Oct 13, 2015
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-1
CHAPTER 3The Accounting Information System
Study Objectives1. Analyze the effect of business transactions on the basic accounting equation.2. Explain what an account is and how it helps in the recording process.3. Define debits and credits and explain how they are used to record business transactions.4. Identify the basic steps in the recording process.5. Explain what a journal is and how it helps in the recording process.6. Explain what a ledger is and how it helps in the recording process.7. Explain what posting is and how it helps in the recording process.8. Explain the purposes of a trial balance.9. Classify cash activities as operating, investing, or financing.
Summary of Questions by Study Objectives and Blooms TaxonomyItem SO BT Item SO BT Item SO BT Item SO BT Item SO BT
Questions 1. 4 C 6. 3 C 11. 3 K 16. 5 K 21. 7 K 2. 1 C 7. 3 C 12. 3 K 17. 5 K 22. 8 AN 3. 1 C 8. 3 C 13. 3 K 18. 5 AP 4. 1 K 9. 3 K 14. 3 K 19. 6 C 5. 2 K 10. 3 K 15. 4 K 20. 8 C
Brief Exercises 1. 1 C 4. 3 K 7. 4 C 9. 5 AP 11. 8 AP 2. 1 AP 5. 3 C 8. 4 C 10. 7 AP 12. 8 AP 3. 1 AP 6. 5 AP
Do It! Review Exercises 1. 1 C 2. 2, 3 C 3. 4, 5 AP 4. 6, 7 AP
Exercises 1. 1 C 5. 1 AP 8. 5 AP 12. 5, 8 AP 15. 8 AN 2. 1 AP 6. 3, 5 AP 9. 3, 4,
5 AP13. 7, 8 AP 16. 8 AP
3. 1 AP 7. 3 C 10. 14. 5, 8 AP 17. 3 K 4. 1 AP 11.
7, 81, 5,
7
AP
AP18. 9 AP
19. 9 APProblems: Set A
1. 1 AP 5. 6. 7. 8 AN 9. 8 AN 2. 1 AP 8. 3. 1 AP
3, 5,6, 7,
8 AP
3, 5,6, 7,
8 AP 4. 3, 5 AP
3, 5,6, 7,
8 APProblems: Set B
1. 1 AP 5. 6. 7. 8 AN 9. 8 AN 2. 1 AP 8. 3. 1 AP
3, 5,6, 7,
8 AP
3, 5,6, 7,
8 AP 4. 3, 5 AP
3, 5,6, 7,
8 AP
3-2 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
ASSIGNMENT CHARACTERISTICS TABLE
ProblemNumber Description
DifficultyLevel
TimeAllotted (min.)
1A Analyze transactions and compute net income. Moderate 4050
2A Analyze transactions and prepare financial statements. Moderate 4050
3A Analyze transactions and prepare an income statement,retained earnings statement, and balance sheet.
Moderate 5060
4A Journalize a series of transactions. Simple 2030
5A Journalize transactions, post, and prepare a trial balance. Simple 3040
6A Journalize transactions, post, and prepare a trial balance. Moderate 4050
7A Prepare a correct trial balance. Moderate 3040
8A Journalize transactions, post, and prepare a trial balance. Moderate 4050
9A Analyze errors and their effects on the trial balance. Moderate 3040
1B Analyze transactions and compute net income. Moderate 4050
2B Analyze transactions and prepare financial statements. Moderate 4050
3B Analyze transactions and prepare an income statement,retained earnings statement, and balance sheet.
Moderate 5060
4B Journalize a series of transactions. Simple 2030
5B Journalize transactions, post, and prepare a trial balance. Simple 3040
6B Journalize transactions, post, and prepare a trial balance. Moderate 4050
7B Prepare a correct trial balance. Moderate 3040
8B Journalize transactions, post, and prepare a trial balance. Moderate 4050
9B Analyze errors and their effects on the trial balance Moderate 3040
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-3
ANSWERS TO QUESTIONS
1. The system of collecting and processing transaction data and communicating financial informa-tion to decision makers is known as the accounting information system.
2. Yes, a business can enter into a transaction in which only the left side of the accounting equationis affected. An example would be a transaction where an increase in one asset is offset by adecrease in another asset. An increase in the equipment account which is offset by a decrease inthe cash account is a specific example.
3. Accounting transactions are the economic events of the company recorded by accountants becausethey affect the basic accounting equation.
(a) The death of a major stockholder of the company is not an accounting transaction as it does notaffect the basic accounting equation.
(b) Supplies purchased on account is an accounting transaction because it affects the basicaccounting equation.
(c) An employee being fired is not an accounting transaction as it does not affect the basicaccounting equation.
(d) Paying a cash dividend to stockholders is an accounting transaction as it does affect thebasic accounting equation.
4. (a) Decrease assets and decrease stockholders equity.(b) Increase assets and decrease assets.(c) Increase assets and increase stockholders equity.(d) Decrease assets and decrease liabilities.
5. An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or creditside. Because the alignment of these parts resembles the letter T, it is referred to as a T account.
6. Disagree. The terms debit and credit are synonymous with left and right, respectively.
7. James is incorrect. The double-entry system merely records the dual (two-sided) effect of a transac-tion on the accounting equation. A transaction is not recorded twice; it is recorded once, and mustaffect two or more accounts to keep the basic accounting equation in balance. In other words, foreach transaction, debits must equal credits.
8. Gayle is incorrect. A debit balance only means that debit amounts exceed credit amounts in anaccount. Conversely, a credit balance only means that credit amounts are greater than debit amountsin an account. Thus, a debit or credit balance is neither favorable or unfavorable.
9. (a) Asset accounts are increased by debits and decreased by credits.(b) Liability accounts are decreased by debits and increased by credits.(c) The common stock account is decreased by debits and increased by credits.
3-4 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Questions Chapter 3 (Continued)10. (a) Accounts Receivabledebit balance.
(b) Cashdebit balance.(c) Dividendsdebit balance.(d) Accounts Payablecredit balance.(e) Service Revenuecredit balance.(f) Salaries and Wages Expensedebit balance.(g) Common Stockcredit balance.
11. (a) Accounts Receivableassetdebit balance.(b) Accounts Payableliabilitycredit balance.(c) Equipmentassetdebit balance.(d) Dividendsstockholders equitydebit balance.(e) Suppliesassetdebit balance.
12. (a) Debit Supplies and credit Accounts Payable.(b) Debit Cash and credit Notes Payable.(c) Debit Salaries and Wages Expense and credit Cash.
13. (a) Cashboth debit and credit entries.(b) Accounts Receivableboth debit and credit entries.(c) Dividendsdebit entries only.(d) Accounts Payableboth debit and credit entries.(e) Salaries and Wages Expensedebit entries only.(f) Service Revenuecredit entries only.
