Demonstration_Problems_Ch3_solution

Demonstration_Problems_Ch3_solution - Demonstration Problem...

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Demonstration Problem 3-1 Solution, part 1. Accounting Equations Assets = Liabilities + Equity 2006 Cash = Unearned Revenue + Com. Stock + Ret. Ear. Beginning Balances $ -0- $ -0- $ -0- $ -0- 1. Recognize Liability 12,000 12,000 2. Adjustment for Earned Rev. (3,000) 3,000 ───── ──── ───── ───── Ending/Beginning Balances $12,000 = $ 9,000 + $ -0- + $3,000 2007 1. Adjustment for Earned Rev. (9,000) 9,000 ───── ──── ───── ───── Ending Balances $12,000 $ -0- $ -0- $12,000 ═════ ════ ═════ ═════ 1
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Demonstration Problem 3-1 Solution, part 2. Financial Statements Jackson Legal Services Financial Statements Income Statements For the Years Ended December 31, 2006 2007 Fees Revenue $3,000 $9,000 Expenses -0- -0- Net Income $3,000 $9,000 Statements of Retained Earnings Beginning Retained Earnings $ -0- $ 3,000 Net Income 3,000 9,000 Dividends -0- -0- Ending Retained Earnings $3,000 $12,000 Balance Sheets as of December 31 Assets Cash $12,000 $12,000 Liabilities Unearned Revenue $ 9,000 $ -0- Equity Retained Earnings 3,000 12,000 Total Liabilities and Equity $12,000 $12,000 Statements of Cash Flows
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