FM9e_SM03 - CHAPTER 3Solutions MEASURING BUSINESS INCOME...

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Ch3 SE1 to SE5 CHAPTER 3—Solutions MEASURING BUSINESS INCOME Chapter 3, SE 1. 1. c 2. b 3. d 4. a Chapter 3, SE 2. Dec. 31 Insurance Expense 1,600 Prepaid Insurance 1,600 To record insurance expired during the year $920 + $2,080 $1,400 = $1,600 Chapter 3, SE 3. Dec. 31 Supplies Expense 1,840 Supplies 1,840 To record supplies used during the year $760 + $1,960 $880 = $1,840 Chapter 3, SE 4. Mar. 31 Depreciation Expense—Office Equipment 100 Accumulated Depreciation—Office Equipment 100 To record depreciation for the month Balance Sheet Presentation: Office equipment $1,900 Less accumulated depreciation 300 $1,600 Chapter 3, SE 5. June 30 Wages Expense 230 Wages Payable 230 To record wages accrued at the end of June ( $1,380 ÷ 6 1 = $230 ) x
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Ch3 SE6 to SE7 Chapter 3, SE 6. Aug. 31 Unearned Service Revenue 1,520 Service Revenue 1,520 To record service revenue earned during August on which advance deposits had been received Chapter 3, SE 7. Shimura Company Income Statement For the Month Ended December 31, 2010 Revenue Service revenue $1,300 Expenses Rent expense $200 Wages expense 450 Utilities expense 100 Telephone expense 25 Income taxes expense 175 Total expenses 950 Net income $ 350 Shimura Company Statement of Retained Earnings For the Month Ended December 31, 2010 Retained earnings, November 30, 2010 $4,300 Net income 350 Subtotal $4,650 Less dividends 175 Retained earnings, December 31, 2010 $4,475
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Ch3 SE8 to SE10 Chapter 3, SE 8. Closing entries prepared Dec. 31 Service Revenue 1,300 Income Summary 1,300 To close the revenue account Income Summary 950 Rent Expense 200 Wages Expense 450 Utilities Expense 100 Telephone Expense 25 Income Taxes Expense 175 To close the expense accounts Income Summary 350 Retained Earnings 350 To close the Income Summary account Retained Earnings 175 Dividends 175 To close the Dividends account Chapter 3, SE 9. Unearned Revenue at December 31 $ 450 Service Revenue earned during December 2,550 Potential receipts from services provided during December $3,000 Less Unearned Revenue at November 30 650 Cash received during December for services provided $2,350 Chapter 3, SE 10. Key ratio calculated: Profit Margin = Net Income = $14,000 = 0.0854 or 8.54% Net Sales $164,000
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Ch3 E1 to E3 Chapter 3, E 1. 1. When a company has net income, its stockholders' equity increases, but there is also an increase in assets and/or decrease in liabilities. 2. To measure a company's performance (net income) accurately, each expense (in this case, guaranty or warranty expense) must be matched with the related revenue in the year in which the product or service was sold. Otherwise, net income will be overstated, and the related liability will be understated. 3.
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This note was uploaded on 02/18/2012 for the course ACCOUNTING 2301 taught by Professor Dr.susaneason during the Spring '12 term at San Jacinto.

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FM9e_SM03 - CHAPTER 3Solutions MEASURING BUSINESS INCOME...

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