Self Study Solutions Chapter 3

SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 3-1
May 1 Cash 4,000

Common Stock 4,000
3 Equipment 1,100
Accounts Payable 1,100
13 Rent Expense 400

Cash 400
21 Accounts Receivable 500

Service Revenue 500
BRIEF EXERCISE 3-2
Aug. 2 Cash 12,000

Equipment 2,500
Owner’s Capital 14,500
7 Supplies 500
Accounts Payable 500
12 Cash 1,300
Accounts Receivable 670
Service Revenue 1,970
15 Rent Expense 600

Cash 600
19 Supplies Expense 230

Supplies ($500 – $270) 230
Copyright © 2011 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 14/e, Solutions Manual(For Instructor Use Only) 3-
BRIEF EXERCISE 3-3
July 1 Prepaid Insurance 15,000

Cash 15,000
Dec. 31 Insurance Expense 2,500

Prepaid Insurance
($15,000 X 1/2 X 1/3) 2,500
BRIEF EXERCISE 3-4
July 1 Cash 15,000

Unearned Service Revenue 15,000
Dec. 31 Unearned Service Revenue 3,000 2,500

Service Revenue
($15,000 X 1/2 X 1/3) 2,500
BRIEF EXERCISE 3-5
Feb. 1 Prepaid Insurance 720,000

Cash 720,000
June 30 Insurance Expense 150,000

Prepaid Insurance
($720,000 X 5/24) 150,000
BRIEF EXERCISE 3-6
Nov. 1 Cash 2,400

Unearned Rent Revenue 2,400
Dec. 31 Unearned Rent Revenue 1,600

Rent Revenue
($2,400 X 2/3) 1,600
BRIEF EXERCISE 3-7
Dec. 31 Salaries and Wages Expense 4,800

Salaries and Wages Payable
($8,000 X 3/5) 4,800
Jan. 2 Salaries and Wages Payable 4,800

Salaries and Wages Expense 3,200
Cash 8,000
BRIEF EXERCISE 3-8
Dec. 31 Interest Receivable 300

Interest Revenue 300
Feb. 1 Cash 12,400

Notes Receivable 12,000
Interest Receivable 300
Interest Revenue 100
BRIEF EXERCISE 3-9
Aug. 31 Interest Expense 300

Interest Payable 300
31 Accounts Receivable 1,400

31 Salaries and Wages Expense 700

Salaries and Wages Payable 700
31 Bad Debt Expense 900

Allowance for Doubtful Accounts 900
*BRIEF EXERCISE 3-12
(a) Cash receipts $142,000

+ Increase in accounts receivable
($18,600 – $13,000) 5,600
Service revenue $147,600
(b) Payments for operating expenses $ 97,000

– Increase in prepaid expenses
($23,200 – $17,500) (5,700)
Operating expenses $ 91,300
*BRIEF EXERCISE 3-13
(a) Salaries and Wages Payable 4,200

(b) Salaries and Wages Expense 7,000

Cash 7,000
(c) Salaries and Wages Payable 4,200

Cash 7,000
SOLUTIONS TO EXERCISES
EXERCISE 3-1 (15–20 minutes)
Apr. 2 Cash 30,000

