease in assets, therefore it is credited.

Office supplies expense:

DateAccounts title and explanationPost Ref.Debit ($)Credit ($)
December 31, 2021Suppliesexpense6,300
Supplies6,300
(To record the supplies expense incurred at the end of the accounting year)

Table (5)

Working Note:

Calculate the supplies expense.

Supplies expense = {Supplies at beginning of the year+Supplies purchased – Supplies on hand at the end of first year}=$+$9,200–$2,900=$6,300

Following is the rule of debit and credit of above transaction:

  • Supplies expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
  • Supplies are an asset account. There is a decrease in assets, therefore it is credited.

6.

To determine

Post the adjusting entries to appropriate T-accounts.

6.

Expert Solution
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Explanation of Solution

Cash
$24,600$8,500
$134,100$11,400
$51,500$123,600
$12,900$2,800
$27,000
Bal.$103,800
Supplies
$0
 $9,200$6,300
$2,900
Deferred revenue
$5,800
11,800$12,900
$6,900
Dividends
    $0
$2,800
$2,800
Salaries expense
       $0
$123,600
$123,600
Accounts receivable
$15,400
$52,200$51,500
Bal.$16,100
Land
Jan. 1$148,000
Bal.$148,000
Common stock
$143,300
Bal.$27,000
Total$170,000
Service revenue
$0
Bal.$186,300
$11,800
Total$198,100
Insurance expense
Jan. 1$0
$7,000
Total$7,000
Prepaid Insurance
$12,000
$7,000
$5,000
Accounts payable
$6,700
$11,400$9,200
$4,500
Retained earnings
44,500
Bal.$44,500
Property Tax Expense
$0
$8,500
Supplies expense

$0

$6,300

Bal.$6,300

7.

To determine

Prepare the adjusted trial balance of Company Z.

7.

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.

Adjusted trial balance of Company R is as follows:

Company Z
Adjusted Trial Balance
December 31, 2021
AccountsDebitCredit
Cash103,800
Accounts Receivable16,100
Prepaid insurance5,000
Supplies2,900
Land148,000
Accounts payable4,500
    Deferred revenue6,900
Common stock170,000
Retained earnings44,500
Dividends2,800
Service revenue198,100
Property tax expense8,500
Salaries expense123,600
Insurance expense7,000
Supplies expense6,300 
Totals$424,000$424,000

Table (6)

Therefore, the total of debit, and credit columns of adjusted trial balance is $424,000 and agree.

8.

To determine

Prepare an income statement for 2021 and classified balance sheet as on December 31, 2021.

8.

Expert Solution
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Explanation of Solution

Income statement:

This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.

Classified balance sheet:

This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

Income statement:

Income statement of Company Z is as follows:

Company Z
 Income statement
 For the year ended December 31, 2021
  $ $
 Service revenue (A)$198,100
 Expenses:
Property tax8,500
Salaries123,600
 Insurance7,000
 Supplies6,300
 Total expense (B)145,400
 Net income (AB)52,700

Table (7)

Therefore, the net income of Company Z is $52,700.

Classified balance sheet:

Classified balance sheet of Company Z is as follows:

Financial Accounting Connect Access Card, Chapter 3, Problem 9PA

Figure (1)

Therefore, the total assets of Company Z are$275,800, and the total liabilities and stockholders’ equity are $275,800.

Working note:

Calculation of ending balance retained earnings

Retained earnings = (Beginning retained earnings + Net income Dividends)=$44,500+$52,700$2,800=$94,400

9.

To determine

Record the necessary closing entries of Company R.

9.

Expert Solution
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Explanation of Solution

Closing entries:

Closing entries are those journal entries, which are passed to transfer the final balances of temporary accounts, (all revenues account, all expenses account and dividend) to the retained earnings. Closing entries produce a zero balance in each temporary account.

Closing entries of Company R is as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

2021Service revenue198,100
December 31Retained earnings198,100
(To close all revenue account)
2021Retained earnings145,400
December 31    Property tax expense8,500
    Salaries expense123,600
    Insurance expense7,000
    Supplies expense6,300
(To close all theexpenses account)
2021Retained earnings2,800
December 31    Dividends2,800
(To close the dividends account)

Table (8)

10.

To determine

Post the closing entries to the T-accounts.

10.

Expert Solution
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Explanation of Solution

Cash
$24,600$8,500
$134,100$11,400
$51,500$123,600
$12,900$2,800
$27,000
Bal.$103,800
Supplies
$0
 $9,200$6,300
$2,900
Deferred revenue
$5,800
11,800$12,900
$6,900
Dividends
    $0
$2,800$2,800
    $0
Salaries expense
       $0
$123,600$123,600
       $0
Accounts receivable
$15,400
$52,200$51,500
Bal.$16,100

Land

$148,000
Bal.$148,000
Common stock
$143,300
Bal.$27,000
Total$170,000
Service revenue
$0
Bal.$186,300
198,100$11,800
Total$0
Insurance expense
$0
$7,000$7,000
$0
Prepaid Insurance
$12,000
$7,000
$5,000
Accounts payable
$6,700
$11,400$9,200
$4,500
Retained Earnings

145,400

2,800

44,500

198,100

94,400
Property Tax Expense
$0
$8,500$8,500
$0
Supplies expense
$0
$6,300$6,300
$0

11.

To determine

Prepare a post-closing trial balance of Company Z.

11.

Expert Solution
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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.

Post-closing trial balance of Company R is as follows:

Company Z
Post-closing trial balance
December 31, 2021
AccountsDebit Amount($)

Credit

Amount($)

Cash$103,800 
Accounts Receivable16,100 
Prepaid Insurance5,000 
Supplies2,900 
Land148,000 
Accounts payable 4,500
    Deferred revenue 6,900
Common stock 170,000
Retained Earnings 94,400
Totals$275,800$275,800

Table (9)

Therefore, the total of debit, and credit columns of post-closing trial balance is $275,800 and agree.

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Chapter 3 Solutions

Financial Accounting Connect Access Card

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