14. Normal balances for accounts in Tootsie Rolls financial statements: Accounts Receivabledebit;Income Taxes Payablecredit; Salescredit; Selling, Marketing, and Administrative Expensesdebit.
15. The basic steps in the recording process are:(1) Analyze each transaction in terms of its effect on the accounts.(2) Enter the transaction information in a journal.(3) Transfer the journal information to the appropriate accounts in the ledger.
16. (a) The debit should be entered first.(b) The credit should be indented.
17. (a) No, debits and credits should not be recorded directly in the ledger.(b) The advantages of using the journal are:
(1) It discloses in one place the complete effect of a transaction.(2) It provides a chronological record of all transactions.(3) It helps to prevent or locate errors because the debit and credit amounts for each entry
can be readily compared.
18. (a) Cash............................................................................................................................ 12,000Common Stock ................................................................................................ 12,000 (Issued stock for cash)
(b) Prepaid Insurance .................................................................................................... 800Cash................................................................................................................... 800 (Paid one-year insurance policy)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-5
Questions Chapter 3 (Continued)
(c) Supplies ..................................................................................................................... 1,800Accounts Payable ........................................................................................... 1,800 (Purchased supplies on account)
(d) Cash ........................................................................................................................... 7,500Service Revenue............................................................................................. 7,500 (Received cash for services rendered)
19. (a) The entire group of accounts maintained by a company, including all the asset, liability, andstockholders equity accounts, is referred to collectively as the ledger.
(b) The chart of accounts is important, particularly for a company that has a large number ofaccounts, because it helps organize the accounts and identify their location in the ledger.
20. A trial balance is a list of accounts and their balances at a given time. The primary purpose of atrial balance is to prove the mathematical equality of debits and credits after all journalized trans-actions have been posted. A trial balance also facilitates the discovery of errors in journalizingand posting. In addition, it is useful in preparing financial statements.
21. The proper sequence is as follows:(b) Accounting transaction occurs.(c) Information is entered in the journal.(a) Debits and credits are posted to the ledger.(e) Trial balance is prepared.(d) Financial statements are prepared.
22. (a) The trial balance would balance.(b) The trial balance would not balance since the debits would be $720 higher than the credits.
3-6 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 3-1
Assets Liabilities Stockholders Equity(a)(b)(c)
++
+NENE
NE+
BRIEF EXERCISE 3-2
Assets = Liabilities + Stockholders Equity
Cash +Accounts
Receivable + Supplies =AccountsPayable +
BondsPayable +
CommonStock +
RetainedEarnings
(1) +$60,000 +$60,000(2) 9,000 $9,000 Paid div.(3) +13,000 $13,000(4) +$3,100 +$3,100
BRIEF EXERCISE 3-3
Assets = Liabilities + Stockholders Equity
Cash + Inventory + Equipment =AccountsPayable +
CommonStock +
RetainedEarnings
(1) $286,176 +$286,176(2) +137,590 +$137,590 Issued stock(3) +$68,480 +$68,480
BRIEF EXERCISE 3-4DebitEffect
CreditEffect
NormalBalance
(a)(b)(c)(d)(e)(f)
Accounts PayableAdvertising ExpenseService RevenueAccounts ReceivableRetained EarningsDividends
DecreaseIncreaseDecreaseIncreaseDecreaseIncrease
IncreaseDecreaseIncreaseDecreaseIncreaseDecrease
CreditDebitCreditDebitCreditDebit
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-7
BRIEF EXERCISE 3-5
Account Debited Account CreditedJune 1
23
12
CashEquipmentRent ExpenseAccounts Receivable
Common StockAccounts PayableCashService Revenue
BRIEF EXERCISE 3-6
June 1 Cash .................................................................................. 5,000Common Stock..................................................... 5,000
2 Equipment....................................................................... 1,100Accounts Payable................................................ 1,100
3 Rent Expense................................................................. 740Cash ......................................................................... 740
12 Accounts Receivable................................................... 700Service Revenue .................................................. 700
BRIEF EXERCISE 3-7
The basic steps in the recording process are:
1. Analyze each transaction. In this step, source documents are exam-ined to determine the effects of the transaction on the accounts.
2. Enter each transaction in a journal. This step is called journalizing andit results in making a chronological record of the transactions.
3. Transfer journal information to ledger accounts. This step is calledposting. Posting makes it possible to accumulate the effects of jour-nalized transactions on individual accounts.
3-8 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
BRIEF EXERCISE 3-8
(a) Basic Analysis (b) Debit-Credit AnalysisAug. 1 The asset Cash is increased;
the stockholders equityaccount Common Stock isincreased.
Debits increase assets:debit Cash $10,000. Creditsincrease stockholders equity:credit Common Stock $10,000.
4 The asset Prepaid Insuranceis increased; the asset Cashis decreased.
Debits increase assets:debit Prepaid Insurance $1,500.Credits decrease assets:credit Cash $1,500.
16 The asset Cash is increased;the revenue ServiceRevenue is increased.
Debits increase assets:debit Cash $900.Credits increase revenues:credit Service Revenue $900.
27 The expense Salaries andWages Expense is increased;the asset Cash is decreased.
Debits increase expenses:debit Salaries and WagesExpense $620.Credits decrease assets:credit Cash $620.
BRIEF EXERCISE 3-9
Aug. 1 Cash .................................................................................. 10,000Common Stock ..................................................... 10,000
4 Prepaid Insurance......................................................... 1,500Cash ......................................................................... 1,500
16 Cash .................................................................................. 900Service Revenue .................................................. 900
27 Salaries and Wages Expense ................................... 620Cash ......................................................................... 620
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-9
BRIEF EXERCISE 3-10
Cash Service Revenue5/12 1,600 5/15 2,000
5/5 3,800 5/15 2,000
Accounts Receivable5/5 3,800 5/12 1,600
BRIEF EXERCISE 3-11
LYNDON COMPANYTrial BalanceJune 30, 2012
Debit CreditCash ..........................................................................................Accounts Receivable...........................................................Equipment ...............................................................................Accounts Payable.................................................................Common Stock ......................................................................Dividends.................................................................................Service Revenue ...................................................................Salaries and Wages Expense ...........................................Rent Expense .........................................................................
$ 5,400 3,000 13,000
1,200
4,000 1,000$27,600
$ 1,000 18,000
8,600
$27,600
3-10 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
BRIEF EXERCISE 3-12
PELICAN COMPANYTrial Balance
December 31, 2012
Debit CreditCash..........................................................................................Prepaid Insurance ................................................................Accounts Payable ................................................................Unearned Service Revenue...............................................Common Stock......................................................................Retained Earnings................................................................Dividends ................................................................................Service Revenue...................................................................Salaries and Wages Expense...........................................Rent Expense.........................................................................