Equipment 14,000
2 No entry—not a transaction.
3 Supplies 700
7 Rent Expense 600

Cash 600
11 Accounts Receivable 1,100

12 Cash 3,200
17 Cash 2,300
21 Insurance Expense 110

Cash 110
30 Salaries and Wages Expense 1,160

Cash 1,160
30 Supplies Expense 120

Supplies 120
30 Equipment 5,100
GERONIMO COMPANY
Trial Balance
April 30, 2012
Debit Credit
Cash $ 2,100
Accounts Receivable 2,750
Prepaid Insurance ($700 + $1,000) 1,700
Equipment 8,000
Accounts Payable ($4,500 – $1,000) $ 3,500
Property Tax Payable 560
Owner’s Capital ($11,200 + $3,200) 14,400
Owner’s Drawings 3,200
Advertising Expense ($1,100 + $300) 1,400
Property Tax Expense ($800 + $1,000) 1,800
$25,150 $25,150
The ledger accounts are reproduced below, and corrections are shown in
the accounts.
Cash Accounts
Payable
Bal. 5,912 (4) 190 Bal. 7,044
(1) 270
Accounts Common
Receivable Stock
Bal. 5,240 (1) 270 Bal. 8,000
Supplies Retained
Earnings
Bal. 2,967 Bal. 2,000
EXERCISE 3-3 (Continued)
Equipment Service
Revenue
Bal. 6,100 Bal. 5,200
(2) 1,900 (3) 2,025
(5) 80
Office
Expense
Bal. 4,320 (2) 1,900
SCARLATTI CORPORATION
Trial Balance (Corrected)
April 30, 2012
Debit Credit
Cash $ 5,992
Supplies 2,967
Equipment 8,000
Accounts Payable $ 7,044
Common Stock 8,000
Retained Earnings 2,000
Office Expense 2,420
$24,349 $24,349
OAKLEY CO.
Trial Balance
June 30, 2012
Debit Credit
Cash ($2,870 + $360 – $65 – $65) $ 3,100
Accounts Receivable ($3,231 – $360) 2,871
Supplies ($800 – $500) 300
Equipment ($3,800 + $500) 4,300
Accounts Payable ($2,666 – $206 – $260) $ 2,200
Unearned Service Revenue ($1,200 – $225) 975
Common Stock 6,000
Dividends 575
Retained Earnings 3,000
Service Revenue ($2,380 + $801 + $225) 3,406
Salaries and Wages Expense ($3,400 + $670 – $575) 3,495
Office Expenses 940
$15,581 $15,581
1. Depreciation Expense ($250 X 3) 750

Accumulated Depreciation—Equipment 750
2. Unearned Rent Revenue ($6,300 X 1/3) 2,100

Rent Revenue 2,100
3. Interest Expense 500

4. Supplies Expense 2,150

Supplies ($2,800 – $650) 2,150
5. Insurance Expense ($300 X 3) 900

Prepaid Insurance 900
(a) Salaries and Wages Expense 2,900

Salaries and Wages Payable 2,900
(b) Utilities Expenses 600

(c) Interest Expense ($60,000 X 8% X 1/12) 400

(d) Utilities Expenses 117

(a) 1. Aug. 31 Insurance Expense ($4,500 X 3/12) 1,125

Prepaid Insurance 1,125
2. Aug. 31 Supplies Expense ($2,600 – $650) 1,950

Supplies 1,950
3. Aug. 31 Depreciation Expense 1,080

Accumulated Depreciation—
Buildings 1,080
($120,000 – $12,000 = $108,000;
$108,000 X 4% = $4,320 per
year;
$4,320 X 3/12 = $1,080)
Aug. 31 Depreciation Expense 360

Equipment 360
($16,000 – $1,600 = $14,400;
$14,400 X 10% = $1,440;
$1,440 X 3/12 = $360)
4. Aug. 31 Unearned Rent Revenue 3,800
Rent Revenue 3,800
5. Aug. 31 Salaries and Wages Expense 375

6. Aug. 31 Accounts Receivable 800

Rent Revenue 800
7. Aug. 31 Interest Expense 1,000

Interest Payable
[($50,000 X 8%) X 3/12] 1,000
(b) UHURA RESORT

Adjusted Trial Balance
August 31, 2012
Debit Credit
Cash $ 19,600
Accounts Receivable 800
Prepaid Insurance ($4,500 – $1,125) 3,375
Supplies ($2,600 – $1,950) 650
Land 20,000
Buildings 120,000
Accumulated Depreciation—Buildings $ 1,080
Equipment 16,000
Accumulated Depreciation—Equipment 360
Accounts Payable 4,500
Unearned Rent Revenue ($4,600 – 800
$3,800)
Interest Payable 1,000
Mortgage Payable 50,000
Common Stock 100,000
Dividends 5,000
Rent Revenue ($86,200 + $3,800 + $800) 90,800
Salaries and Wages Expense
($44,800 + $375) 45,175
Utilities Expenses 9,200
Maintenance and Repairs Expenses 3,600
Insurance Expense 1,125
Supplies Expense 1,950
Depreciation Expense 1,080
Depreciation Expense 360
Interest Expense 1,000
$248,915 $248,915
EXERCISE 3-12 (20–25 Minutes)
(a) FLYNN DESIGN AGENCY

Income Statement
For the Year Ended December 31, 2012
Revenues
Expenses
Salaries and wages expense $12,300
Depreciation expense 7,000
Rent expense 4,000
Supplies expense 3,400
Insurance expense 850
Interest expense 500
Total expenses 28,050
Net income $30,450
FLYNN DESIGN AGENCY

Statement of Retained Earnings
Retained earnings, January 1 $ 3,500
Add: Net income 30,450
Retained earnings, December 31 $33,950
(a) (Continued) FLYNN DESIGN AGENCY

