Chapter_3_Solutions - Chapter 3 The Adjusting Process Quick...

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Chapter 3 The Adjusting Process Quick Check Answers: 1. c 3. d 5. b 7. c 9. c 2. d 4. a 6. b 8. a 10. d Explanations: 5. b. Debit Salary Expense and Credit Salary Payable for $60 ($300 × 1/5) 6. b. Income statement reports service revenue of $200 ($600 × 2/6) Chapter 3 The Adjusting Process 151
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Short Exercises (5 min.) S 3-1 Req. 1 Service revenue: (a) Cash basis $600 (b) Accrual basis $1,100 ($600 + $500) The accrual basis provides more information because it considers all the revenue you earned, including revenue earned on account. The accrual basis also keeps a record of your receivables from customers. The cash basis ignores both your receivables and the revenue you earned on account. (5 min.) S 3-2 (a) Cash Basis (b) Accrual Basis Record expense of $5,000 Record asset of $5,000 The accrual basis is more realistic because the computer is an asset. To record the cost of the computer as an expense is unrealistic. Accounting 7/e Solutions Manual 152
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(5 min.) S 3-3 Req. a Phoenix Magazine should record revenue only after it mails out magazines, not when it collects cash from subscribers. Req. b Amount of Revenue = 3/12 of the annual subscription amount for 3 months (January, February, March) of the year. (5 min.) S 3-4 Prepaid Rent $ 900 ($3,600 × 3/12) Rent Expense $2,700 ($3,600 × 9/12) Chapter 3 The Adjusting Process 153
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(5 min.) S 3-5 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT April 30 Rent Expense ($3,000 × 1/6) 500 Prepaid Rent 500 To record rent expense. Prepaid Rent Rent Expense Apr. 1 3,000 Apr. 30 500 Apr. 30 500 Bal. 2,500 Bal. 500 Accounting 7/e Solutions Manual 154
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(5 min.) S 3-6 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT a. May 1 Computer Equipment 36,000 Cash 36,000 Purchased computer equipment. b. May 31 Depreciation Expense— Computer Equipment ($36,000 / 36) 1,000 Accumulated Depreciation— Computer Equipment 1,000 (5 min.) S 3-7 Req. 1 Computer Equipment Accumulated Depreciation— Computer Equipment Depreciation Expense— Computer Equipment May 1 36,000 May 31 1,000 May 31 1,000 Bal. 36,000 Bal. 1,000 Bal. 1,000 Req. 2 Computer equipment………………………. . $36,000 Less Accumulated depreciation…………. . (1,000 ) Book value……………………………………. $35,000 Chapter 3 The Adjusting Process 155
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(10 min.) S 3-8 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Dec. 31 Interest Expense 700 Interest Payable 700 To accrue interest expense. Req. 2 Interest Payable Interest Expense Dec. 31 700 Dec. 31 700 Accounting 7/e Solutions Manual 156
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S 3-9 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Adjusting Unearned Subscription Revenue 5,000 entry: Subscription Revenue 5,000 To record subscription revenue that was collected in advance. Chapter 3
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This note was uploaded on 05/05/2010 for the course BUSINESS 71395 taught by Professor Brown during the Spring '09 term at Miss. College.

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Chapter_3_Solutions - Chapter 3 The Adjusting Process Quick...

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