$20,800 3,500
5,000
14,600 2,600$46,500
$ 2,500 1,800 10,000 6,600
25,600
$46,500
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-11
SOLUTIONS TO DO IT! REVIEW EXERCISES
DO IT! 3-1
Assets = Liabilities + Stockholders EquityRetained Earnings
Cash +Accounts
Receivable =AccountsPayable +
CommonStock + Revenues Expenses Dividends
(1) +$20,000 +$20,000(2) +$20,000 20,000(3) +$1,800 $1,800(4) 3,000 $3,000
DO IT! 3-2
Phil would likely need the following accounts in which to record the trans-actions necessary to ready his photography studio for opening day:
Cash (debit balance) Equipment (debit balance)Supplies (debit balance) Accounts Payable (credit balance)Notes Payable (credit balance) Common Stock (credit balance)
DO IT! 3-3
Each transaction that is recorded is entered in the general journal. Thethree activities would be recorded as follows:
1. Cash....................................................................................... 8,000Common Stock.......................................................... 8,000
2. Supplies ............................................................................... 950Accounts Payable .................................................... 550Cash.............................................................................. 400
3. No entry because no transaction has occurred.
DO IT! 3-4
Cash4/1 1,9004/3 3,400
4/16 5004/20 300
4/30 4,500
3-12 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
SOLUTIONS TO EXERCISESEXERCISE 3-1
1. Increase in assets and increase in stockholders equity.2. Decrease in assets and decrease in stockholders equity.3. Increase in assets and increase in stockholders equity.4. Increase in assets and increase in stockholders equity.5. Decrease in assets and decrease in stockholders equity.6. Increase in liabilities and decrease in stockholders equity.7. Increase in assets and decrease in assets.8. Increase in assets and decrease in assets.9. Increase in assets and increase in liabilities.
EXERCISE 3-2
Assets = Liabilities + Stockholders EquityRetained Earnings
Cash +Accounts
Receivable + Equipment =AccountsPayable +
CommonStock + Revenues Expenses
(1) +$30,000 +$30,000(2) $ 4,000 $4,000 Rent Expense(3) +12,000 $12,000(4) +5,000 +$5,000 Service Revenue(5) 8,000 8,000 Utilities Expense(6) +40,000 +$40,000 Issued Stock(7) 30,000 30,000(8) +1,300 1,300 Advertising Expense
$15,000 + $12,000 + $30,000 = $ 1,300 + $40,000 + $5,000 $13,300
$33,000 $33,000
Ass
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$3
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$1
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$131
,500
$131
,500
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-13
EXERCISE 3-3
3-14 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-4
(a) 1. Stockholders invested $20,000 cash in the business. 2. Purchased equipment for $5,000, paying $1,000 in cash and the
balance of $4,000 on account. 3. Paid $750 cash for supplies. 4. Earned $9,500 in revenue, receiving $4,100 cash and $5,400 on
account. 5. Paid $1,500 cash on accounts payable. 6. Paid $2,000 cash dividends to stockholders. 7. Paid $800 cash for rent. 8. Collected $450 cash from customers on account. 9. Paid salaries of $3,000.10. Incurred $300 of utilities expense on account.
(b) Issued common stock........................................................................ $20,000Service revenue ................................................................................... 9,500Dividends ............................................................................................... (2,000)Rent expense ........................................................................................ (800)Salaries and wages expense ........................................................... (3,000)Utilities expense................................................................................... (300)Increase in stockholders equity .................................................... $23,400
(c) Service revenue ................................................................................... $ 9,500Rent expense ........................................................................................ (800)Salaries and wages expense ........................................................... (3,000)Utilities expense................................................................................... (300)Net income............................................................................................. $ 5,400
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-15
EXERCISE 3-5NIGEL COMPANYIncome Statement
For the Month Ended August 31, 2012
RevenuesService revenue................................................................. $9,500
ExpensesSalaries and wages expense......................................... $3,000Rent expense...................................................................... 800Utilities expense ................................................................ 300
Total expenses.......................................................... 4,100Net income ................................................................................... $5,400
NIGEL COMPANYRetained Earnings Statement
For the Month Ended August 31, 2012
Retained earnings, August 1........................................................................ $ 0Add: Net income ............................................................................................ 5,400
5,400Less: Dividends............................................................................................... 2,000Retained earnings, August 31...................................................................... $3,400
NIGEL COMPANYBalance Sheet
August 31, 2012
AssetsCurrent Assets:Cash............................................................................................. $15,500Accounts receivable .............................................................. 4,950Supplies ..................................................................................... 750
Total current assets ...................................................... 21,200Equipment ................................................................................. 5,000
Total assets...................................................................... $26,200Liabilities and Stockholders Equity
Current liabilitiesAccounts payable .......................................................... $ 2,800
Stockholders equityCommon stock................................................................ $20,000Retained earnings.......................................................... 3,400 23,400
Total liabilities and stockholders equity ...... $26,200
(a)
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3-16 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-6
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-17
EXERCISE 3-6 (Continued)(b)
General JournalTrans. Account Titles Debit Credit
1. Cash ..............................................................................Common Stock.................................................
15,00015,000
2. Equipment...................................................................Cash .....................................................................
10,00010,000
3. Supplies.......................................................................Accounts Payable............................................
300 300
4. Accounts Receivable...............................................Service Revenue ..............................................
3,700 3,700
5. Advertising Expense ...............................................Cash .....................................................................
200 200
6. Cash ..............................................................................Accounts Receivable......................................
1,100 1,100
7. Accounts Payable.....................................................Cash .....................................................................
300 300
8. Dividends ....................................................................Cash .....................................................................
400 400
EXERCISE 3-7
Oct. 1 Debits increase assets: debit Cash $30,000.Credits increase stockholders equity: credit Common Stock $30,000.
2 No accounting transaction.
3 Debits increase assets: debit Equipment $3,800.Credits increase liabilities: credit Accounts Payable $3,800.
3-18 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-7 (Continued)Oct. 6 Debits increase assets: debit Accounts Receivable $10,800.
Credits increase revenues: credit Service Revenue $10,800.
10 Debits increase assets: debit Cash $140.Credits increase revenues: credit Service Revenue $140.
27 Debits decrease liabilities: debit Accounts Payable $700.Credits decrease assets: credit Cash $700.
30 Debits increase expenses: debit Salaries and WagesExpense $3,000.Credits decrease assets: credit Cash $3,000.
EXERCISE 3-8
General JournalDate Account Titles Debit CreditOct. 1 Cash............................................................................
Common Stock...............................................30,000
30,000
2 No entry.
3 Equipment.................................................................Accounts Payable..........................................
3,800 3,800
6 Accounts Receivable.............................................Service Revenue ............................................
10,80010,800
10 Cash............................................................................Service Revenue ............................................
140 140
27 Accounts Payable...................................................Cash ...................................................................
700 700
30 Salaries and Wages Expense .............................Cash ...................................................................
3,000 3,000
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-19
EXERCISE 3-9
General JournalDate Account Titles Debit CreditMay 4 Accounts Payable ...................................................
Cash....................................................................700
700
7 Accounts Receivable .............................................Service Revenue.............................................
6,8006,800
8 Supplies .....................................................................Accounts Payable ..........................................
850 850
9 Equipment .................................................................Cash....................................................................
1,0001,000
17 Salaries and Wages Expense..............................Cash....................................................................
530 530
22 Maintenance and Repair Expense.....................Accounts Payable ..........................................
900 900
29 Prepaid Insurance...................................................Cash....................................................................
1,200 1,200
3-20 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-10
(a)Cash Accounts Payable
Oct. 1 30,000 Oct. 27 700 Oct. 27 700 Oct. 3 3,80010 140 30 3,000 Bal. 3,100
Bal. 26,440Common Stock
Accounts Receivable Oct. 1 30,000Oct. 6 10,800 Bal. 30,000Bal. 10,800
Service RevenueEquipment Oct. 6 10,800
Oct. 3 3,800 10 140Bal. 3,800 Bal. 10,940
Salaries and Wages ExpenseOct. 30 3,000Bal. 3,000
(b) PLUNKETT REAL ESTATE AGENCYTrial Balance
October 31, 2012
Debit CreditCash ................................................................................Accounts Receivable.................................................Equipment.....................................................................Accounts Payable.......................................................Common Stock............................................................Service Revenue .........................................................Salaries and Wages Expense .................................
$26,44010,800 3,800
3,000$44,040
$ 3,100 30,000 10,940
$44,040
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-21
EXERCISE 3-11
(a) Assets = Liabilities + Stockholders Equity
Cash + Equipment =AccountsPayable +
CommonStock Dividends
Sept. 1 +$20,000 +$20,000 Issued stock5 3,000 +$9,000 +$ 6,000
25 4,000 4,00030 500 $500 Dividends
$ 12,500 + $9,000 = $ 2,000 + +$20,000 $500
$21,500.. $21,500
(b)General Journal J1
Date Account Titles Debit CreditSept. 1 Cash ...........................................................................
Common Stock..............................................20,000
20,000
5 Equipment................................................................Accounts Payable.........................................Cash ..................................................................
9,000 6,000 3,000
25 Accounts Payable..................................................Cash ..................................................................
4,000 4,000
30 Dividends .................................................................Cash ..................................................................
500 500
3-22 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-11 (Continued)(c)
Cash9/1 20,000 9/5 3,000
9/25 4,000 9/30 500
Bal. 12,500
Equipment9/5 9,000 Bal. 9,000
Accounts Payable9/25 4,000 9/5 6,000
Bal. 2,000
Common Stock9/1 20,000Bal. 20,000
Dividends9/30 500 Bal. 500
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-23
EXERCISE 3-12
(a)General Journal
Date Account Titles and Explanation Debit CreditApr. 1 Cash.............................................................................
Common Stock ............................................... (Issued stock for cash)
15,00015,000
4 Supplies .....................................................................Accounts Payable .......................................... (Purchased supplies on account)
5,2005,200
7 Accounts Receivable .............................................Service Revenue............................................. (Billed clients for services rendered)
3,4003,400
12 Cash.............................................................................Service Revenue............................................. (Received cash for revenue earned)
700 700
15 Salaries and Wages Expense..............................Cash.................................................................... (Paid salaries)
800 800
25 Accounts Payable ...................................................Cash.................................................................... (Paid creditors on account)
3,5003,500
29 Cash.............................................................................Accounts Receivable .................................... (Received cash in payment of account)
800 800
30 Cash.............................................................................Unearned Service Revenue ........................ (Received cash for future services)
900 900
3-24 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-12 (Continued)(b) McGREGOR GARDENING COMPANY, INC.
Trial BalanceApril 30, 2012
Debit CreditCash ................................................................................Accounts Receivable.................................................Supplies .........................................................................Accounts Payable.......................................................Unearned Service Revenue.....................................Common Stock............................................................Service Revenue .........................................................Salaries and Wages Expense .................................
$13,100 2,600 5,200
800$21,700
$ 1,700 900 15,000 4,100
$21,700
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-25
EXERCISE 3-13
(a)Cash
Aug. 1 8,000 10 1,700 31 600
Aug. 12 1,200
Bal. 9,100
Accounts ReceivableAug. 25 3,400 Aug. 31 600Bal. 2,800
EquipmentAug. 12 6,200 Bal. 6,200
Notes Payable Aug. 12 5,000 Bal. 5,000
Common Stock Aug. 1 8,000 Bal. 8,000
Service Revenue Aug. 10 1,700
25 3,400 Bal. 5,100
(b) GALAXY INC.Trial Balance
August 31, 2012
Debit CreditCash.................................................................................Accounts Receivable .................................................Equipment......................................................................Notes Payable...............................................................Common Stock.............................................................Service Revenue..........................................................
$ 9,100 2,800 6,200
$18,100
$ 5,000 8,000 5,100$18,100
3-26 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-14
(a) Oct. 1 Cash........................................................................... 7,000Common Stock ............................................. 7,000 (Issued stock for cash)
10 Cash........................................................................... 980Service Revenue........................................... 980 (Received cash for services provided)
10 Cash........................................................................... 8,000Notes Payable ............................................... 8,000 (Obtained loan from bank)
20 Cash........................................................................... 700Accounts Receivable .................................. 700 (Received cash in payment of account)
20 Accounts Receivable ........................................... 920Service Revenue........................................... 920 (Billed clients for services provided)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-27
EXERCISE 3-14 (Continued)(b) STAMPFER CO.
Trial BalanceOctober 31, 2012
Debit CreditCash.................................................................................Accounts Receivable .................................................Supplies..........................................................................Equipment......................................................................Notes Payable...............................................................Accounts Payable .......................................................Common Stock.............................................................Dividends .......................................................................Service Revenue..........................................................Salaries and Wages Expense..................................Supplies Expense........................................................Rent Expense................................................................
$15,7301,020
2203,000
300
500180
250$21,200
$ 8,000 1,500 9,000
2,700
$21,200
EXERCISE 3-15
Error(a)
In Balance(b)
Difference(c)
Larger Column1.2.3.4.5.6.
NoYesYesNoYesNo
$400
300
36
Debit
Credit
Credit
3-28 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-16
(a) ROSHEK DELIVERY SERVICETrial BalanceJuly 31, 2012
Debit CreditCash ($98,370 Debit total without Cash $85,946) ......................................................................Accounts Receivable .................................................Prepaid Insurance .......................................................Equipment......................................................................Accounts Payable .......................................................Salaries and Wages Payable ...................................Notes Payable (due 2015) .........................................Common Stock.............................................................Retained Earnings.......................................................Dividends .......................................................................Service Revenue..........................................................Salaries and Wages Expense..................................Maintenance and Repairs Expense.......................Insurance Expense .....................................................
