unit_03_key - Solutions to Suggested Exercises Problems in...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Solutions to Suggested Exercises & Problems in Unit 3 E3–1. TERM F (1) Expenses E (2) Gains G (3) Revenue principle I (4) Cash basis accounting D (5) Unearned revenue C (6) Operating cycle M (7) Accrual basis accounting K (8) Prepaid expenses J (9) Revenues - Expenses = Net Income L (10) Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends E3–3. Activity Revenue Account Affected Amount of Revenue Earned in September a. Sales revenue $25,000 b. Sales revenue $21,000 c. None No transaction has occurred; exchange of promises only. d. Sales revenue $18,000 (= 1,000 shirts x $18 per shirt); revenue earned when goods are delivered. e. None Payment related to revenue recorded previously in (d) above. f. None No revenue earned in September; earnings process is not yet complete. g. None No revenue is earned; the issuance of stock is a financing activity. h. None No revenue earned in September; earnings process is not yet complete. i. Ticket sales revenue $4,000,000 (= $20,000,000 ÷ 5 games) j. None No revenue earned in September; earnings process is not yet complete. k. Interest revenue $1,000 (= $100,000 x 12% ÷ 12 months) l. None No revenue earned in September; earnings process is not yet complete. m. Sales revenue $100
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
E3–4. Activity Expense Account Affected Amount of Expense Incurred in January a. Salary expense $45,000 incurred in January. The remaining half was incurred in December. b. Insurance expense $1,500 incurred in January. The remainder is not incurred until February and March. c. Utilities expense $6,000 d. Cost of goods sold $4,500 (= 500 shirts x $9 per shirt) e. None Expense will be recorded in the future when the related revenue has been earned. f. Cost of goods sold $45,000 (= 450 books x $100 per book) g. None December expense paid in January. h. Commission expense $14,200 i. None Expense will be recorded as depreciation over the equipment’s useful life. j. None Expense will be recorded when the related revenue has been earned. k. Supplies expense $4,800 (= $4,000 + $2,600 - $1,800) l. Wages expense $120 (= 8 hours x $15 per hour) m. Insurance expense $300 (= $3,600 ÷ 12 months) n. Repairs expense $280 o. Utilities Expense $230 p. Consulting Expense $11,500 q. None December expense paid in January.
Image of page 2
E3–5. Balance Sheet Income Statement Assets Liabilities Stockholders’ Equity Revenues Expenses Net Income a. + NE + NE NE NE b. + + NE NE NE NE c. + + NE NE NE NE d. + NE + + NE + e. NE + NE + f. + NE + + NE + g. NE NE NE NE h. NE NE + i. + NE + + NE + j. NE NE NE NE k. + / – NE NE NE NE NE l. NE NE + m. + NE + n. NE NE + Transaction (k) results in an increase in an asset (cash) and a decrease in an asset (accounts receivable). Therefore, there is no net effect on assets.
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
E3–8. Req. 1 a. Cash (+A) .................................................................................... 2,500,000 Short-term note payable (+L) .......................................... 2,500,000 Debits equal credits. Assets and liabilities increase by the same amount. b. Equipment (+A) ............................................................................ 90,000 Cash ( - A) ........................................................................ 90,000 Debits equal credits. Assets increase and decrease by the same amount.
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern