IFRS Edition-2nd: The Accounting Information System

Intermediate Accounting
IFRS Edition-2nd
Questions & Solutions
Chapter 3
The Accounting
Information
System
Donald E. Kieso
Jerry J. Weygandt
Terry D. Warfield
BRIEF EXERCISES
4 BE3-1 Transactions for Mehta Company for the month of May are presented below. Prepare journal entries
for each of these transactions. (You may omit explanations.)
May 1 B.D. Mehta invests €4,000 cash in exchange for ordinary shares in a small welding corporation.
3 Buys equipment on account for €1,100.
13 Pays €400 to landlord for May rent.
21 Bills Noble Corp. €500 for welding work done.
4 BE3-2 Agazzi Repair Shop had the following transactions during the first month of business as a propri-
etorship. Journalize the transactions. (Omit explanations.)
Aug. 2 Invested €12,000 cash and €2,500 of equipment in the business.
7 Purchased supplies on account for €500. (Debit asset account.)
12 Performed services for clients, for which €1,300 was collected in cash and €670 was billed to the
clients.
15 Paid August rent €600.
19 Counted supplies and determined that only €270 of the supplies purchased on August 7 are still
on hand.
4 5 BE3-3 On July 1, 2015, Crowe Co. pays €15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both
companies have fiscal years ending December 31. For Crowe Co. journalize the entry on July 1 and the
adjusting entry on December 31.
4 5 BE3-4 Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for
Zubin Insurance Co. Zubin uses the accounts Unearned Insurance Revenue and Insurance Revenue.
4 5 BE3-5 Assume that on February 1, Marks and Spencer plc (M&S) (GBR) paid £72,000 in advance for
2 years’ insurance coverage. Prepare M&S’s February 1 journal entry and the annual adjusting entry on
June 30.
114 Chapter 3 The Accounting Information System
4 5 BE3-6 LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (ten-
ant) for 3 months for a total cash payment of €2,400 received in advance. Prepare LaBouche’s November 1
journal entry and the December 31 annual adjusting entry.
4 5 BE3-7 Dresser Company’s weekly payroll, paid on Fridays, totals €8,000. Employees work a 5-day week.
Prepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the €8,000
cash payment on Friday, January 2.
5 BE3-8 Included in Gonzalez Company’s December 31 trial balance is a note receivable of €12,000. The note
is a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record €300 of
accrued interest, and the February 1 journal entry to record receipt of €12,400 from the borrower.
4 BE3-9 Prepare the following adjusting entries at August 31 for Nokia (FIN).
(a) Interest on notes payable of €300 is accrued.
(b) Unbilled fees for services performed total €1,400.
(c) Salaries and wages earned by employees of €700 have not been recorded.
(d) Bad debt expense for year is €900.
Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Pay-
able, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and
Bad Debt Expense.
5 BE3-10 At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment
€30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depre-
ciation for the year is estimated to be €2,000. Prepare the adjusting entry for depreciation at December 31,
and indicate the statement of financial position presentation for the equipment at December 31.
7 BE3-11 Side Kicks has year-end account balances of Sales Revenue €808,900; Interest Revenue €13,500;
Cost of Goods Sold €556,200; Operating Expenses €189,000; Income Tax Expense €35,100; and Dividends
€18,900. Prepare the year-end closing entries.
9 *BE3-12 Kelly Company had cash receipts from customers in 2015 of €142,000. Cash payments for oper-
ating expenses were €97,000. Kelly has determined that at January 1, accounts receivable was €13,000,
and prepaid expenses were €17,500. At December 31, accounts receivable was €18,600, and prepaid
expenses were €23,200. Compute (a) service revenue and (b) operating expenses.
10 *BE3-13 Assume that GlaxoSmithKline (GBR) made a December 31 adjusting entry to debit Salaries and
Wages Expense and credit Salaries and Wages Payable for £4,200 for one of its departments. On January 2,
Glaxo paid the weekly payroll of £7,000. Prepare Glaxo’s (a) January 1 reversing entry; (b) January 2 entry
(assuming the reversing entry was prepared); and (c) January 2 entry (assuming the reversing entry was
not prepared).
EXERCISES
4 E3-1 (Transaction Analysis—Service Company) Kai Edo is a licensed public accountant. During the first
month of operations of her business (a sole proprietorship), the following events and transactions occurred
(amounts in thousands).
April 2 Invested ¥30,000 cash and equipment valued at ¥14,000 in the business.
2 Hired a secretary-receptionist at a salary of ¥290 per week payable monthly.
3 Purchased supplies on account ¥700. (Debit an asset account.)
7 Paid office rent of ¥600 for the month.
11 Completed a tax assignment and billed client ¥1,100 for services rendered. (Use Service Revenue
account.)
12 Received ¥3,200 advance on a management consulting engagement.
17 Received cash of ¥2,300 for services completed for Ferengi Co.
21 Paid insurance expense ¥110.
30 Paid secretary-receptionist ¥1,160 for the month.
30 A count of supplies indicated that ¥120 of supplies had been used.
30 Purchased a new computer for ¥5,100 with personal funds. (The computer will be used exclusively
for business purposes.)
Instructions
Journalize the transactions in the general journal. (Omit explanations.)
Exercises 115
4 E3-2 (Corrected Trial Balance) The trial balance of Geronimo Company does not balance. Your review
of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Pre-
paid Insurance, Accounts Payable, and Property Tax Expense were each understated €1,000. (c) A trans-
position error was made in Accounts Receivable and Service Revenue; the correct balances for Accounts
Receivable and Service Revenue are €2,750 and €6,690, respectively. (d) A debit posting to Advertising
Expense of €300 was omitted. (e) A €3,200 cash drawing by the owner was debited to Geronimo, Capital,
and credited to Cash.
GERONIMO COMPANY
TRIAL BALANCE
APRIL 30, 2015
Debit Credit
Cash € 2,100
Accounts Receivable 2,570
Prepaid Insurance 700
Equipment € 8,000
Accounts Payable 4,500
Property Taxes Payable 560
Geronimo, Capital 11,200
Service Revenue 6,960
Salaries and Wages Expense 4,200
Advertising Expense 1,100
Property Tax Expense 800
€18,190 €24,500
Instructions
Prepare a correct trial balance.
4 E3-3 (Corrected Trial Balance) The trial balance of Scarlatti Corporation does not balance.
SCARLATTI CORPORATION
TRIAL BALANCE
APRIL 30, 2015
Debit Credit
Cash $ 5,912
Supplies 2,967
Equipment 6,100
Accounts Payable $ 7,044
Share Capital—Ordinary 8,000
Retained Earnings 2,000
Office Expense 4,320
$24,539 $22,244
An examination of the ledger shows these errors.

1. Cash received from a customer on account was recorded (both debit and credit) as $1,580 instead
of $1,850.
2. The purchase on account of a computer costing $1,900 was recorded as a debit to Office Expense
and a credit to Accounts Payable.
3. Services were performed on account for a client, $2,250, for which Accounts Receivable was deb-
ited $2,250 and Service Revenue was credited $225.
4. A payment of $95 for telephone charges was entered as a debit to Office Expense and a debit to Cash.
5. The Service Revenue account was totaled at $5,200 instead of $5,280.
Instructions
From this information prepare a corrected trial balance.
4 E3-4 (Corrected Trial Balance) The trial balance of Oakley Co. does not balance.
OAKLEY CO.
TRIAL BALANCE
JUNE 30, 2015
Debit Credit
Cash € 2,870
Accounts Receivable € 3,231
Supplies 800
Equipment 3,800
Unearned Service Revenue 1,200
Office Expense 940
€13,371 €16,916
Each of the listed accounts should have a normal balance per the general ledger. An examination of the
ledger and journal reveals the following errors.
1. Cash received from a customer on account was debited for €370, and Accounts Receivable was
credited for the same amount. The actual collection was for €730.
2. The purchase of a computer printer on account for €500 was recorded as a debit to Supplies for
€500 and a credit to Accounts Payable for €500.
3. Services were performed on account for a client for €890. Accounts Receivable was debited for
€890 and Service Revenue was credited for €89.
4. A payment of €65 for telephone charges was recorded as a debit to Office Expense for €65 and a
debit to Cash for €65.
5. When the Unearned Service Revenue account was reviewed, it was found that service revenue
amounting to €225 was performed prior to June 30.
6. A debit posting to Salaries and Wages Expense of €670 was omitted.
7. A payment on account for €206 was credited to Cash for €206 and credited to Accounts Payable for €260.
8. A dividend of €575 was debited to Salaries and Wages Expense for €575 and credited to Cash for €575.
Instructions
Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)
5 E3-5 (Adjusting Entries) The ledger of Chopin Rental Agency on March 31 of the current year includes
the following selected accounts before adjusting entries have been prepared.
Debit Credit
Prepaid Insurance € 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation—Equipment € 8,400
Notes Payable 20,000
Unearned Rent Revenue 6,300
Rent Revenue 60,000
Interest Expense –0–
An analysis of the accounts shows the following.

1. The equipment depreciates €250 per month.
2. One-third of the unearned rent was earned during the quarter.
3. Interest of €500 is accrued on the notes payable.
4. Supplies on hand total €650.
5. Insurance expires at the rate of €300 per month.
Exercises 117
Instructions
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional
accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense. (Omit
explanations.)
5 E3-6 (Adjusting Entries) Stephen King, D.D.S., opened a dental practice on January 1, 2015. During the
first month of operations, the following transactions occurred.
1. Performed services for patients who had dental plan insurance. At January 31, $750 of such ser-
vices was performed but not yet billed to the insurance companies.
2. Utility expenses incurred but not paid prior to January 31 totaled $520.
3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000,
3-year note payable. The equipment depreciates $400 per month. Interest is $500 per month.
4. Purchased a one-year malpractice insurance policy on January 1 for $15,000.
5. Purchased $1,600 of dental supplies. On January 31, determined that $400 of supplies were on hand.
Instructions
Prepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—
Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense,
Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Accounts Payable.
5 E3-7 (Analyze Adjusted Data) A partial adjusted trial balance of Safin Company at January 31, 2015,
shows the following.
SAFIN COMPANY
ADJUSTED TRIAL BALANCE
JANUARY 31, 2015
Debit Credit
Supplies £ 900
Prepaid Insurance 2,400
Salaries and Wages Payable £ 800
Unearned Service Revenue 750
Supplies Expense 950
Insurance Expense 400
Instructions
Answer the following questions, assuming the year begins January 1.
(a) If the amount in Supplies Expense is the January 31 adjusting entry and £850 of supplies was pur-
chased in January, what was the balance in Supplies on January 1?
(b) If the amount in Insurance Expense is the January 31 adjusting entry and the original insurance
premium was for one year, what was the total premium and when was the policy purchased?
(c) If £2,700 of salaries and wages were paid in January, what was the balance in Salaries and Wages
Payable at December 31, 2014?
(d) If £1,600 was received in January for services performed in January, what was the balance in
Unearned Service Revenue at December 31, 2014?
5 E3-8 (Adjusting Entries) William Bryant is the new owner of Ace Computer Services. At the end of
August 2015, his first month of ownership, Bryant is trying to prepare monthly financial statements. Below
is some information related to unrecorded expenses that the business incurred during August.
1. At August 31, Bryant owed his employees $2,900 in salaries and wages that will be paid on
September 1.
2. At the end of the month, he had not yet received the month’s utility bill. Based on past experience,
he estimated the bill would be approximately $600.
3. On August 1, Bryant borrowed $60,000 from a local bank on a 15-year mortgage. The annual interest
rate is 8%.
4. A telephone bill in the amount of $117 covering August charges is unpaid at August 31 (use Tele-
phone and Internet Expense account).
Instructions
Prepare the adjusting journal entries as of August 31, 2015, suggested by the information provided.
5 E3-9 (Adjusting Entries) Selected accounts of Leno Company are shown below.
Supplies Accounts Receivable
Beg. Bal. 800 10 ⁄ 31 470 10 ⁄ 17 2,100