Balance Sheet
December 31, 2012
Assets
Cash $10,000
Accounts receivable 21,500
Supplies 5,000
Prepaid insurance 2,500
Equipment $60,000
Less: Accumulated depreciation—equipment 35,000 25,000
Total assets $64,000
Liabilities and Stockholders’ Equity

Liabilities
Notes payable $ 5,000
Accounts payable 8,000
Unearned service revenue 5,600
Salaries and wages payable 1,300
Interest payable 150
Total liabilities $20,050
Stockholders’ equity
Common stock $10,000
Retained earnings 33,950 43,950
Total liabilities and stockholders’ $64,000
equity
(b) 1. Based on interest payable at December 31, 2012, interest is $25

per month or .5% of the note payable. .5% X 12 = 6% interest per
year.
2. Salaries and Wages Expense, $12,300 less Salaries and Wages
Payable 12/31/12, $1,300 = $11,000. Total Payments, $17,500 –
$11,000 = $6,500 Salaries and Wages Payable 12/31/11.
*EXERCISE 3-20 (20–25 minutes)
(a) Adjusting
Entries:
1. Insurance Expense ($6,000 X 5/24) 1,250
2. Rent Revenue ($2,400 X 1/3) 800

Unearned Rent Revenue 800
3. Supplies 290
Advertising Expense 290
4. Interest Expense 770
*EXERCISE 3-20 (Continued)
(b) Reversing
Entries:
1. No reversing entry required.
2. Unearned Rent Revenue 800

Rent Revenue 800
3. Advertising Expense 290

Supplies 290
4. Interest Payable 770

Interest Expense 770
SOLUTIONS TO PROBLEMS
PROBLEM 3-5
(a) -1-
Equipment
(1/16 X $168,000) 10,500
-2-
Interest Expense 1,440*
Interest Payable
($90,000 X 8% X 72/360) 1,440*
-3-
Admissions Revenue 60,000
Unearned Admissions Revenue
(2,000 X $30) 60,000
-4-
Prepaid Advertising 1,100
Advertising Expense 1,100
-5-
(b) 1. Interest expense, $2,840 ($1,400 + $1,440).

2. Admissions revenue, $320,000 ($380,000 – $60,000).
3. Advertising expense, $12,580 ($13,680 – $1,100).
4. Salaries and wages expense, $62,300 ($57,600 + $4,700).
*Note to instructor: If 30-day months are assumed, interest expense =

$1,400 ($90,000 X 8% X 70/360).
PROBLEM 3-6
(a) -1-
-2-
-3-
Bad Debt Expense 1,430
Allowance for Doubtful Accounts 1,430
-4-
Insurance Expense 480
Prepaid Insurance 480
-5-
Accumulated Depreciation—Equipment
($25,000 X .10) 2,500
-6-
Interest Expense 60
Interest Payable
($7,200 X .10 X 30/360) 60
-7-
Prepaid Rent Expense 750
Rent Expense 750
-8-
PROBLEM 3-6 (Continued)
(b) YORKIS PEREZ, CONSULTING ENGINEER

Income Statement
Service revenue ($100,000 – $6,000 + $4,900) $98,900

Expenses
Salaries and wages expense
($30,500+$2,510) $33,010
Rent expense ($9,750 – $750) 9,000
Bad debt expense 1,430
Utilities expense 1,080
Office expense 720
Insurance expense 480
Interest expense 60
Net income $50,620
YORKIS PEREZ, CONSULTING ENGINEER

Statement of Owners’ Equity
Onwer’s Capital, January 1 $ 52,010a

Less: Withdrawals (17,000)
Owner’s Capital, December 31 $ 85,630
(a)
Owner’s Capital—trial balance $ 35,010
Withdrawals during the year 17,000
Owner’s Capital, as of January 1, 2010 $ 52,010
YORKIS PEREZ, CONSULTING

ENGINEER
Balance Sheet
December 31, 2012
Assets
Current assets
Cash $29,500
Accounts receivable
($49,600 + $4,900) $54,500
Less: Allowance for
doubtful accounts (2,180) 52,320
*
Supplies 1,960
Prepaid insurance
($1,100 – $480) 620
Prepaid rent expense 750
Total current assets $ 85,150
Equipment 25,000
Less: Accumulated depreciation (8,750)** 16,250
Liabilities and Owners’ Equity

Current liabilities
Notes payable $7,200
Salaries and wages 2,510
payable
Interest payable 60 $ 15,770
Owner’s Capital
($35,010 + $50,620) 85,630
Total liabilities and
owners’ equity $101,400
*($750 + $1,430)
**($6,250 + $2,500)
PROBLEM 3-8
(a)
Dec. 31 Accounts Receivable 3,500
31 Supplies Expense 2,900