$12,424 13,400 2,200 59,360
700
7,428 1,958 900$98,370
$ 8,400 820 28,450 40,000 5,200
15,500
$98,370
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-29
EXERCISE 3-16 (Continued)(b) ROSHEK DELIVERY SERVICE
Income StatementFor the Month Ended July 31, 2012
Revenues Service revenue .......................................................... $15,500Expenses Salaries and wages expense.................................. $7,428 Maintenance and repairs expense........................ 1,958 Insurance expense..................................................... 900 Total expenses........................................................ 10,286Net income........................................................................ $ 5,214
ROSHEK DELIVERY SERVICERetained Earnings Statement
For the Month Ended July 31, 2012
Retained earnings, July 1 ............................................ $ 5,200Add: Net income .......................................................... 5,214
10,414Less: Dividends ............................................................. 700Retained earnings, July 31.......................................... $ 9,714
3-30 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
EXERCISE 3-16 (Continued)ROSHEK DELIVERY SERVICE
Balance SheetJuly 31, 2012
AssetsCurrent Assets Cash ............................................................................... $12,424 Accounts receivable ................................................. 13,400 Prepaid insurance...................................................... 2,200 Total current assets .............................................. $28,024Equipment ........................................................................ 59,360 Total assets.............................................................. $87,384
Liabilities and Stockholders EquityCurrent Liabilities Accounts payable...................................................... $ 8,400 Salaries and wages payable................................... 820 Total current liabilities ......................................... $ 9,220Notes payable ................................................................. 28,450 Total liabilities......................................................... 37,670Stockholders EquityCommon stock................................................................ 40,000Retained earnings.......................................................... 9,714 Total stockholders equity.................................. 49,714 Total liabilities and stockholders equity....... $87,384
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-31
EXERCISE 3-17
(a) (b)Account
Normal BalanceDebit or Credit
Balance Sheet orIncome Statement
Accounts payableAccounts receivableCommon stockDepreciation expenseInterest expenseInterest incomeInventoriesPrepaid expensesProperty and EquipmentRevenues
CreditDebitCreditDebitDebitCreditDebitDebitDebitCredit
Balance sheetBalance sheetBalance sheetIncome statementIncome statementIncome statementBalance sheetBalance sheetBalance sheetIncome statement
EXERCISE 3-18
1. Financing activity2. Operating activity3. Operating activity4. Non-cash event5. Financing activity6. Non-cash event7. Operating activity8. Investing activity9. Non-cash event
EXERCISE 3-19
1. Financing activity2. Financing activity3. Investing activity4. Operating activity5. Non-cash event6. Operating activity7. Non-cash event8. Operating activity9. Financing activity
(a)VA
GA
BO
ND
TR
AVE
L A
GEN
CY IN
C.
Ass
ets
=Li
abili
ties
+St
ockh
olde
rs E
quity
Ret
aine
d Ea
rnin
gsCa
sh+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent
=
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Rev
enue
s
Expe
nses
D
ivid
ends
1.+
$30,0
00+
$30,0
00
2.90
0$9
00R
ent E
xpen
se
3.3,
400
+$3
,400
4.+
$200
20
0A
dver
tisin
g Ex
pens
e
5.50
0+
$500
6.+
3,00
0+
$9,00
0+
$12,0
00Se
rvic
e Re
venu
e
7.40
0$4
00D
ivid
ends
8.20
020
0
9.1,
800
1,
800
Sala
ries
and
Wag
esEx
pens
e
10.
+
9,00
0 9,
000
$3
4,800
+ $
0
+ $5
00+
$3
,400
=$
0
+ $3
0,000
+ $1
2,000
$2
,900
$4
00
$3
8,700
$3
8,700
PROBLEM 3-1A
SOLUTIONS TO PROBLEM
3-32 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-33
PROBLEM 3-1A (Continued)(b) Service Revenue................................................................ $12,000
ExpensesSalaries and Wages Expense............................... $1,800Rent Expense............................................................. 900Advertising Expense............................................... 200 2,900
Net Income......................................................... $ 9,100
OR
Revenues ............................................................................. $12,000Less: Expenses ................................................................ 2,900Net Income........................................................................... $ 9,100
(a)TA
YLO
R M
AD
E CO
NSU
LTIN
G IN
C.
Ass
ets
=Li
abili
ties
+St
ockh
olde
rs E
quity
Ret
aine
d Ea
rnin
gsD
ate
Cash
+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent=
Not
esPa
yabl
e+
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Rev
enue
s
Expe
nses
D
ivid
ends
May
1+
$15,0
00+
$15,0
00
260
0$6
00R
ent E
xpen
se
3+
$500
+$5
00
515
015
0A
dver
tisin
g Ex
pens
e
9+
1,40
0+
$1,40
0Se
rvic
e Re
venu
e
1220
0$2
00D
ivid
ends
15+
4,20
0+
4,20
0Se
rvic
e Re
venu
e
172,
500
2,
500
Sala
ries
and
Wag
esEx
pens
e20
50
050
0
23+
1,20
01,
200
26+
5,00
0+
$5,00
0
2920
0+
$2,00
0+
1,80
0
30 18
0
18
0
Utili
ties
Expe
nse
$1
8,270
+$3
,000
+ $5
00+
$2
,000
= $5
,000
+ $1
,800
+ $1
5,000
+ $5
,600
$3
,430
$2
00
$23,7
70 $2
3,770
PROBLEM 3-2A
3-34 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-35
PROBLEM 3-2A (Continued)(b) TAYLOR MADE CONSULTING INC.
Income StatementFor the Month Ended May 31, 2012
RevenuesService revenue ($1,400 + $4,200) ................... $5,600
ExpensesSalaries and wages expense............................. $2,500Rent expense.......................................................... 600Utilities expense .................................................... 180Advertising expense ............................................ 150
Total expenses.............................................. 3,430Net income........................................................................ $2,170
(c) TAYLOR MADE CONSULTING INC.Balance SheetMay 31, 2012
AssetsCurrent assets
Cash .......................................................................... $18,270Accounts receivable ............................................ 3,000Supplies ................................................................... 500
Total current assets .................................... $21,770Equipment ............................................................... 2,000
Total assets.................................................... $23,770
Liabilities and Stockholders EquityCurrent liabilities
Notes payable ........................................................ $ 5,000Accounts payable ................................................. 1,800
Total current liabilities................................ $ 6,800Stockholders Equity
Common stock....................................................... 15,000Retained earnings ($0 + $2,170 $200)......... 1,970 16,970
Total liabilities and stockholders equity ........................................................... $23,770
(a)D
ICK
R
EBER
IN
C.