10 ⁄ 31 1,650
Salaries and Wages Expense Salaries and Wages Payable
10 ⁄ 15 800 10 ⁄ 31 600
10 ⁄ 31 600
Unearned Service Revenue Supplies Expense
10 ⁄ 31 400 10 ⁄ 20 650 10 ⁄ 31 470
Service Revenue
10 ⁄ 17 2,100
10 ⁄ 31 1,650
10 ⁄ 31 400
Instructions
From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting
journal entries that were made on October 31, 2015. Prepare explanations for each journal entry.
5 E3-10 (Adjusting Entries) Uhura Resort opened for business on June 1 with eight air-conditioned units. Its
trial balance on August 31 is as follows (in thousands).
UHURA RESORT
TRIAL BALANCE
AUGUST 31, 2015
Debit Credit
Cash ¥ 19,600
Supplies 2,600
Land 20,000
Buildings 120,000
Equipment 16,000
Accounts Payable ¥ 4,500
Unearned Rent Revenue 4,600
Mortgage Payable 50,000
Retained Earnings 0
Dividends 5,000
Rent Revenue 86,200
Utilities Expense 9,200
Maintenance and Repairs Expense 3,600
¥245,300 ¥245,300
Other data:
1. The balance in prepaid insurance is a one-year premium paid on June 1, 2015.
2. An inventory count on August 31 shows ¥650 of supplies on hand.
3. Annual depreciation rates are buildings (4%) and equipment (10%). Residual value is estimated to
be 10% of cost.
4. Unearned rent revenue of ¥3,800 was earned prior to August 31.
5. Salaries and wages of ¥375 were unpaid at August 31.
6. Rentals of ¥800 were due from tenants at August 31.
7. The mortgage note is dated 1/1/2015. The mortgage interest rate is 8% per year.
Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (Omit
explanations.)
(b) Prepare an adjusted trial balance on August 31.
Exercises 119
6 E3-11 (Prepare Financial Statements) The adjusted trial balance of Cavamanlis Co. as of December 31,
2015, contains the following.
CAVAMANLIS CO.
DECEMBER 31, 2015
Account Titles Dr. Cr.
Cash $18,972
Prepaid Rent 2,280
Equipment 18,050
Accumulated Depreciation—Equipment $ 4,895
Notes Payable 5,700
Dividends 3,000
Rent Expense 2,760
Depreciation Expense 145
Interest Expense 83
Interest Payable 83
$59,050 $59,050
Instructions
(a) Prepare an income statement.
(b) Prepare a retained earnings statement.
(c) Prepare a classified statement of financial position.
6 E3-12 (Prepare Financial Statements) Flynn Design Agency was founded by Kevin Flynn in January 2011.
Presented below is the adjusted trial balance as of December 31, 2015.
FLYNN DESIGN AGENCY

DECEMBER 31, 2015
Dr. Cr.
Cash € 10,000
Supplies 5,000
Equipment 60,000
Interest Payable 150
Notes Payable 5,000
Unearned Service Revenue 5,600
Salaries and Wages Payable 1,300
Interest Expense 500
Depreciation Expense 7,000
Supplies Expense 3,400
Rent Expense 4,000
€127,050 €127,050
Instructions
(a) Prepare an income statement and a retained earnings statement for the year ending December 31,
2015, and an unclassified statement of financial position at December 31.
(b) Answer the following questions.
(1) If the note has been outstanding 6 months, what is the annual interest rate on that note?
(2) If the company paid €17,500 in salaries and wages in 2015, what was the balance in Salaries
and Wages Payable on December 31, 2014?
7 E3-13 (Closing Entries) The adjusted trial balance of Faulk Company shows the following data pertain-
ing to sales at the end of its fiscal year, October 31, 2015: Sales Revenue £800,000; Delivery Expense £12,000;
Sales Returns and Allowances £24,000; and Sales Discounts £12,000.
Instructions
(a) Prepare the revenues section of the income statement.
(b) Prepare separate closing entries for (1) sales revenue and (2) the contra accounts to sales revenue.
7 E3-14 (Closing Entries) Presented below is information related to Russell Corporation for the month
of January 2015.
Cost of goods sold €202,000 Salaries and wages expense € 61,000
Delivery expense 7,000 Sales discounts 8,000
Insurance expense 12,000 Sales returns and allowances 13,000
Rent expense 20,000 Sales revenue 340,000
Instructions
Prepare the necessary closing entries.
8 E3-15 (Missing Amounts) Presented below is financial information for two different companies.
Shabbona Company Jenkins Company

Sales revenue $90,000 (d)
Sales returns and allowances (a) $ 5,000
Net sales 85,000 90,000
Cost of goods sold 56,000 (e)
Gross profit (b) 38,000
Operating expenses 15,000 23,000
Net income (c) 15,000
Instructions
Compute the missing amounts.
7 E3-16 (Closing Entries for a Corporation) Presented below are selected account balances for Alistair Co.
as of December 31, 2015.
Inventory 12/31/15 $ 60,000 Cost of Goods Sold $235,700

Share Capital—Ordinary 75,000 Selling Expenses 16,000
Retained Earnings 45,000 Administrative Expenses 38,000
Dividends 18,000 Income Tax Expense 30,000
Sales Returns and Allowances 12,000
Sales Discounts 15,000
Sales Revenue 390,000
Instructions
Prepare closing entries for Alistair Co. on December 31, 2015. (Omit explanations.)
4 E3-17 (Transactions of a Corporation, Including Investment and Dividend) Snyder Miniature Golf and
Driving Range Inc. was opened on March 1 by Mickey Snyder. The following selected events and transac-
tions occurred during March.
Mar. 1 Invested £60,000 cash in the business in exchange for ordinary shares.
3 Purchased Michelle Wie’s Golf Land for £38,000 cash. The price consists of land £10,000, building
£22,000, and equipment £6,000. (Make one compound entry.)
5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of
£1,600.
6 Paid cash £1,480 for a one-year insurance policy.
10 Purchased golf equipment for £2,500 from Young Company, payable in 30 days.
Exercises 121
18 Received golf fees of £1,200 in cash.

25 Declared and paid a £1,000 cash dividend.
30 Paid salaries and wages of £900.
30 Paid Young Company in full.
31 Received £750 of fees in cash.
Snyder uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable,
Share Capital—Ordinary, Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.
Instructions
Journalize the March transactions. (Provide explanations for the journal entries.)
9 *E3-18 (Cash to Accrual Basis) Corinne Dunbar, M.D., maintains the accounting records of Dunbar Clinic
on a cash basis. During 2015, Dr. Dunbar collected €142,600 from her patients and paid €60,470 in expenses.
At January 1, 2015, and December 31, 2015, she had accounts receivable, unearned service revenue, accrued
expenses, and prepaid expenses as follows. (All long-lived assets are rented.)
January 1, 2015 December 31, 2015

Accounts receivable €11,250 €15,927
Unearned service revenue 2,840 4,111
Accrued expenses 3,435 2,108
Prepaid expenses 1,917 3,232
Instructions
Prepare a schedule that converts Dr. Dunbar’s “excess of cash collected over cash disbursed” for the year
2015 to net income on an accrual basis for the year 2015.
9 *E3-19 (Cash and Accrual Basis) Nalezny Corp. maintains its financial records on the cash basis of ac-
counting. Interested in securing a long-term loan from its regular bank, Nalezny Corp. requests you to
convert its cash-basis income statement data to the accrual basis. You are provided with the following sum-
marized data covering 2014, 2015, and 2016.
2014 2015 2016
Cash receipts from sales:
On 2014 sales $290,000 $160,000 $ 30,000
On 2015 sales –0– 355,000 90,000
On 2016 sales 408,000
Cash payments for expenses:
On 2014 expenses 185,000 67,000 25,000
On 2015 expenses 40,000a 170,000 55,000
On 2016 expenses 45,000b 218,000
a
Prepayments of 2015 expenses.
b
Prepayments of 2016 expenses.
Instructions
(a) Using the data above, prepare abbreviated income statements for the years 2014 and 2015 on the
cash basis.
(b) Using the data above, prepare abbreviated income statements for the years 2014 and 2015 on the
accrual basis.
5 10 *E3-20 (Adjusting and Reversing Entries) When the accounts of Constantine Inc. are examined, the
adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.
1. The prepaid insurance account shows a debit of 6,000, representing the cost of a 2-year fire insur-
ance policy dated August 1 of the current year.
2. On November 1, Rent Revenue was credited for 2,400, representing revenue from a subrental for
a 3-month period beginning on that date.
3. Purchase of advertising materials for 800 during the year was recorded in the Supplies Expense
account. On December 31, advertising materials of 290 are on hand.
4. Interest of 770 has accrued on notes payable.
Instructions
Prepare the following in general journal form.
(a) The adjusting entry for each item.
(b) The reversing entry for each item where appropriate.
11 *E3-21 (Worksheet) Presented below are selected accounts for Acevedo Company as reported in the
worksheet at the end of May 2015.
Acevedo Company.xls
Home Insert Page Layout Formulas Data Review View
P18 fx
A B C D E F G
Adjusted Income Statement of
Trial Balance Statement Financial Position
1 Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
2 Cash 15,000
3 Inventory 80,000
4 Sales Revenue 470,000
5 Sales Returns and Allowances 10,000
6 Sales Discounts 5,000
7 Cost of Goods Sold 250,000
Instructions
Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate
columns in the worksheet. Do not total individual columns.
11 *E3-22 (Worksheet and Statement of Financial Position Presentation) The adjusted trial balance for
Madrasah Co. (in euros) is presented in the following worksheet for the month ended April 30, 2015.
Madrasah Co.xls
P18 fx
A B C D E F G
1
2 MADRASAH CO.
3 Worksheet (PARTIAL)
4 For the Month Ended April 30, 2015
5 Adjusted Income Statement of
6 Trial Balance Statement Financial Position
8 Cash 18,972
9 Accounts Receivable 6,920
10 Prepaid Rent 2,280
11 Equipment 18,050
12 Accumulated Depreciation—Equipment 4,895
13 Notes Payable 5,700
14 Accounts Payable 4,472
15 Madrasah, Capital 34,960
16 Madrasah, Drawing 6,650
17 Service Revenue 12,590
18 Salaries and Wages Expense 6,840
19 Rent Expense 2,760
20 Depreciation Expense 145
21 Interest Expense 83
22 Interest Payable 83
Instructions
Complete the worksheet and prepare a classified statement of financial position.
Problems 123
11 *E3-23 (Partial Worksheet Preparation) Letterman Co. prepares monthly financial statements from a
worksheet. Selected portions of the January worksheet showed the following data.
Letterman Co.xls
P18 fx
A B C D E F G
1
2 LETTERMAN CO.
3 Worksheet (PARTIAL)
4 For the Month Ended January 31, 2015
5 Adjusted
6 Trial Balance Adjustments Trial Balance
8 Supplies 3,256 (a) 1,500 1,756
9 Accumulated Depreciation—Equipment 7,710 (b) 257 7,967
10 Interest Payable 100 (c) 50 150
11 Supplies Expense (a) 1,500 1,500
12 Depreciation Expense (b) 257 257
13 Interest Expense (c) 50 50
During February, no events occurred that affected these accounts. But at the end of February, the following
information was available.
(a) Supplies on hand €515