Supplies 2,900
31 Insurance Expense 1,560

31 Depreciation Expense 5,000

Accumulated Depreciation—Equipment 5,000
31 Interest Expense 560

31 Unearned Service Revenue 1,900

31 Salaries and Wages Expense 820

(b) VEDULA ADVERTISING AGENCY

Income Statement
Revenues
Expenses
Salaries and wages expense $9,820
Rent expense 4,350
Supplies expense 2,900
Insurance expense 1,560
Interest expense 560
Net income $38,810
VEDULA ADVERTISING AGENCY

Retained Earnings Statement
Retained earnings, Janaury 1 $ 5,500

Less: Dividends (10,000)
Retained earnings, December 31 $34,310
VEDULA ADVERTISING AGENCY

Balance Sheet
December 31, 2012
Assets
Current assets
Cash $11,000
Accounts receivable 19,500
Supplies 6,500
Prepaid insurance 1,790
Total current assets $38,790
Equipment 60,000
Less: Accumulated depreciation (30,000) 30,000
Liabilities and Stockholders’ Equity

Current liabilities
Notes payable $8,000
Accounts payable 2,000
Salaries and wages payable 820
Interest payable 560 $ 14,480
Stockholders’ Equity
Common stock 20,000
Retained earnings 34,310
Total stockholders’ equity 54,310
Total liabilities and
stockholders’ equity $68,790
(c) Service Revenue, Salaries and Wages Expense, Depreciation Expense,

Rent Expense, Supplies Expense, Insurance Expense, Interest
Expense, Dividends.
(d) Interest is $56 per month or .7% of the note payable ($56 ÷ $8,000).
.7% X 12 = 8.4% interest per year.
(e) Salaries and Wages Expense, $9,820, less Salaries and Wages Payable
12/31/12, $820 = $9,000. Total payments, $10,500 – $9,000 = $1,500
Salaries Payable 12/31/11.

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SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

May 1 Cash 4,000

13 Rent Expense 400

21 Accounts Receivable 500

BRIEF EXERCISE 3-2

Aug. 2 Cash 12,000

15 Rent Expense 600

19 Supplies Expense 230

July 1 Prepaid Insurance 15,000

Dec. 31 Insurance Expense 2,500

BRIEF EXERCISE 3-4

July 1 Cash 15,000

Dec. 31 Unearned Service Revenue 3,000 2,500

BRIEF EXERCISE 3-5

Feb. 1 Prepaid Insurance 720,000

June 30 Insurance Expense 150,000

BRIEF EXERCISE 3-6

Nov. 1 Cash 2,400

Dec. 31 Unearned Rent Revenue 1,600

Dec. 31 Salaries and Wages Expense 4,800

Jan. 2 Salaries and Wages Payable 4,800

BRIEF EXERCISE 3-8

Dec. 31 Interest Receivable 300

Feb. 1 Cash 12,400

BRIEF EXERCISE 3-9

Aug. 31 Interest Expense 300

31 Accounts Receivable 1,400

31 Salaries and Wages Expense 700

31 Bad Debt Expense 900

(a) Cash receipts $142,000

(b) Payments for operating expenses $ 97,000

*BRIEF EXERCISE 3-13

(a) Salaries and Wages Payable 4,200

(b) Salaries and Wages Expense 7,000

(c) Salaries and Wages Payable 4,200

EXERCISE 3-1 (15–20 minutes)

Apr. 2 Cash 30,000

7 Rent Expense 600

11 Accounts Receivable 1,100

21 Insurance Expense 110

30 Salaries and Wages Expense 1,160

30 Supplies Expense 120

EXERCISE 3-3 (15–20 minutes)

EXERCISE 3-5 (10–15 minutes)

1. Depreciation Expense ($250 X 3) 750

2. Unearned Rent Revenue ($6,300 X 1/3) 2,100

3. Interest Expense 500

4. Supplies Expense 2,150

5. Insurance Expense ($300 X 3) 900

(a) Salaries and Wages Expense 2,900

(b) Utilities Expenses 600

(c) Interest Expense ($60,000 X 8% X 1/12) 400

(d) Utilities Expenses 117

EXERCISE 3-10 (25–30 minutes)

(a) 1. Aug. 31 Insurance Expense ($4,500 X 3/12) 1,125

2. Aug. 31 Supplies Expense ($2,600 – $650) 1,950

3. Aug. 31 Depreciation Expense 1,080