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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