(b) Monthly depreciation €257
(c) Accrued interest € 50
Instructions
Reproduce the data that would appear in the February worksheet and indicate the amounts that would be
shown in the February income statement.
PROBLEMS
4 6 P3-1 (Transactions, Financial Statements—Service Company) Listed below are the transactions of
7 Yasunari Kawabata, D.D.S., for the month of September (amounts in thousands).
Sept. 1 Kawabata begins practice as a dentist and invests ¥20,000 cash.
2 Purchases equipment on account from Green Jacket Co. for ¥17,280.
4 Pays rent for office space, ¥680 for the month.
4 Employs a receptionist, Michael Bradley.
5 Purchases dental supplies for cash, ¥942.
8 Receives cash of ¥1,690 from patients for services performed.
10 Pays miscellaneous office expenses, ¥430.
14 Bills patients ¥5,820 for services performed.
18 Pays Green Jacket Co. on account, ¥3,600.
19 Withdraws ¥3,000 cash from the business for personal use.
20 Receives ¥980 from patients on account.
25 Bills patients ¥2,110 for services performed.
30 Pays the following expenses in cash: office salaries ¥1,800; miscellaneous office expenses ¥85.
30 Dental supplies used during September, ¥330.
Instructions
(a) Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use
the following ledger accounts: Cash; Accounts Receivable; Supplies; Equipment; Accumulated
Depreciation—Equipment; Accounts Payable; Yasunari Kawabata, Capital; Service Revenue; Rent
Expense; Office Expense; Salaries and Wages Expense; Supplies Expense; Depreciation Expense;
and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for
each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the
straight-line method, and no residual value. Do not use a drawing account.
(b) Prepare a trial balance.
(c) Prepare an income statement, a statement of owner’s equity, and an unclassified statement of
financial position.
(d) Close the ledger.
(e) Prepare a post-closing trial balance.
5 6 P3-2 (Adjusting Entries and Financial Statements) Mason Advertising Agency was founded in January
2011. Presented below are adjusted and unadjusted trial balances as of December 31, 2015.
MASON ADVERTISING AGENCY

TRIAL BALANCE
DECEMBER 31, 2015
Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash € 11,000 € 11,000
Accounts Receivable 20,000 23,500
Supplies 8,400 3,000
Prepaid Insurance 3,350 2,500
Equipment 60,000 60,000
Accumulated Depreciation—Equipment € 28,000 € 33,000
Accounts Payable 5,000 5,000
Interest Payable –0– 150
Notes Payable 5,000 5,000
Unearned Service Revenue 7,000 5,600
Salaries and Wages Payable –0– 1,300
Share Capital—Ordinary 10,000 10,000
Retained Earnings 3,500 3,500
Service Revenue 58,600 63,500
Salaries and Wages Expense 10,000 11,300
Interest Expense 350 500
Supplies Expense 5,400
Rent Expense 4,000 4,000
€117,100 €117,100 €127,050 €127,050
Instructions
(a) Journalize the annual adjusting entries that were made. (Omit explanations.)
(b) Prepare an income statement and a retained earnings statement for the year ending December 31,
2015, and an unclassified statement of financial position at December 31.
(c) Answer the following questions.
(2) If the company paid €12,500 in salaries in 2015, what was the balance in Salaries and Wages
Payable on December 31, 2014?
5 P3-3 (Adjusting Entries) A review of the ledger of Baylor Company at December 31, 2015, produces the
following data pertaining to the preparation of annual adjusting entries.
1. Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday
for the current week. Five employees receive $700 each per week, and three employees earn $600 each
per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last
2 days of December.
Problems 125
2. Unearned Rent Revenue $429,000. The company began subleasing office space in its new building on
November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until
occupancy is terminated. At December 31, the company had the following rental contracts that are
paid in full for the entire term of the lease.
Date Term (in months) Monthly Rent Number of Leases
Nov. 1 6 $6,000 5
Dec. 1 6 $8,500 4
3. Prepaid Advertising $13,200. This balance consists of payments on two advertising contracts. The con-
tracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown
below.
Contract Date Amount Number of Magazine Issues
A650 May 1 $6,000 12
B974 Oct. 1 $7,200 24
The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $60,000. This balance consists of a note for one year at an annual interest rate of 12%,
dated June 1.
Instructions
Prepare the adjusting entries at December 31, 2015. (Show all computations.)
4 5 P3-4 (Financial Statements, Adjusting and Closing Entries) The trial balance of Bellemy Fashion Center
6 7 contained the following accounts at November 30, the end of the company’s fiscal year.
BELLEMY FASHION CENTER

TRIAL BALANCE
NOVEMBER 30, 2015
Debit Credit
Cash € 28,700
Inventory 45,000
Supplies 5,500
Equipment 133,000
Sales Returns and Allowances 4,200
Cost of Goods Sold 495,400
Delivery Expense 16,700
Rent Expense 24,000
€978,700 €978,700
Adjustment data:
1. Supplies on hand totaled €1,500.
2. Depreciation is €15,000 on the equipment.
3. Interest of €11,000 is accrued on notes payable at November 30.
Other data:
1. Salaries and wages expense is 70% selling and 30% administrative.
2. Rent expense and utilities expense are 80% selling and 20% administrative.
3. €30,000 of notes payable are due for payment next year.
4. Maintenance and repairs expense is 100% administrative.
Instructions
(a) Journalize the adjusting entries.
(b) Prepare an adjusted trial balance.
(c) Prepare an income statement and retained earnings statement for the year and a classified state-
ment of financial position as of November 30, 2015.
(d) Journalize the closing entries.
5 P3-5 (Adjusting Entries) The accounts listed below appeared in the December 31 trial balance of the
Savard Theater.
Debit Credit
Equipment €192,000
Admissions Revenue 380,000
Interest Expense 1,400
Instructions
(a) From the account balances listed above and the information given below, prepare the annual
adjusting entries necessary on December 31. (Omit explanations.)
(1) The equipment has an estimated life of 16 years and a residual value of €24,000 at the end of
that time. (Use straight-line method.)
(2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%.
(Use 360 days for denominator.)
(3) In December, 2,000 coupon admission books were sold at €30 each. They could be used for
admission any time after January 1. The proceeds were recorded as Admissions Revenue.
(4) Advertising expense paid in advance and included in Advertising Expense €1,100.
(5) Salaries and wages accrued but unpaid €4,700.
(b) What amounts should be shown for each of the following on the income statement for the
year?
(1) Interest expense. (3) Advertising expense.
(2) Admissions revenue. (4) Salaries and wages expense.
5 6 P3-6 (Adjusting Entries and Financial Statements) The following are the trial balance and other informa-
tion related to Yorkis Perez, a consulting engineer.
YORKIS PEREZ, CONSULTING ENGINEER

TRIAL BALANCE
DECEMBER 31, 2015
Debit Credit
Cash R$ 29,500
Allowance for Doubtful Accounts R$ 750
Supplies 1,960
Equipment 25,000
Accumulated Depreciation—Equipment 6,250
Notes Payable 7,200
Yorkis Perez, Capital 35,010
Rent Expense 9,750
Office Expense 720
R$149,210 R$149,210
Problems 127
1. Fees received in advance from clients R$6,000.

2. Services performed for clients that were not recorded by December 31, R$4,900.
3. Bad debt expense for the year is R$1,430.
4. Insurance expired during the year R$480.
5. Equipment is being depreciated at 10% per year.
6. Yorkis Perez gave the bank a 90-day, 10% note for R$7,200 on December 1, 2015.
7. Rent of the building is R$750 per month. The rent for 2015 has been paid, as has that for January 2016.
8. Salaries and wages earned but unpaid December 31, 2015, R$2,510.
Instructions
(a) From the trial balance and other information given, prepare annual adjusting entries as of
December 31, 2015. (Omit explanations.)
(b) Prepare an income statement for 2015, a statement of owner’s equity, and a classified state-
ment of financial position. Yorkis Perez withdrew R$17,000 cash for personal use during the
year.
5 6 P3-7 (Adjusting Entries and Financial Statements) Sorenstam Advertising Corp. was founded in
January 2011. Presented below are the adjusted and unadjusted trial balances as of December 31,
2015.
SORENSTAM ADVERTISING CORP.

TRIAL BALANCE
DECEMBER 31, 2015
Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash € 7,000 € 7,000
Supplies 8,500 3,500
Prepaid Insurance 3,250 2,500
Equipment 60,000 60,000
Accumulated Depreciation—
Equipment € 27,000 € 35,750
Interest Payable 150
Unearned Service Revenue 7,000 5,600
Salaries and Wages Payable 1,500
Share Capital—Ordinary 10,000 10,000
Retained Earnings 4,500 4,500
Salaries and Wages Expense 10,000 11,500
Supplies Expense 5,000 10,000
€117,100 €117,100 €128,500 €128,500
Instructions
(a) Journalize the annual adjusting entries that were made. (Omit explanations.)
(b) Prepare an income statement and a retained earnings statement for the year ending December 31,
2015, and an unclassified statement of financial position at December 31, 2015.
(c) Answer the following questions.

(1) If the useful life of equipment is 6 years, what is the expected residual value?
(3) If the company paid €12,500 in salaries and wages in 2015, what was the balance in Salaries
and Wages Payable on December 31, 2014?
4 5 P3-8 (Adjusting and Closing) Presented below is the trial balance of the Ko Golf Club, Inc. as of Decem-
6 7 ber 31. The books are closed annually on December 31.
KO GOLF CLUB, INC.

TRIAL BALANCE
DECEMBER 31
Debit Credit
Cash £ 15,000
Allowance for Doubtful Accounts £ 1,100
Land 350,000
Buildings 120,000
Accumulated Depreciation—Buildings 38,400
Equipment 150,000
Equipment 70,000
Dues Revenue 200,000
Green Fees Revenue 5,900
Rent Revenue 17,600
£815,000 £815,000
Instructions
(a) Enter the balances in ledger accounts. Allow five lines for each account.
(b) From the trial balance and the information given below, prepare annual adjusting entries and post
to the ledger accounts. (Omit explanations.)
(1) The buildings have an estimated life of 30 years with no residual value (straight-line
method).
(2) The equipment is depreciated at 10% per year.
(3) Insurance expired during the year £3,500.
(4) The rent revenue represents the amount received for 11 months for dining facilities. The
December rent has not yet been received.
(5) It is estimated that 12% of the accounts receivable will be uncollectible.
(6) Salaries and wages earned but not paid by December 31, £3,600.
(7) Dues received in advance from members £8,900.
(c) Prepare an adjusted trial balance.
(d) Prepare closing entries and post.
4 5 P3-9 (Adjusting and Closing) Presented on page 129 is the December 31 trial balance of New York
6 7 Boutique.
8
Problems 129
NEW YORK BOUTIQUE

TRIAL BALANCE
DECEMBER 31
Debit Credit
Cash € 18,500
Allowance for Doubtful Accounts € 700
Inventory, December 31 80,000
Equipment 84,000
Accumulated Depreciation—Equipment 35,000
Cost of Goods Sold 408,000
Office Expense 5,000
€754,300 €754,300
Instructions
(a) Construct T-accounts and enter the balances shown.
(b) Prepare adjusting journal entries for the following and post to the T-accounts. (Omit explana-
tions.) Open additional T-accounts as necessary. (The books are closed yearly on December 31.)
(1) Bad debt expense is estimated to be €1,400.
(2) Equipment is depreciated based on a 7-year life (no residual value).
(3) Insurance expired during the year €2,550.
(4) Interest accrued on notes payable €3,360.
(5) Salaries and wages earned but not paid €2,400.
(6) Advertising paid in advance €700.
(7) Office supplies on hand €1,500, charged to Office Expense when purchased.
(c) Prepare closing entries and post to the accounts.
9 *P3-10 (Cash and Accrual Basis) On January 1, 2015, Norma Smith and Grant Wood formed a computer
sales and service enterprise in Manchester, U.K., by investing £90,000 cash. The new company, Lakeland
Sales and Service, has the following transactions during January.
1. Pays £6,000 in advance for 3 months’ rent of office, showroom, and repair space.
2. Purchases 40 personal computers at a cost of £1,500 each, 6 graphics computers at a cost of £2,500
each, and 25 printers at a cost of £300 each, paying cash upon delivery.
3. Sales, repair, and office employees earn £12,600 in salaries and wages during January, of which £3,000
was still payable at the end of January.
4. Sells 30 personal computers at £2,550 each, 4 graphics computers for £3,600 each, and 15 printers
for £500 each; £75,000 is received in cash in January, and £23,400 is sold on a deferred payment
basis.
5. Other operating expenses of £8,400 are incurred and paid for during January; £2,000 of incurred
expenses are payable at January 31.
Instructions
(a) Using the transaction data above, prepare for the month of January (1) a cash-basis income
statement, and (2) an accrual-basis income statement.
(b) Using the transaction data above, prepare as of January 31, 2015, (1) a cash-basis statement of
financial position and (2) an accrual-basis statement of financial position.
(c) Identify the items in the cash-basis financial statements that make cash-basis accounting inconsis-
tent with the theory underlying the elements of financial statements.
5 6 *P3-11 (Worksheet, Statement of Financial Position, Adjusting and Closing Entries) Cooke Company has
7 11 a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.
Cooke Co.xls
P18 fx
A B C D E
1
2 COOKE COMPANY
3 Worksheet
4 For the Month Ended September 30, 2015
5 Trial Balance Adjusted Trial Balance
6 Account Titles Dr. Cr. Dr. Cr.
7 Cash 37,400 37,400
8 Supplies 18,600 4,200
9 Prepaid Insurance 31,900 3,900
10 Land 80,000 80,000
11 Equipment 120,000 120,000
12 Accumulated Depreciation—Equipment 36,200 42,000
13 Accounts Payable 14,600 14,600
14 Unearned Service Revenue 2,700 700
15 Mortgage Payable 50,000 50,000
16 Cooke, Capital 109,700 109,700
17 Cooke, Drawing 14,000 14,000
18 Service Revenue 278,500 280,500
19 Salaries and Wages Expense 109,000 109,000
20 Maintenance and Repairs Expense 30,500 30,500
21 Advertising Expense 9,400 9,400
22 Utilities Expense 16,900 16,900
23 Property Tax Expense 18,000 21,000
24 Interest Expense 6,000 12,000
25 Totals 491,700 491,700
26 Insurance Expense 28,000
27 Supplies Expense 14,400
28 Interest Payable 6,000
29 Depreciation Expense 5,800
30 Property Taxes Payable 3,000
31 Totals 506,500 506,500
Instructions
(a) Prepare a complete worksheet.
(b) Prepare a classified statement of financial position. (Note: €10,000 of the mortgage payable is due
for payment in the next fiscal year.)
(c) Journalize the adjusting entries using the worksheet as a basis.
(d) Journalize the closing entries using the worksheet as a basis.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 3-1
May 1 Cash ................................................................. 4,000

Share Capital-Ordinary ........................... 4,000
3 Equipment ....................................................... 1,100

Accounts Payable.................................... 1,100
13 Rent Expense .................................................. 400

Cash .......................................................... 400
21 Accounts Receivable ...................................... 500

Service Revenue ...................................... 500
BRIEF EXERCISE 3-2
Aug. 2 Cash .................................................................. 12,000

Equipment ........................................................ 2,500
Agazzi, Capital .......................................... 14,500
7 Supplies ............................................................ 500

Accounts Payable ..................................... 500
12 Cash .................................................................. 1,300

Accounts Receivable ....................................... 670
Service Revenue ....................................... 1,970
Copyright © 2014 John Wiley & Sons, Inc. Kieso, IFRS, 2/e, Solutions Manual (For Instructor Use Only) 3-7
BRIEF EXERCISE 3-2 (Continued)
15 Rent Expense .................................................... 600

Cash ........................................................... 600
19 Supplies Expense ............................................. 230

Supplies (€500 – €270) .............................. 230
BRIEF EXERCISE 3-3
July 1 Prepaid Insurance ............................................ 15,000

Cash ........................................................... 15,000
Dec. 31 Insurance Expense ........................................... 2,500

Prepaid Insurance
(€15,000 X 1/2 X 1/3) .............................. 2,500
BRIEF EXERCISE 3-4
July 1 Cash ................................................................... 15,000

Unearned Insurance Revenue .................. 15,000
Dec. 31 Unearned Insurance Revenue ......................... 2,500

Insurance Revenue
(€15,000 X 1/2 X 1/3) .............................. 2,500
3-8 Copyright © 2014 John Wiley & Sons, Inc. Kieso, IFRS, 2/e, Solutions Manual (For Instructor Use Only)
BRIEF EXERCISE 3-5
Feb. 1 Prepaid Insurance ............................................ 72,000

Cash ........................................................... 72,000
June 30 Insurance Expense .......................................... 15,000

Prepaid Insurance
(£72,000 X 5/24) ..................................... 15,000
BRIEF EXERCISE 3-6
Nov. 1 Cash .................................................................. 2,400

Unearned Rent Revenue .......................... 2,400
Dec. 31 Unearned Rent Revenue.................................. 1,600

Rent Revenue
(€2,400 X 2/3) ......................................... 1,600
BRIEF EXERCISE 3-7
Dec. 31 Salaries and Wages Expense.......................... 4,800

Salaries and Wages Payable
(€8,000 X 3/5) ......................................... 4,800
Jan. 2 Salaries and Wages Payable ........................... 4,800

Salaries and Wages Expense.......................... 3,200
Cash ........................................................... 8,000
BRIEF EXERCISE 3-8
Dec. 31 Interest Receivable ........................................... 300

Interest Revenue ....................................... 300
Feb. 1 Cash ................................................................... 12,400

Notes Receivable ...................................... 12,000
Interest Receivable ................................... 300
Interest Revenue ....................................... 100
BRIEF EXERCISE 3-9
Aug. 31 Interest Expense ............................................... 300

Interest Payable......................................... 300
31 Accounts Receivable ....................................... 1,400

Service Revenue ....................................... 1,400
31 Salaries and Wages Expense .......................... 700

Salaries and Wages Payable .................... 700
31 Bad Debt Expense ............................................ 900

Allowance for Doubtful Accounts ........... 900
BRIEF EXERCISE 3-10
Depreciation Expense ....................................................... 2,000

Accumulated Depreciation—Equipment .................. 2,000
Equipment .......................................................................... €30,000

Less: Accumulated Depreciation—Equipment .............. 2,000 €28,000
BRIEF EXERCISE 3-11
Sales Revenue ........................................................... 808,900

Interest Revenue ....................................................... 13,500
Income Summary ............................................... 822,400
Income Summary ...................................................... 780,300

Cost of Goods Sold............................................ 556,200
Operating Expenses .......................................... 189,000
Income Tax Expense.......................................... 35,100
Income Summary ...................................................... 42,100

Retained Earnings.............................................. 42,100
Retained Earnings ..................................................... 18,900

Dividends ............................................................ 18,900
*BRIEF EXERCISE 3-12
(a) Cash receipts .................................................... $142,000

+ Increase in accounts receivable
(€18,600 – €13,000) .................................... 5,600
Service revenue ................................................ $147,600
(b) Payments for operating expenses .................. $ 97,000

– Increase in prepaid expenses
(€23,200 – €17,500) .................................... (5,700)
Operating expenses ......................................... $ 91,300
*BRIEF EXERCISE 3-13
(a) Salaries and Wages Payable.................................. 4,200

Salaries and Wages Expense ......................... 4,200
(b) Salaries and Wages Expense ................................ 7,000

Cash .................................................................. 7,000
(c) Salaries and Wages Payable.................................. 4,200

Salaries and Wages Expense ................................ 2,800
Cash .................................................................. 7,000
SOLUTIONS TO EXERCISES
EXERCISE 3-1 (15–20 minutes)
Apr. 2 Cash .................................................................. 30,000

Equipment......................................................... 14,000
Kai Edo, Capital ........................................ 44,000
2 No entry—not a transaction.
3 Supplies ............................................................ 700

Accounts Payable ..................................... 700
7 Rent Expense ................................................... 600

Cash ........................................................... 600
11 Accounts Receivable ....................................... 1,100

Service Revenue ....................................... 1,100
12 Cash .................................................................. 3,200

Unearned Service Revenue ..................... 3,200
17 Cash .................................................................. 2,300

Service Revenue ....................................... 2,300
21 Insurance Expense .......................................... 110

Cash ........................................................... 110
30 Salaries and Wages Expense .......................... 1,160

Cash ........................................................... 1,160
EXERCISE 3-1 (Continued)
30 Supplies Expense ............................................ 120

Supplies .................................................... 120
30 Equipment ........................................................ 5,100

Kai Edo, Capital ........................................ 5,100
GERONIMO COMPANY
Trial Balance
April 30, 2015
Debit Credit
Cash ...................................................................... € 2,100
Accounts Receivable ........................................... 2,750
Prepaid Insurance (€700 + €1,000) ..................... 1,700
Equipment ............................................................ 8,000
Accounts Payable (€4,500 – €1,000) ................... € 3,500
Property Tax Payable .......................................... 560
Geronimo, Capital (€11,200 + €3,200) ................. 14,400
Geronimo, Drawing .............................................. 3,200
Service Revenue .................................................. 6,690
Salaries and Wages Expense.............................. 4,200
Advertising Expense (€1,100 + €300) ................. 1,400
Property Tax Expense (€800 + €1,000) ............... 1,800
€25,150 €25,150
The ledger accounts are reproduced below, and corrections are shown in
the accounts.
Cash Accounts Payable

Bal. 5,912 (4) 190 Bal. 7,044
(1) 270
Accounts Receivable Share Capital—Ordinary

Bal. 5,240 (1) 270 Bal. 8,000
Supplies Retained Earnings

Bal. 2,967 Bal. 2,000
Equipment Service Revenue

Bal. 6,100 Bal. 5,200
(2) 1,900 (3) 2,025
(5) 80
Office Expense
Bal. 4,320 (2) 1,900
SCARLATTI CORPORATION
Trial Balance (Corrected)
April 30, 2015
Debit Credit
Cash ...................................................................... $ 5,992
Accounts Receivable ........................................... 4,970
Supplies ................................................................ 2,967
Equipment ............................................................ 8,000
Accounts Payable ................................................ $ 7,044
Share Capital—Ordinary ..................................... 8,000
Retained Earnings ............................................... 2,000
Service Revenue .................................................. 7,305
Office Expense ..................................................... 2,420
$24,349 $24,349
OAKLEY CO.
Trial Balance
June 30, 2015
Debit Credit
Cash (€2,870 + €360 – €65 – €65) ....................................... € 3,100
Accounts Receivable (€3,231 – €360) ................................ 2,871
Supplies (€800 – €500) ........................................................ 300
Equipment (€3,800 + €500) ................................................. 4,300
Accounts Payable (€2,666 – €206 – €260) ......................... € 2,200
Unearned Service Revenue (€1,200 – €225) ...................... 975
Share Capital—Ordinary ..................................................... 6,000
Dividends ............................................................................. 575
Retained Earnings ............................................................... 3,000
Service Revenue (€2,380 + €801 + €225) ........................... 3,406
Salaries and Wages Expense (€3,400 + €670 – €575)....... 3,495
Office Expense..................................................................... 940
€15,581 €15,581
1. Depreciation Expense (€250 X 3) ............................... 750

Accumulated Depreciation—Equipment ............ 750
2. Unearned Rent Revenue (€6,300 X 1/3) ..................... 2,100

Rent Revenue ....................................................... 2,100
3. Interest Expense .......................................................... 500

Interest Payable .................................................... 500
4. Supplies Expense ....................................................... 2,150

Supplies (€2,800 – €650) ..................................... 2,150
5. Insurance Expense (€300 X 3).................................... 900

Prepaid Insurance ............................................... 900
1. Accounts Receivable .................................................... 750

Service Revenue .................................................... 750
2. Utilities Expense ........................................................... 520

Accounts Payable .................................................. 520
3. Depreciation Expense .................................................. 400

Accumulated Depreciation—Equipment ............. 400
Interest Expense ........................................................... 500

Interest Payable ..................................................... 500
4. Insurance Expense ($15,000 X 1/12)............................ 1,250

Prepaid Insurance ................................................. 1,250
5. Supplies Expense ($1,600 – $400) ............................... 1,200

Supplies .................................................................. 1,200
(a) Ending balance of supplies ................................. £ 900

Add: Adjusting entry ........................................... 950
Deduct: Purchases.............................................. 850
Beginning balance of supplies ........................... £1,000
(b) Total prepaid insurance ..................................... £4,800 (£400 X 12)

Amount used (6 X £400) ..................................... 2,400
Present balance .................................................. £2,400
The policy was purchased six months ago (August 1, 2014)
(c) The entry in January to record salaries paid was
Salaries and Wages Expense ............................ 1,800

Salaries and Wages Payable ............................. 900
Cash .............................................................. 2,700
The “T” account for salaries and Wages payable is
Salaries and Wages Payable

Paid 900 Beg. Bal. ?
January
End Bal. 800
The beginning balance is therefore
Ending balance of Salaries

and Wages Payable ........................................... £ 800
Plus: Reduction of Salaries
and Wages Payable ........................................... 900
Beginning balance of Salaries
and Wages Payable ........................................... £1,700
(d) Service revenue ........................................... £2,000

Cash received .............................................. 1,600
Unearned service revenue reduced ........... £ 400
Ending Unearned revenue January 31, 2015 ............... £ 750

Plus: Unearned service revenue reduced .................... 400
Beginning unearned revenue December 31, 2014 ....... £1,150
(a) Salaries and Wages Expense........................................... 2,900

Salaries and Wages Payable .................................... 2,900
(b) Utilities Expense ............................................................... 600

Accounts Payable ...................................................... 600
(c) Interest Expense ($60,000 X 8% X 1/12) .......................... 400

Interest Payable ......................................................... 400
(d) Telephone and Internet Expense ..................................... 117

Accounts Payable ...................................................... 117
(a) 10/15 Salaries and Wages Expense............................. 800

Cash .............................................................. 800
(To record payment of October 15
payroll)
10/17 Accounts Receivable .......................................... 2,100

Service Revenue .......................................... 2,100
(To record revenue for services
performed for which payment has
not yet been received)
10/20 Cash ..................................................................... 650

Unearned Service Revenue ........................ 650
(To record receipt of cash for
services not yet performed)
(b) 10/31 Supplies Expense ............................................... 470

Supplies ........................................................ 470
(To record the use of supplies during
October)
10/31 Accounts Receivable .......................................... 1,650

Service Revenue .......................................... 1,650
(To record revenue for services
performed for which payment
has not yet been received)
10/31 Salaries and Wages Expense............................. 600

Salaries and Wages Payable ...................... 600
(To record liability for accrued payroll)
10/31 Unearned Service Revenue ................................ 400

Service Revenue .......................................... 400
(To reduce the Unearned Service
Revenue account for service that
has been performed)
(a) 1. Aug. 31 Insurance Expense (¥4,500 X 3/12) ........... 1,125

Prepaid Insurance ............................... 1,125
2. Aug. 31 Supplies Expense (¥2,600 – ¥650) ............ 1,950

Supplies ............................................... 1,950
3. Aug. 31 Depreciation Expense ................................ 1,080

Buildings ........................................... 1,080
(¥120,000 – ¥12,000 = ¥108,000;
¥108,000 X 4% = ¥4,320 per year;
¥4,320 X 3/12 = ¥1,080)
Aug. 31 Depreciation Expense ................................ 360

Equipment......................................... 360
(¥16,000 – ¥1,600 = ¥14,400;
¥14,400 X 10% = ¥1,440;
¥1,440 X 3/12 = ¥360)
4. Aug. 31 Unearned Rent Revenue ............................ 3,800

Rent Revenue ...................................... 3,800
5. Aug. 31 Salaries and Wages Expense .................... 375

Salaries and Wages Payable .............. 375
6. Aug. 31 Accounts Receivable ................................. 800

Rent Revenue ...................................... 800
7. Aug. 31 Interest Expense ......................................... 1,000

Interest Payable
[(¥50,000 X 8%) X 3/12] ................... 1,000
(b) UHURA RESORT

Adjusted Trial Balance
August 31, 2015
Debit Credit
Cash ........................................................................ ¥ 19,600
Accounts Receivable ............................................ 800
Prepaid Insurance (¥4,500 – ¥1,125) .................... 3,375
Supplies (¥2,600 – ¥1,950) .................................... 650
Land ........................................................................ 20,000
Buildings ................................................................ 120,000
Accumulated Depreciation—Buildings ............... ¥ 1,080
Equipment .............................................................. 16,000
Accumulated Depreciation—Equipment ............. 360
Accounts Payable.................................................. 4,500
Unearned Rent Revenue (¥4,600 – ¥3,800) .......... 800
Salaries and Wages Payable ................................ 375
Interest Payable ..................................................... 1,000
Mortgage Payable .................................................. 50,000
Share Capital—Ordinary ....................................... 100,000
Retained Earnings .................................................
Dividends ............................................................... 5,000
Rent Revenue (¥86,200 + ¥3,800 + ¥800) ............. 90,800
Salaries and Wages Expense (¥44,800 + ¥375)... 45,175
Utilities Expense .................................................... 9,200
Maintenance and Repairs Expense ..................... 3,600
Insurance Expense ................................................ 1,125
Supplies Expense .................................................. 1,950
Depreciation Expense—(Buildings) ..................... 1,080
Depreciation Expense—(Equipment) .................. 360
Interest Expense .................................................... 1,000
¥248,915 ¥248,915
EXERCISE 3-11 (20–25 Minutes)
(a) CAVAMANLIS CO.

Income Statement
For the Year Ended December 31, 2015
Revenues
Service revenue ....................................... $12,590
Expenses
Salaries and wages expense .................. $6,840
Rent expense ........................................... 2,760
Depreciation expense ............................. 145
Interest expense ...................................... 83 9,828
Net Income ......................................................... $ 2,762
(b) CAVAMANLIS CO.

Retained Earnings Statement
Retained earnings, January 1 ................................................. $11,310
Add: Net income .................................................................... 2,762
Less: Dividends ...................................................................... 3,000
Retained earnings, December 31 ........................................... $11,072
(c) CAVAMANLIS CO.

Statement of Financial Position
December 31, 2015
Assets
Noncurrent assets
Property, plant, and equipment
Equipment ........................................................ $18,050
Less: Accumulated depreciation—
equipment ........................................................ 4,895 $13,155
Current assets
Prepaid rent ...................................................... 2,280
Accounts receivable ........................................ 6,920
Cash .................................................................. 18,972
Total current assets ................................... 28,172
Total assets................................................................... $41,327
Equity and Liabilities

Equity
Share capital—ordinary .................................. $20,000
Retained earnings ........................................... 11,072 $31,072
Current liabilities
Notes payable .................................................. 5,700
Accounts payable ........................................... 4,472
Interest payable ............................................... 83
Total current liabilities .............................. 10,255
Total equity and liabilities ............................................ $41,327
(a) FLYNN DESIGN AGENCY

Income Statement
Revenues
Service revenue ..................................... €58,500
Expenses
Salaries and wages expense ................ €12,300
Depreciation expense ............................ 7,000
Rent expense .......................................... 4,000
Supplies expense ................................... 3,400
Insurance expense ................................. 850
Interest expense ..................................... 500
Total expenses ................................ 28,050
Net income ........................................................ €30,450
FLYNN DESIGN AGENCY

Retained earnings, January 1 ................................................. € 3,500

Add: Net income...................................................................... 30,450
Retained earnings, December 31............................................ €33,950
(a) (Continued) FLYNN DESIGN AGENCY

December 31, 2015
Assets
Equipment ..................................................................... €60,000
Less: Accumulated depreciation—equipment .......... 35,000 €25,000
Supplies ......................................................................... 5,000
Prepaid insurance ......................................................... 2,500
Accounts receivable ..................................................... 21,500
Cash ............................................................................... 10,000
Total assets ......................................................... €64,000

Equity
Share capital—ordinary .................................... €10,000
Retained earnings ............................................. 33,950 €43,950
Liabilities
Notes payable ...................................................... 5,000
Accounts payable ................................................ 8,000
Unearned service revenue .................................. 5,600
Salaries and wages payable ............................... 1,300
Interest payable ................................................... 150
Total liabilities .............................................. 20,050
Total equity and liabilities ........................................... €64,000
(b) 1. Based on interest payable at December 31, 2015, interest is €25 per
month or .5% of the note payable. .5% X 12 = 6% interest per year.
2. Salaries and Wages Expense, €12,300 less Salaries and Wages Payable
12/31/15, €1,300 = €11,000. Total Payments, €17,500 – €11,000 =
€6,500 Salaries and Wages Payable 12/31/14.
(a) Sales revenue ......................................................... £800,000

Less: Sales returns and allowances ................... £24,000
Sales discount ............................................ 12,000 36,000
Net sales ................................................................. £764,000
(b) Sales Revenue ........................................................ 800,000

Income Summary ............................................ 800,000
Income Summary ................................................... 36,000

