unit_03_key - Solutions to Suggested Exercises & Problems...

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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
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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.
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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.
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E3–8. Req. 1
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This note was uploaded on 09/27/2010 for the course ACTG 100 taught by Professor Ortiz during the Fall '09 term at Skyline College.

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unit_03_key - Solutions to Suggested Exercises & Problems...

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