fin-acctg7-sm-ch03 - Chapter 3 Accrual Accounting and...

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Chapter 3 Accrual Accounting and Income Short Exercises (10 min.) S 3-1 Millions Sales revenue……………………………………………. $ 700 Cost of goods sold……………………………………… (300) All other expenses……………………………………… (350 ) Net income………………………………………………. . $ 50 Beginning cash…………………………………………. . $ 100 Collections ($700 $30)………………………………. . 670 Payments for: inventory………………………………. (400) everything else………………………. (280 ) Ending cash……………………………………………… $ 90 Chapter 3 Accrual Accounting and Income 129
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(10 min.) S 3-2 Statement Reports (Amounts in millions) Income statement Interest expense………………. $1.0 Balance sheet Notes payable ($4.0 + $2.6 $2.5)…………. $4.1 Interest payable………………. . 0.2 Financial Accounting 7/e Solutions Manual 130
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(10 min.) S 3-3 Ford should record sales revenue when the revenue is earned by delivering automobiles to Enterprise or Hertz. Ford should not record any revenue prior to delivery of the vehicles because Ford hasn’t earned the revenue yet. The revenue principle governs this decision. When Ford records the revenue from the sale, at that time — not before or after — Ford should also record cost of goods sold, the expense. The matching principle tells when to record expenses. Chapter 3 Accrual Accounting and Income 131
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(10 min.) S 3-4 a. Dec. 31 Rent Expense ($3,000 × 2/6)……. . 1,000 Prepaid Rent……………………. . 1,000 To record rent expense. Prepaid Rent Rent Expense Nov. 1 3,000 Dec. 31 1,000 Dec. 31 1,000 Bal. 2,000 Bal. 1,000 b. Dec. 31 Supplies Expense ($800 $500)…. 300 Supplies……………………………. 300 To record supplies expense. Supplies Supplies Expense Dec. 1 800 Dec. 31 300 Dec. 31 300 Bal. 500 Bal. 300 Financial Accounting 7/e Solutions Manual 132
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(10 min.) S 3-5 Req. 1 (a) Jan. 1 Computer Equipment…………….…. . 30,000 Cash…………………………………. . 30,000 Purchased computer equipment. (b) Dec. 31 Depreciation Expense Computer Equipment ($30,000 / 3)… 10,000 Accumulated Depreciation Computer Equipment……………. .. 10,000 Req. 2 Computer Equipment Accumulated Depreciation Computer Equipment Depreciation Expense Computer Equipment Jan. 1 30,000 Dec. 31 10,000 Dec. 31 10,000 Bal. 30,000 Bal. 10,000 Bal. 10,000 Req. 3 Computer equipment…………………………………. $30,000 Less Accumulated depreciation……………………. (10,000 ) Book value……………………………………………… $20,000 Chapter 3 Accrual Accounting and Income 133
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(10 min.) S 3-6 (Amounts in millions) Income statement: 20X8 Salary expense ($40 + $2)…. . $42 Balance sheet: 20X8 Salary payable………………. .. $ 2 Financial Accounting 7/e Solutions Manual 134
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(10 min.) S 3-7
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This note was uploaded on 12/07/2009 for the course ACCOUNTING 110 taught by Professor Mcwilliams during the Spring '09 term at San Jose State University .

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fin-acctg7-sm-ch03 - Chapter 3 Accrual Accounting and...

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