Sales Returns and Allowances...................... 24,000
Sales Discounts .............................................. 12,000
Sales Revenue................................................................ 340,000

Sales Returns and Allowances ............................. 13,000
Sales Discounts ...................................................... 8,000
Income Summary.................................................... 319,000
Income Summary ........................................................... 302,000

Cost of Goods Sold ................................................ 202,000
Delivery Expense .................................................... 7,000
Insurance Expense ................................................. 12,000
Rent Expense .......................................................... 20,000
Income Summary ........................................................... 17,000

Retained Earnings .................................................. 17,000
(a) $5,000 ($90,000 – $85,000) (d) $95,000 ($5,000 + $90,000)

(b) $29,000 ($85,000 – $56,000) (e) $52,000 ($90,000 – $38,000)
(c) $14,000 ($29,000 – $15,000)
Sales Revenue ............................................................ 390,000

Cost of Goods Sold............................................. 235,700
Sales Returns and Allowances .......................... 12,000
Sales Discounts .................................................. 15,000
Selling Expenses................................................. 16,000
Administrative Expenses ................................... 38,000
Income Tax Expense........................................... 30,000
Income Summary ................................................ 43,300
(or)
Sales Revenue ............................................................ 390,000

Income Summary ................................................ 390,000
Income Summary ....................................................... 346,700

Cost of Goods Sold............................................. 235,700
Sales Returns and Allowances .......................... 12,000
Sales Discounts .................................................. 15,000
Selling Expenses................................................. 16,000
Administrative Expenses ................................... 38,000
Income Tax Expense........................................... 30,000
Income Summary ....................................................... 43,300

Retained Earnings............................................... 43,300
Retained Earnings ...................................................... 18,000

Dividends ............................................................. 18,000
Mar. 1 Cash .............................................................................. 60,000

Share Capital—Ordinary ................................... 60,000
(Investment of cash in business)
3 Land .............................................................................. 10,000

Buildings ...................................................................... 22,000
Equipment .................................................................... 6,000
Cash .................................................................... 38,000
(Purchased Michelle Wie’s Golf Land)
5 Advertising Expense ................................................... 1,600

Cash .................................................................... 1,600
(Paid for advertising)
6 Prepaid Insurance ....................................................... 1,480

Cash .................................................................... 1,480
(Paid for one-year insurance policy)
10 Equipment .................................................................... 2,500

Accounts Payable .............................................. 2,500
(Purchased equipment on account)
18 Cash .............................................................................. 1,200

Service Revenue ................................................ 1,200
(Received cash for services performed)
25 Dividends ..................................................................... 1,000

Cash .................................................................... 1,000
(Declared and paid a £1,000 cash dividend)
30 Salaries and Wages Expense ..................................... 900

Cash .................................................................... 900
(Paid salaries and wages expense)
30 Accounts Payable ........................................................ 2,500

Cash .................................................................... 2,500
(Paid creditor on account)
31 Cash .............................................................................. 750

Service Revenue ................................................ 750
(Received cash for services performed)
*EXERCISE 3-18 (15–20 minutes)
CORINNE DUNBAR, M.D.

Conversion of Cash Basis to Accrual Basis
For the Year 2015
Excess of cash collected over cash disbursed
(€142,600 – €60,470) ...................................................................... €82,130
Add increase in accounts receivable (€11,250 – €15,927) .............. 4,677
Deduct increase in unearned service revenue (€2,840 – €4,111) ... (1,271)
Add decrease in accrued expenses (€3,435 – €2,108) .................... 1,327
Add increase in prepaid expenses (€1,917 – €3,232) ...................... 1,315
Net income on an accrual basis ........................................................ €88,178
Alternate solution:
CORINNE DUNBAR, M.D.
Conversion of Income Statement Data
from Cash Basis to Accrual Basis
For the Year 2015
Cash Adjustments Accrual

Basis Add Deduct Basis
Collections from customers: €142,600
–Accounts receivable, Jan. 1 €11,250
+Accounts receivable, Dec. 31 €15,927
+Unearned service revenue, Jan. 1 2,840
–Unearned service revenue, Dec. 31 4,111
Service revenue €146,006
Disbursements for expenses: 60,470
–Accrued liabilities, Jan. 1 3,435
+Accrued liabilities, Dec. 31 2,108
+Prepaid expenses, Jan. 1 1,917
–Prepaid expenses, Dec. 31 3,232
Operating expenses 57,828
Net income—cash basis € 82,130
Net income—accrual basis € 88,178
(a) NALEZNY CORP.

Income Statement (Cash Basis)
For the Year Ended December 31,
2014 2015
Cash receipts ............................................... $290,000 $515,000
Cash payments ............................................ 225,000 282,000
Net income ................................................... $ 65,000 $233,000
(b) NALEZNY CORP.

Income Statement (Accrual Basis)
For the Year Ended December 31,
2014 2015
Revenues* .................................................... $480,000 $445,000
Expenses** ................................................... 277,000 265,000
Net income ................................................... $203,000 $180,000
*2014: $290,000 + $160,000 + $30,000 = $480,000

2015: $355,000 + $90,000 = $445,000
**2014: $185,000 + $67,000 + $25,000 = $277,000
2015: $40,000 + $170,000 + $55,000 = $265,000
(a) Adjusting Entries:

1. Insurance Expense (₺6,000 X 5/24)....................... 1,250
Prepaid Insurance .......................................... 1,250
2. Rental Revenue (₺2,400 X 1/3) .............................. 800

Unearned Rental Revenue............................. 800
3. Supplies ................................................................. 290

Supplies Expense .......................................... 290
4. Interest Expense .................................................... 770

Interest Payable.............................................. 770
(b) Reversing Entries:

1. No reversing entry required.
2. Unearned Rent Revenue ....................................... 800

Rent Revenue ................................................. 800
3. Supplies Expense .................................................. 290

Supplies .......................................................... 290
4. Interest Payable ..................................................... 770

Interest Expense ............................................ 770
Statement of
Adjusted Trial Income Financial
Accounts Balance Statement Position
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,000 15,000
Inventory 80,000 80,000
Sales Revenue 470,000 470,000
Sales Returns and
Allowances 10,000 10,000
Sales Discounts 5,000 5,000
Cost of Goods Sold 250,000 250,000
MADRASAH CO.
Worksheet (Partial)
For the Month Ended April 30, 2015
Statement of
Balance Statement Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 18,972 18,972
Prepaid Rent 2,280 2,280
Equipment 18,050 18,050
Accum. Depr. –
Equipment 4,895 4,895
Madrasah, Capital 34,960 34,960
Madrasah, Drawing 6,650 6,650
Salaries and Wages
Expense 6,840 6,840
Depreciation Expense 145 145
Interest Payable 83 83
Totals 62,700 62,700 9,828 12,590 52,872 50,110
Net Income 2,762 2,762
Totals 12,590 12,590 52,872 52,872
*EXERCISE 3-22 (Continued)
MADRASAH CO.
April 30, 2015
Assets
Noncurrent Assets
Equipment........................................................... €18,050
Less Accumulated depreciation–equipment ... 4,895 €13,155
Current Assets
Prepaid rent ................................................................. 2,280
Accounts receivable ................................................... 6,920
Cash ............................................................................. 18,972
Total current assets ........................................... 28,172
Total assets ............................................................................ €41,327

Equity
Madrasah, capital ........................................................ €31,072*
Current liabilities
Notes payable .............................................................. € 5,700
Accounts payable........................................................ 4,472
Interest payable ........................................................... 83
Total current liabilities ....................................... 10,255
Total equity and liabilities ..................................................... €41,327
*Beg. Balance – Drawings + Net Income = Ending Balance

€34,960 – €6,650 + €2,762 = €31,072
LETTERMAN CO.
Worksheet (Partial)
For Month Ended February 28, 2015
Adjusted Statement
Trial Trial Income of Financial
Balance Adjustments Balance Statement Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Supplies 1,756 (a) 1,241 515 515

Accumulated
Depreciation–
Equipment 7,967 (b) 257 8,224 8,224
Interest
Payable 150 (c) 50 200 200
Supplies
Expense (a) 1,241 1,241 1,241
Depreciation
Expense (b) 257 257 257
Interest
Expense (c) 50 50 50
The following accounts and amounts would be shown in the February

income statement:
Supplies expense ................................. €1,241

Depreciation expense .......................... € 257
Interest expense ................................... € 50
SOLUTIONS TO PROBLEMS
PROBLEM 3-1
(a) (Explanations are omitted.) and (d)
Cash Equipment
Sept. 1 20,000 Sept. 4 680 Sept. 2 17,280
8 1,690 5 942
20 980 10 430
18 3,600 Yasunari Kawabata, Capital
19 3,000 Sept. 19 3,000 Sept. 1 20,000
30 1,800 30 6,007
30 85 Bal. 30 23,007
30 Bal. 12,133
Accounts Receivable
Sept. 14 5,820 Sept. 20 980
25 2,110 Accounts Payable
Bal. 30 6,950 Sept. 18 3,600 Sept. 2 17,280
Bal. 30 13,680
Rent Expense
Sept. 4 680 Sept. 30 680
Supplies Service Revenue

Sept. 5 942 Sept. 30 330 Sept. 30 9,620 Sept. 8 1,690
Bal. 30 612 14 5,820
25 2,110
9,620 9,620
Office Expense Accumulated Depreciation–Equipment

Sept. 10 430 Sept. 30 515 Sept. 30 288
30 85
515 515
Salaries and Wages Expense

Sept. 30 1,800 Sept. 30 1,800
Supplies Expense
Sept. 30 330 Sept. 30 330
PROBLEM 3-1 (Continued)
Depreciation Expense Income Summary

Sept. 30 288 Sept. 30 288 Sept. 30 680 Sept. 30 9,620
30 515
30 1,800
30 330
30 288
30 Inc. 6,007
9,620 9,620
(b) YASUNARI KAWABATA, D.D.S.

Trial Balance
September 30
Debit Credit
Cash ..................................................................... ¥12,133
Accounts Receivable .......................................... 6,950
Supplies ............................................................... 612
Equipment ........................................................... 17,280
Accumulated Depreciation–Equipment............. ¥ 288
Accounts Payable ............................................... 13,680
Yasunari Kawabata, Capital ............................... 17,000
Service Revenue ................................................. 9,620
Rent Expense ...................................................... 680
Office Expense .................................................... 515
Salaries and Wages Expense ............................ 1,800
Supplies Expense ............................................... 330
Depreciation Expense ........................................ 288
Totals ......................................................... ¥40,588 ¥40,588
(c) YASUNARI KAWABATA, D.D.S.

Income Statement
For the Month of September
Service revenue........................................................ ¥9,620

Expenses:
Salaries and wages expense ................... ¥1,800
Rent expense ............................................ 680
Supplies expense ..................................... 330
Depreciation expense ............................... 288
Office expense .......................................... 515
Total expenses...................................... 3,613
Net income ................................................................ ¥6,007
YASUNARI KAWABATA, D.D.S.

Statement of Owner’s Equity
For the Month of September
Kawabata, Capital September 1 .......................................... ¥20,000

Add: Net income for September ....................................... 6,007
26,007
Less: Withdrawal by owner ................................................ 3,000
Kawabata, Capital September 30 ........................................ ¥23,007
YASUNARI KAWABATA, D.D.S.