Ass
ets
=Li
abili
ties
+ St
ockh
olde
rs E
quity
Cash
+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent
=
Not
espa
yabl
e+
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Ret
aine
dEa
rnin
gs+
R
even
ues
Ex
pens
es
Div
iden
dsJu
ly 3
1B
al.
$4,00
0+
$2,50
0+
$500
+$5
,000
=$4
,200
+$6
,200
+$1
,600
Aug
. 1+
1,10
01,
100
42,
700
2,
700
9+
3,60
0+
1,80
0+
$5,40
0Se
rvic
e Re
venu
e
1570
0+
4,00
0+
3,30
0
192,
450
$1
,400
Sala
ries
and
Wag
esEx
pens
e
70
0R
ent E
xpen
se
35
0A
dver
tisin
g Ex
pens
e
2370
0$7
00D
ivid
ends
26+
5,00
0+
$5,00
0
31
+
380
38
0
Utili
ties
Expe
nse
$7,15
0+
$3,20
0+
$500
+$9
,000
= $5
,000
+$5
,180
+$6
,200
+$1
,600
+ $5
,400
$2
,830
$7
00
$19,8
50 $1
9,850
PROBLEM 3-3A
3-36 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-37
PROBLEM 3-3A (Continued)
(b) ROBIN KLANN INC.Income Statement
For the Month Ended August 31, 2012
RevenuesService revenue ........................................................ $5,400
ExpensesSalaries and wages expense................................ $1,400Rent expense............................................................. 700Utilities expense ....................................................... 380Advertising expense ............................................... 350
Total expenses................................................. 2,830Net income........................................................................... $2,570
ROBIN KLANN INC.Retained Earnings Statement
For the Month Ended August 31, 2012
Retained earnings, August 1............................................................... $1,600Add: Net income................................................................................... 2,570
4,170Less: Dividends...................................................................................... 700Retained earnings, August 31............................................................. $3,470
3-38 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-3A (Continued)ROBIN KLANN INC.
Balance SheetAugust 31, 2012
AssetsCurrent assets
Cash ............................................................................ $7,150Accounts receivable .............................................. 3,200Supplies ..................................................................... 500
Total current assets ...................................... $10,850Office equipment..................................................... 9,000
Total assets ..................................................... $19,850
Liabilities and Stockholders EquityCurrent liabilities
Notes payable .......................................................... $5,000Accounts payable................................................... 5,180
Total current liabilities ................................. $10,180Stockholders equity
Common stock ........................................................ 6,200Retained earnings .................................................. 3,470 9,670
Total liabilities and stockholders equity............................................................. $19,850
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-39
PROBLEM 3-4A
Date Account Titles and Explanation Debit CreditMar. 1 Cash.............................................................................
Common Stock ............................................... (Issued stock for cash)
50,00050,000
3 Land.............................................................................Buildings....................................................................Equipment .................................................................
Cash.................................................................... (Purchased Arnies Golf Land)
23,000 9,000 6,000
38,000
5 Advertising Expense..............................................Cash.................................................................... (Paid for advertising)
1,200 1,200
6 Prepaid Insurance...................................................Cash.................................................................... (Paid for one-year insurance policy)
2,400 2,400
10 Equipment .................................................................Accounts Payable .......................................... (Purchased equipment on account)
5,500 5,500
18 Cash.............................................................................Service Revenue............................................. (Received cash for revenue earned)
1,600 1,600
19 Cash (100 X $25)......................................................Unearned Service Revenue ........................ (Received cash for coupon books sold)
2,500 2,500
25 Dividends...................................................................Cash.................................................................... (Payment of cash dividend)
500 500
3-40 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-4A (Continued)
Date Account Titles and Explanation Debit CreditMar. 30 Salaries and Wages Expense .............................
Cash ................................................................... (Paid salaries expense)
800 800
30 Accounts Payable...................................................Cash ................................................................... (Paid creditor on account)
5,5005,500
31 Cash............................................................................Service Revenue ............................................ (Received cash for revenue earned)
900 900
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-41
PROBLEM 3-5A
(a)
Date Account Titles and Explanation Debit CreditApr. 1 Cash.............................................................................
Common Stock ............................................... (Issued shares of stock for cash)
18,00018,000
1 No entrynot a transaction.
2 Rent Expense ...........................................................Cash.................................................................... (Paid monthly office rent)
900 900
3 Supplies .....................................................................Accounts Payable .......................................... (Purchased supplies on account from Spring Green Company)
1,300 1,300
10 Accounts Receivable .............................................Service Revenue............................................. (Billed clients for services rendered)
1,900 1,900
11 Cash.............................................................................Unearned Service Revenue ........................ (Received cash advance for future service)
700 700
20 Cash.............................................................................Service Revenue............................................. (Received cash for revenue earned)
2,800 2,800
30 Salaries and Wages Expense..............................Cash.................................................................... (Paid monthly salary)
1,500 1,500
30 Accounts Payable ...................................................Cash.................................................................... (Paid Spring Green Company on account)
300 300
3-42 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-5A (Continued)(b)
Cash4/1 18,000 4/11 700 4/20 2,800
4/2 900 4/30 1,500 4/30 300
Bal. 18,800
Accounts Receivable4/10 1,900 Bal. 1,900
Supplies4/3 1,300 Bal. 1,300
Accounts Payable4/30 300 4/3 1,300
Bal. 1,000
Unearned Service Revenue 4/11 700 Bal. 700
Common Stock 4/1 18,000 Bal. 18,000
Service Revenue 4/10 1,900 4/20 2,800 Bal. 4,700
Salaries and Wages Expense4/30 1,500 Bal. 1,500
Rent Expense4/2 900 Bal. 900
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-43
PROBLEM 3-5A (Continued)(c) TOWNE ARCHITECTS INC.
Trial BalanceApril 30, 2012
Debit CreditCash.................................................................................Accounts Receivable .................................................Supplies..........................................................................Accounts Payable .......................................................Unearned Service Revenue......................................Common Stock.............................................................Service Revenue..........................................................Salaries and Wages Expense..................................Rent Expense................................................................
$18,800 1,900 1,300
1,500 900$24,400
$ 1,000 700 18,000 4,700
$24,400
3-44 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-6A
(a) & (c)Cash
10/1 Bal. 8,200 10/5 1,300
10/15 1,200 10/20 1,900 10/29 300 10/31 400
Bal. 5,700
Accounts Receivable10/1 Bal. 2,600 10/10 5,100
10/5 1,300
Bal. 6,400
Supplies10/1 Bal. 2,100 Bal. 2,100
Equipment10/1 Bal. 8,000 Bal. 8,000
Accounts Payable10/20 1,900 10/1 Bal. 4,800
Bal. 2,900
Unearned Service Revenue10/17 600 10/1 Bal. 1,000
Bal. 500
Common Stock10/1 Bal. 15,000Bal. 15,000
Dividends10/29 300 Bal. 300
Service Revenue10/10 5,10010/17 600Bal. 5,700
Salaries and Wages Expense10/15 1,200 Bal. 1,200
Utilities Expense10/31 400 Bal. 400
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-45
PROBLEM 3-6A (Continued)(b)
Date Account Titles and Explanation Debit CreditOct. 5 Cash.............................................................................
Accounts Receivable .................................... (Received collections from customers on account)
1,3001,300
10 Accounts Receivable .............................................Service Revenue............................................. (Billed customers for services performed)
5,1005,100
15 Salaries and Wages Expense..............................Cash.................................................................... (Paid employee salaries)
1,2001,200
17 Unearned Service Revenue .................................Service Revenue............................................. (Performed services for customers who paid in advance)
600 600
20 Accounts Payable ...................................................Cash.................................................................... (Paid creditors on account)
1,9001,900
29 Dividends...................................................................Cash.................................................................... (Payment of cash dividend)
300 300
31 Utilities Expense......................................................Cash.................................................................... (Paid utilities)
400 400
3-46 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-6A (Continued)(d) MIMOSA COMPANY
Trial BalanceOctober 31, 2012
Debit CreditCash ................................................................................Accounts Receivable.................................................Supplies .........................................................................Equipment.....................................................................Accounts Payable.......................................................Unearned Service Revenue.....................................Common Stock............................................................Dividends.......................................................................Service Revenue .........................................................Salaries and Wages Expense .................................Utilities Expense .........................................................
$ 5,700 6,400 2,100 8,000
300
1,200 400$24,100
$ 2,900 500 15,000
5,700
$24,100
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-47
PROBLEM 3-7A
MICHELS CO.Trial BalanceJune 30, 2012
Debit CreditCash ($3,090 $780 + $870).....................................Accounts Receivable*................................................Supplies ($800 $340)...............................................Equipment ($3,000 + $340) .......................................Accounts Payable ($3,686 $206 $260) ...........Unearned Service Revenue......................................Common Stock.............................................................Dividends ($800 + $600) ............................................Service Revenue..........................................................Salaries and Wages Expense ($3,600 + $700 $600) ............................................Utilities Expense..........................................................
$ 3,180 3,910 460 3,340
1,400
3,700 910$16,900
$ 3,220 1,200 9,000
3,480
$16,900
*$3,190 + $780 $870 $90 + $900
3-48 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-8A
(a) & (c)Cash
3/1 Bal. 16,000 3/9 9,900 3/20 8,300 3/31 750 3/31 20,000
3/2 2,000 3/10 10,900 3/12 500 3/20 5,000 3/31 3,800
Bal. 32,750
Accounts Receivable3/31 750 Bal. 750
Land3/1 Bal. 38,000 Bal. 38,000
Buildings3/1 Bal. 22,000 Bal. 22,000
Equipment3/1 Bal. 16,000 Bal. 16,000
Accounts Payable3/10 10,900 3/1 Bal. 12,000
3/2 8,000 Bal. 9,100
Common Stock3/1 Bal. 80,000Bal. 80,000
Service Revenue3/9 9,9003/20 8,3003/31 20,000Bal. 38,200
Sales Revenue3/31 1,500Bal. 1,500
Advertising Expense3/12 500 Bal. 500
Rent Expense3/2 10,000 3/20 5,000 Bal. 15,000
Salaries and Wages Expense3/31 3,800 Bal. 3,800
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-49
PROBLEM 3-8A (Continued)(b)
Date Account Titles and Explanation Debit CreditMar. 2 Rent Expense...........................................................
Accounts Payable..........................................Cash ................................................................... (Rented films for cash and on account)
10,000 8,000 2,000
3 No entrynot a transaction.
9 Cash ............................................................................Service Revenue ............................................ (Received cash for admissions)
9,900 9,900
10 Accounts Payable ($8,000 + $2,900).................Cash ................................................................... (Paid creditors on account)
10,90010,900
11 No entrynot a transaction.
12 Advertising Expense .............................................Cash ................................................................... (Paid advertising expenses)
500 500
20 Cash ............................................................................Service Revenue ............................................ (Received cash for admissions)
8,300 8,300
20 Rent Expense...........................................................Cash ................................................................... (Paid film rental)
5,000 5,000
31 Salaries and Wages Expense .............................Cash ................................................................... (Paid salaries expense)
3,800 3,800
3-50 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-8A (Continued)
Date Account Titles and Explanation Debit CreditMar. 31 Cash............................................................................
Accounts Receivable ............................................Sales Revenue (15% X $10,000)................... (Received cash and balance on account for concession revenue)
750 750
1,500
31 Cash............................................................................Service Revenue............................................ (Received cash for admissions)
20,00020,000
(d) SCIFI THEATER INC.Trial Balance
March 31, 2012
Debit CreditCash .............................................................................Accounts Receivable..............................................Land..............................................................................Buildings.....................................................................Equipment..................................................................Accounts Payable....................................................Common Stock.........................................................Service Revenue ......................................................Sales Revenue ..........................................................Advertising Expense ..............................................Rent Expense............................................................Salaries and Wages Expense ..............................
$ 32,750 750 38,000 22,000 16,000
500 15,000 3,800$128,800
$ 9,100 80,000 38,200 1,500
$128,800
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-51
PROBLEM 3-9A
Error (a) In Balance (b) Difference (c) Larger Column1. No $600 Debit2. Yes None N/A3. Yes None N/A4. No $680 Credit5. Yes None N/A6. Yes None N/A7. No $900 Debit8. Yes None N/A
(a)N
EW D
AW
N W
INDO
W W
ASH
ING
IN
C.
Ass
ets
=Li
abili
ties
+St
ockh
olde
rs E
quity
Ret
aine
d Ea
rnin
gsCa
sh+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent
=
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Rev
enue
s
Expe
nses
D
ivid
ends
1.+
$20,0
00+
$20,0
00
2.9,
000
+$9
,000
3.70
0$7
00R
ent E
xpen
se
4.30
0+
$300
5.+
$750
75
0A
dver
tisin
g Ex
pens
e
6.+
7,20
0+
$7,20
0Se
rvic
e Re
venu
e
7.50
0$5
00D
ivid
ends
8.1,
700
1,
700
Sala
ries
and
Wag
esEx
pens
e
9.14
0 14
0Ut
ilitie
s Ex
pens
e
10.
+$1
,000
+1,
000
Serv
ice
Reve
nue
11.