As of September 30
Assets Equity and Liabilities

Equipment. .................... ¥17,280 Yasunari Kawabata,
Accum. depreciation– Capital.............................. ¥23,007
equipment ............. (288)
Supplies ........................ 612 Accounts payable .............. 13,680
Accounts receivable .... 6,950
Cash............................... 12,133 Total equity and
Total assets........... ¥36,687 liabilities .......................... ¥36,687
(e) YASUNARI KAWABATA, D.D.S.

Post-Closing Trial Balance
September 30
Debit Credit
Cash ............................................................... ¥12,133
Accounts Receivable.................................... 6,950
Supplies ......................................................... 612
Equipment ..................................................... 17,280
Accumulated Depreciation–Equipment ...... ¥ 288
Accounts Payable ......................................... 13,680
Yasunari Kawabata, Capital ......................... 23,007
Totals .................................................. ¥36,975 ¥36,975
PROBLEM 3-2
(a) Dec. 31 Accounts Receivable........................................... 3,500

Service Revenue........................................... 3,500
31 Unearned Service Revenue ................................ 1,400

Service Revenue........................................... 1,400
31 Supplies Expense ................................................ 5,400

Supplies ........................................................ 5,400
31 Depreciation Expense ......................................... 5,000

Accumulated Depreciation-Equipment ...... 5,000
31 Interest Expense .................................................. 150

Interest Payable ............................................ 150
31 Insurance Expense .............................................. 850

Prepaid Insurance ........................................ 850
31 Salaries and Wages Expense ............................. 1,300

Salaries and Wages Payable ....................... 1,300
(b) MASON ADVERTISING AGENCY

Income Statement
Revenues
Service revenue .................................... €63,500
Expenses
Salaries and wages expense ............... €11,300
Supplies expense ................................. 5,400
Depreciation expense ........................... 5,000
Rent expense ........................................ 4,000
Insurance expense ............................... 850
Interest expense ................................... 500
Total expenses ............................... 27,050
Net income ....................................................... €36,450

Retained earnings, January 1 ................................................. € 3,500

Add: Net income ...................................................................... 36,450
Retained earnings, December 31 ............................................ €39,950

December 31, 2015
Assets
Equipment ................................................................. €60,000
Less: Accumulated depreciation—equipment ...... 33,000 €27,000
Supplies ..................................................................... 3,000
Prepaid insurance..................................................... 2,500
Accounts receivable ................................................. 23,500
Cash ........................................................................... 11,000
Total assets ................................................ €67,000

Equity
Share capital—ordinary ................................. €10,000
Retained earnings........................................... 39,950 €49,950
Liabilities
Notes payable ................................................. 5,000
Accounts payable ........................................... 5,000
Unearned service revenue ............................. 5,600
Salaries and wages payable .......................... 1,300
Interest payable .............................................. 150
Total liabilities .......................................... 17,050
Total equity and liabilities ...................................... €67,000
(c) 1. Interest is €50 per month or 1% of the note payable. 1% X 12 = 12%

interest per year.
2. Salaries and Wages Expense, €11,300 less Salaries and Wages
Payable 12/31/15, €1,300 = €10,000. Total Payments, €12,500 –
€10,000 = €2,500 Salaries and Wages Payable 12/31/14.
PROBLEM 3-3
1. December 31 Salaries and Wages Expense .................... 2,120

Salaries and Wages Payable ............. 2,120
(5 X $700 X 2/5) = $1,400
(3 X $600 X 2/5) = 720
Total accrued salaries $2,120
2. Unearned Rent Revenue ............................ 94,000

Rent Revenue ...................................... 94,000
(5 X $6,000 X 2) = $60,000
(4 X $8,500 X 1) = 34,000
Total rent recognized $94,000
3. Advertising Expense .................................. 4,900

Prepaid Advertising ............................ 4,900
(A650 – $500 per month
for 8 months) = $4,000
(B974 – $300 per month
for 3 months) = 900
Total advertising expense $4,900
4. Interest Expense ........................................ 4,200

Interest Payable
($60,000 X 12% X 7/12) ................... 4,200
PROBLEM 3-4
(a) November 30 Supplies Expense ...................................... 4,000

Supplies .............................................. 4,000
Depreciation Expense—Equipment ......... 15,000

Equipment ....................................... 15,000
Interest Expense ........................................ 11,000

Interest Payable .................................. 11,000
(b) BELLEMY FASHION CENTER

November 30, 2015
Dr. Cr.
Cash ............................................................. € 28,700
Accounts Receivable .................................. 33,700
Inventory ...................................................... 45,000
Supplies ....................................................... 1,500
Equipment ................................................... 133,000
Accumulated Depreciation—Equipment.. € 39,000
Notes Payable ............................................. 51,000
Accounts Payable ....................................... 48,500
Share Capital—Ordinary ............................ 90,000
Retained Earnings ...................................... 8,000
Sales Revenue............................................. 757,200
Sales Returns and
Allowances ............................................... 4,200
Cost of Goods Sold .................................... 495,400
Salaries Expense ........................................ 140,000
Advertising Expense .................................. 26,400
Utilities Expense ......................................... 14,000
Maintenance and Repairs Expense ........... 12,100
Delivery Expense ........................................ 16,700
Rent Expense .............................................. 24,000
Supplies Expense ....................................... 4,000
Depreciation Expense—Equipment .......... 15,000
Interest Expense ......................................... 11,000
Interest Payable .......................................... 11,000
Totals ..................................................... €1,004,700 €1,004,700
(c) BELLEMY FASHION CENTER

Income Statement
For the Year Ended November 30, 2015
Sales revenue
Sales revenue .................................................. €757,200
Less: Sales returns and allowances ............ 4,200
Net sales .......................................................... 753,000
Cost of goods sold .................................................... 495,400
Gross profit ................................................................ 257,600
Operating expenses
Selling expenses
Salaries and wages expense
(€140,000 X 70%) ................................ €98,000
Advertising expense .............................. 26,400
Rent expense (€24,000 X 80%).............. 19,200
Delivery expense.................................... 16,700
Utilities expense (€14,000 X 80%)......... 11,200
Depr. exp.— equipment ......................... 15,000
Supplies expense................................... 4,000 190,500
Administrative expenses
(€140,000 X 30%) ................................ 42,000
Maintence and repairs expense............ 12,100
Rent expense (€24,000 X 20%).............. 4,800
Utilities expense (€14,000 X 20%)......... 2,800 61,700
Other income and expense
Interest expense .............................................. 11,000
Net loss ..................................................................... (€ 5,600)

For the Year Ended November 30, 2015
Retained earnings, December 1, 2014 ....................................... €8,000

Less: Net loss ............................................................................. 5,600
Retained earnings, November 30, 2015 ..................................... €2,400

November 30, 2015
Assets
Noncurrent assets
Equipment ........................................... €133,000
Accum. depreciation–equipment ...... 39,000 €94,000
Current assets
Supplies .............................................. 1,500
Inventory ............................................. 45,000
Accounts receivable .......................... 33,700
Cash .................................................... 28,700
Total current assets .................. 108,900
Total assets ........................................ €202,900
Equity
Share capital—ordinary ..................... €90,000
Retained earnings .............................. 2,400 € 92,400
Noncurrent Liabilities
Notes payable ..................................... 21,000
Current Liabilities
Notes payable due next year ............. €30,000
Accounts payable .............................. 48,500
Interest payable .................................. 11,000
Total current liabilities .............. 89,500
Total liabilities ........................... 110,500
Total equity and liabilities .......................... €202,900
(d) Nov. 30 Sales Revenue ............................................. 757,200

Income Summary ................................. 757,200
30 Income Summary ......................................... 762,800

Sales Returns and Allowances ........... 4,200
Cost of Goods Sold .............................. 495,400
Salaries and Wages Expense .............. 140,000
Advertising Expense ............................ 26,400
Utilities Expense................................... 14,000
Maintenance and Repairs Expense .... 12,100
Delivery Expense.................................. 16,700
Rent Expense........................................ 24,000
Supplies Expense................................. 4,000
Depreciation Expense—
Equipment ......................................... 15,000
Interest Expense................................... 11,000
30 Retained Earnings ....................................... 5,600

Income Summary ................................. 5,600
(e) BELLEMY FASHION CENTER

November 30, 2015
Debit Credit
Cash ........................................................................ € 28,700
Accounts Receivable ............................................. 33,700
Merchandise Inventory .......................................... 45,000
Supplies .................................................................. 1,500
Equipment............................................................... 133,000
Accumulated Depreciation—Equipment .............. € 39,000
Notes Payable......................................................... 51,000
Accounts Payable .................................................. 48,500
Interest Payable...................................................... 11,000
Share Capital—Ordinary........................................ 90,000
Retained Earnings.................................................. 2,400
€241,900 €241,900
PROBLEM 3-5
(a) -1-
Depreciation Expense ............................................ 10,500
Accumulated Depreciation—Equipment
(1/16 X [€192,000 – €24,000]) ...................... 10,500
-2-
Interest Expense ..................................................... 1,440*
Interest Payable
(€90,000 X 8% X 72/360) .............................. 1,440*
-3-
Admissions Revenue ............................................. 60,000
Unearned Admissions Revenue
(2,000 X €30) ................................................ 60,000
-4-
Prepaid Advertising................................................ 1,100
Advertising Expense ....................................... 1,100
-5-
Salaries and Wages Payable .......................... 4,700
(b) 1. Interest expense, €2,840 (€1,400 + €1,440).

2. Admissions revenue, €320,000 (€380,000 – €60,000).
3. Advertising expense, €12,580 (€13,680 – €1,100).
4. Salaries and wages expense, €62,300 (€57,600 + €4,700).
*Note to instructor: If 30-day months are assumed, interest expense =

€1,400 (€90,000 X 8% X 70/360).
PROBLEM 3-6
(a) -1-
Service Revenue .......................................................... 6,000
Unearned Service Revenue ................................. 6,000
-2-
Accounts Receivable ................................................... 4,900
Service Revenue ................................................... 4,900
-3-
Bad Debt Expense ....................................................... 1,430
Allowance for Doubtful Accounts ....................... 1,430
-4-
Insurance Expense ...................................................... 480
Prepaid Insurance ................................................ 480
-5-
Depreciation Expense—Equipment ........................... 2,500
(R$25,000 X .10) ................................................ 2,500
-6-
Interest Expense .......................................................... 60
Interest Payable
(R$7,200 X .10 X 30/360) ................................... 60
-7-
Prepaid Rent ................................................................. 750
Rent Expense ........................................................ 750
-8-
Salaries and Wages Expense...................................... 2,510
Salaries and Wages Payable ............................... 2,510
(b) YORKIS PEREZ, CONSULTING ENGINEER

Income Statement
Service revenue (R$100,000 – R$6,000 + R$4,900) ... R$98,900

Expenses
(R$30,500 + R$2,510) ......................................... R$33,010
Rent expense (R$9,750 – R$750) ......................... 9,000
Depreciation expense ........................................... 2,500
Bad debt expense ................................................. 1,430
Utilities expense ................................................... 1,080
Office expense ...................................................... 720
Insurance expense ............................................... 480
Interest expense ................................................... 60
Total expenses ................................................. 48,280
Net income ................................................................... R$50,620

Statement of Changes in Equity
Yorkis Perez, Capital, January 1 ............................................ R$ 52,010a