+
650
65
0
$15,5
10+
$
350
+ $3
00+
$9
,000
= $7
50+
$2
0,000
+ $8
,200
$3
,290
$5
00
$2
5,160
$2
5,160
PROBLEM 3-1B
3-52 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-53
PROBLEM 3-1B (Continued)(b) Service Revenue ($7,200 + $1,000).............................. $8,200
ExpensesSalaries and Wages Expense............................... $1,700Advertising Expense............................................... 750Rent Expense............................................................. 700Utilities Expense....................................................... 140 3,290
Net Income......................................................... $4,910
OR
Revenues ............................................................................. $8,200Less: Expenses ................................................................ 3,290Net Income........................................................................... $4,910
(a)A
LDR
ICH
SE
RVI
CE IN
C.
Ass
ets
=Li
abili
ties
+St
ockh
olde
rs E
quity
Ret
aine
d Ea
rnin
gsD
ate
Cash
+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent=
Not
esPa
yabl
e+
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Rev
enue
s
Expe
nses
D
ivid
ends
June
1$1
5,000
$15,0
00
22,
000
+$1
5,000
+$1
3,000
360
0$6
00R
ent E
xpen
se
5+
$2,40
0+
$2,40
0Se
rvic
e Re
venu
e
930
0$3
00D
ivid
ends
12+
$240
+$2
40
15+
750
75
0
17+
200
20
0A
dver
tisin
gEx
pens
e20
+1,
500
+1,
500
Serv
ice
Reve
nue
2350
050
0
2618
018
0Ut
ilitie
s Ex
pens
e
2924
024
0
30 75
0
75
0
Sala
ries
and
Wag
es E
xpen
se$1
2,680
+ $1
,650
+ $2
40+
$1
5,000
= $1
2,500
+ $2
00+
$15,0
00+
$3
,900
$1
,730
$3
00
$29,5
70 $2
9,570
PROBLEM 3-2B
3-54 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-55
PROBLEM 3-2B (Continued)(b) ALDRICH SERVICE INC.
Income StatementFor the Month Ended June 30, 2012
RevenuesService revenue ($2,400 + $1,500) ................... $3,900
ExpensesSalaries and wages expense............................. $750Rent expense.......................................................... 600Advertising expense ............................................ 200Utilities expense .................................................... 180
Total expenses.............................................. 1,730Net income........................................................................ $2,170
(c) ALDRICH SERVICE INC.Balance SheetJune 30, 2012
AssetsCurrent Assets
Cash........................................................................... $12,680Accounts receivable............................................. 1,650Supplies.................................................................... 240
Total current assets..................................... $14,570Equipment ........................................................................ 15,000
Total assets............................................................. $29,570
Liabilities and Stockholders EquityCurrent Liabilities
Notes payable......................................................... $12,500Accounts payable ................................................. 200
Total liabilities ............................................... $12,700Stockholders equity
Common stock....................................................... 15,000Retained earnings* ............................................... 1,870 16,870
Total liabilities and stockholders equity ........................................................... $29,570
*($0 + $2,170 $300)
(a)TI
EDE
COM
PAN
Y
Ass
ets
=Li
abili
ties
+St
ockh
olde
rs E
quity
Cash
+
Acc
ount
sR
ecei
vabl
e+
Supp
lies
+Eq
uipm
ent =
Not
esPa
yabl
e+
Acc
ount
sPa
yabl
e+
Com
mon
Stoc
k+
Ret
aine
dEa
rnin
gs+
Rev
enue
s
Expe
nses
D
ivid
ends
Bal
.$9
,000
+$1
,700
+$6
00+
$5,00
0=
$3,60
0+
$12,0
00+
$700
Sept
. 2.
3,
400
3,
400
5.+
1,20
01,
200
8.1,
000
+5,
100
+4,
100
13.
+2,
300
+8,
300
+$1
0,600
Serv
ice
Rev
enu
e
17.
60
0$6
00D
ivid
ends
22.
2,
250
$9
00Sa
larie
s an
d W
ages
Expe
nse
1,
100
Ren
t Expe
nse
25
0A
dver
tisin
g Ex
pen
se
26.
+22
0 22
0Ut
ilitie
s Ex
pen
se
30.
+
5,00
0
+$5
,000
$10,2
50+
$8,80
0+
$600
+$1
0,100
= $5
,000
+$4
,520
+$1
2,000
+$7
00+
$1
0,600
$2
,470
$6
00
$29,7
50 $2
9,750
PROBLEM 3-3B
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Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-57
PROBLEM 3-3B (Continued)
(b) TIEDE COMPANYIncome Statement
For the Month Ended September 30, 2012
RevenuesService revenue ............................................................ $10,600
ExpensesRent expense................................................................. $1,100Salaries and wages expense.................................... 900Advertising expense ................................................... 250Utilities expense ........................................................... 220
Total expenses..................................................... 2,470Net income............................................................................... $8,130
TIEDE COMPANYRetained Earnings Statement
For the Month Ended September 30, 2012
Retained earnings, September 1........................................................ $ 700Add: Net income ................................................................................... 8,130
8,830Less: Dividends...................................................................................... 600Retained earnings, September 30 ..................................................... $8,230
3-58 Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only)
PROBLEM 3-3B (Continued)TIEDE COMPANY
Balance SheetSeptember 30, 2012
AssetsCurrent assets
Cash .......................................................................... $10,250Accounts receivable ............................................ 8,800Supplies ................................................................... 600
Total current assets .................................... $19,650Equipment............................................................... 10,100
Total assets ................................................... $29,750
Liabilities and Stockholders EquityCurrent liabilities
Notes payable ........................................................ $ 5,000Accounts payable................................................. 4,520
Total current liabilities ............................... $ 9,520Stockholders equity
Common stock ...................................................... 12,000Retained earnings ................................................ 8,230 20,230
Total liabilities and stockholders equity........................................................... $29,750
Copyright 2011 John Wiley & Sons, Inc. Kimmel Accounting, 4/e Solutions Manual (For Instructor Use Only) 3-59
PROBLEM 3-4B
Date Account Titles and Explanation Debit CreditApr. 1 Cash ............................................................................
Common Stock ............................................... (Issued stock for cash)
70,00070,000
4 Land.............................................................................Cash ................................................................... (Purchased land for cash)
50,00050,000
8 Advertising Expense..............................................Accounts Payable.......................................... (Incurred advertising expense on account)
1,200 1,200
11 Salaries and Wages Expense .............................Cash ................................................................... (Paid salaries)
2,700 2,700
12 No entrynot a transaction.
13 Prepaid Insurance...................................................Cash ................................................................... (Paid for one-year insurance policy)
7,200 7,200
17 Dividends...................................................................Cash ................................................................... (Payment of cash dividend)
600 600
20 Cash ............................................................................Service Revenue ............................................ (Received cash for services provided)
6,000 6,000
25 Cash (100 X $90)......................................................Unearned Service Revenue ........................ (Received advance for future services)
9,000 9,000
3-60