Add: Net income ...................................................................... 50,620
Less: Withdrawals ................................................................... 17,000
Yorkis Perez, Capital, December 31....................................... R$ 85,630
(a)
Yorkis Perez, Capital—trial balance ............... R$35,010
Withdrawals during the year ........................... (17,000)
Yorkis Perez, Capital, as of January 1, 2015 ... R$52,010

December 31, 2015
Assets
Noncurrent assets
Equipment......................................... R$25,000
Less: Accum. depreciation—
equipment .................................. 8,750** R$ 16,250
Current assets
Supplies ............................................ 1,960
Prepaid insurance
(R$1,100 – R$480)......................... 620
Prepaid rent ...................................... 750
Accounts receivable
(R$49,600 + R$4,900) ................... R$54,500
Less: Allowance for doubtful
accounts .................................... 2,180* 52,320
Cash .................................................. 29,500
Total current assets .................. 85,150
Total assets .......................... R$101,400

Equity
Yorkis Perez, Capital
(R$35,010 + R$50,620) ................. R$ 85,630
Liabilities
Current liabilities
Notes payable............................ R$7,200
Unearned service revenue ....... 6,000
Salaries and wages payable .... 2,510
Interest payable......................... 60 15,770
Total equity and liabilities... R$101,400
*( R$750 + R$1,430)
**( R$6,250 + R$2,500)
PROBLEM 3-7
(a) Dec. 31 Account Receivable ............................... 1,000

Service Revenue ............................. 1,000
31 Unearned Service Revenue ................... 1,400

Service Revenue ............................. 1,400
31 Supplies Expense .................................. 5,000

Art Supplies..................................... 5,000
31 Depreciation Expense ............................ 8,750

Equipment ................................... 8,750
31 Interest Expense .................................... 150

Interest Payable .............................. 150
31 Insurance Expense ................................ 750

Prepaid Insurance ........................... 750
31 Salaries and Wages Expense ................ 1,500

Salaries and Wages Payable ......... 1,500
(b) SORENSTAM ADVERTISING CORP.

Income Statement
Revenues
Service revenue ......................................... €61,000
Expenses
Salaries and wages expense .................... €11,500
Supplies expense ...................................... 10,000
Depreciation expense ............................... 8,750
Rent expense ............................................. 4,000
Insurance expense .................................... 750
Interest expense ........................................ 500
Total expenses .................................. 35,500
Net income............................................................ €25,500

Retained earnings, January 1 ..................................................... € 4,500

Add: Net income ......................................................................... 25,500
Retained earnings, December 31 ............................................... €30,000

December 31, 2015
Assets
Equipment ................................................................. €60,000
Less: Accum. depr.—equipment............................ 35,750 €24,250
Prepaid insurance .................................................... 2,500
Supplies .................................................................... 3,500
Accounts receivable................................................. 20,000
Cash ........................................................................... 7,000
Total assets ................................................... €57,250

Equity
Share capital—ordinary................................. €10,000
Retained earnings .......................................... 30,000
Total equity ........................................... €40,000
Liabilities
Notes payable ................................................ 5,000
Accounts payable .......................................... 5,000
Unearned service revenue ............................ 5,600
Salaries and wages payable ......................... 1,500
Interest payable ............................................. 150
Total liabilities ....................................... 17,250
Total equity and liabilities........................................ €57,250
(c) 1. Total depreciable cost = €8,750 X 6 = €52,500.

Residual value = cost €60,000 less depreciable cost €52,500 =
€7,500
2. Based on the balance in interest payable, interest is €50 per
month or 1% of the note payable, per month.
1% X 12 = 12% interest per year.
3. Salaries and Wages Expense, €11,500 less Salaries and Wages
Payable 12/31/15, €1,500 = €10,000. Total payments, €12,500 –
€10,000 = €2,500 Salaries and Wages Payable 12/31/14.
PROBLEM 3-8
(a), (b), (d)
Cash Prepaid Insurance Salaries and Wages Expense

Bal. 15,000 Bal. 9,000 Adj. 3,500 Bal. 80,000 Close 83,600
5,500 Adj. 3,600
83,600 83,600
Share Capital—Ordinary
Bal. 400,000
Maintenance and Repairs

Accounts Receivable Retained Earnings Expense
Bal. 13,000 Bal. 82,000 Bal. 24,000 Close 24,000
Inc. 31,640
113,640
Allow. for Doubtful Accts. Dues Revenue

Bal. 1,100 Adj. 8,900 Bal. 200,000
Adj. 460 Cls. 191,100
1,560 200,000 200,000
Rev. 8,900
Land Green Fees Revenue Depr. Expense

Bal. 350,000 Close 5,900 Bal. 5,900 Adj. 4,000 Close 19,000
Adj. 15,000
19,000
Buildings Rent Revenue Accum. Depr.—Equipment

Bal. 120,000 Close 19,200 Bal. 17,600 Bal. 70,000
Adj. 1,600 Adj. 15,000
19,200 19,200 85,000
Rev. 1,600
Accum. Depr.—Buildings Utilities Expense Insurance Expense

Bal. 38,400 Bal. 54,000 Close 54,000 Adj. 3,500 Close 3,500
Adj. 4,000
42,400
Rent Receivable Bad Debt Expense Income Summary

Adj. $1,600 Rev. 1,600 Adj. 460 Close 460 Exp. 184,560 Rev. 216,200
Inc. 31,640
216,200 216,200
Salaries and Wages Payable Unearned Dues Revenue

Adj. 3,600 Adj. 8,900
Equipment
Bal. 150,000
(b) -1-
Depreciation Expense ............................................. 4,000
Accumulated Depreciation—Buildings
(1/30 X £120,000) .......................................... 4,000
-2-
Depreciation Expense ............................................. 15,000
(10% X £150,000) .......................................... 15,000
-3-
Insurance Expense ................................................. 3,500
Prepaid Insurance ............................................ 3,500
-4-
Rent Receivable ...................................................... 1,600
Rent Revenue
(1/11 X £17,600) ............................................ 1,600
-5-
Bad Debt Expense ................................................... 460
Allowance for Doubtful Accounts
[(£13,000 X 12%) – £1,100] ........................... 460
-6-
Salaries and Wages Expense ................................. 3,600
Salaries and Wages Payable........................... 3,600
-7-
Dues Revenue ......................................................... 8,900
Unearned Dues Revenue................................. 8,900
*PROBLEM 3-8 (Continued)
(c) KO GOLF CLUB, INC.

December 31, XXXX
Dr. Cr.
Cash ................................................................... £ 15,000
Accounts Receivable........................................ 13,000
Allowance for Doubtful Accounts ................... £ 1,560
Prepaid Insurance............................................. 5,500
Land ................................................................... 350,000
Buildings ........................................................... 120,000
Accumulated Depreciation—Buildings........... 42,400
Equipment ......................................................... 150,000
Accumulated Depreciation—Equipment ........ 85,000
Salaries and Wages Payable ........................... 3,600
Share Capital—Ordinary .................................. 400,000
Retained Earnings ............................................ 82,000
Dues Revenue ................................................... 191,100
Green Fees Revenue ........................................ 5,900
Rent Revenue .................................................... 19,200
Utilities Expense ............................................... 54,000
Salaries and Wages Expense .......................... 83,600
Maintenance and Repairs Expense ................. 24,000
Bad Debt Expense ............................................ 460
Unearned Dues Revenue ................................. 8,900
Rent Receivable ................................................ 1,600
Depreciation Expense ...................................... 19,000
Insurance Expense ........................................... 3,500
Totals ....................................................... £839,660 £839,660
(d) December 31
Dues Revenues....................................................... 191,100
Green Fees Revenue .............................................. 5,900
Rent Revenue ......................................................... 19,200
Income Summary ............................................ 216,200
December 31
Income Summary ................................................... 184,560
Utilities Expense ............................................. 54,000
Bad Debt Expense .......................................... 460
Salaries and Wages Expense ........................ 83,600
Maintenance and Repairs Expense ............... 24,000
Depreciation Expense .................................... 19,000
Insurance Expense ......................................... 3,500
December 31
Income Summary ................................................... 31,640
Retained Earnings .......................................... 31,640
PROBLEM 3-9
(a), (b), (c)
Cash Accounts Receivable Allow. for Doubtful Accts.

Bal. 18,500 Bal. 32,000 Bal. 700
Adj. 1,400
2,100
Inventory Equipment Accum. Depr.—Equipment

Bal. 80,000 Bal. 84,000 Bal. 35,000
Adj. 12,000
47,000
Prepaid Insurance Notes Payable
Bal. 5,100 Adj. 2,550 Bal. 28,000
2,550
Share Capital—Ordinary Sales Revenue Insurance Expense

Bal. 80,600 Cls. 600,000 Bal. 600,000 Adj. 2,550 Cls. 2,550
Salaries and Wages Advertising Expense Interest Expense

Expense
Bal. 115,000 Cls. 117,400 Bal. 6,700 Adj. 700 Adj. 3,360 Cls. 3,360
Adj. 2,400 Cls. 6,000
117,400 117,400 6,700 6,700
Bad Debt Expense Office Expense Prepaid Advertising

Adj. 1,400 Cls. 1,400 Bal. 5,000 Adj. 1,500 Adj. 700
Cls. 3,500
5,000 5,000
Interest Payable Depreciation Expense Income Summary

Adj. 3,360 Adj. 12,000 Cls. 12,000 Exp. 554,210 Sales 600,000
Inc. 45,790
600,000 600,000
Supplies Salaries and Wages Payable

Adj. 1,500 Adj. 2,400
Retained Earnings Cost of Goods Sold

Bal. 10,000 Bal. 408,000 Cls. 408,000
Inc. 45,790
Bal. 55,790
(b) -1-
Bad Debt Expense ....................................................... 1,400
Allowance for Doubtful Accounts ...................... 1,400
-2-
Depreciation Expense (€84,000 ÷ 7) .......................... 12,000
Accumulated Depreciation—Equipment............ 12,000
-3-
Insurance Expense...................................................... 2,550
Prepaid Insurance ................................................ 2,550
-4-
Interest Expense.......................................................... 3,360
Interest Payable ................................................... 3,360
-5-
Salaries and Wages Expense ..................................... 2,400
Salaries and Wages Payable ............................... 2,400
-6-
Prepaid Advertising .................................................... 700
Advertising Expense ........................................... 700
-7-
Supplies ....................................................................... 1,500
Office Expense ..................................................... 1,500
(c) Dec. 31
Sales Revenue ....................................................... 600,000
Income Summary ........................................... 600,000
Dec. 31
Income Summary ................................................... 554,210
Cost of Goods Sold ........................................ 408,000
Advertising Expense ...................................... 6,000
Salaries and Wages Expense ........................ 117,400
Office Expense (€5,000 – €1,500) .................. 3,500
Insurance Expense ......................................... 2,550
Bad Debt Expense .......................................... 1,400
Depreciation Expense .................................... 12,000
Interest Expense ............................................. 3,360
Dec. 31
Income Summary ................................................... 45,790
Retained Earnings .......................................... 45,790
*PROBLEM 3-10
(a) LAKELAND SALES AND SERVICE

Income Statement
For the Month Ended January 31, 2015
(1) (2)
Cash Basis Accrual Basis
Revenues .................................................... £ 75,000 £98,400*
Expenses
Cost of computers & printers:
Purchased and paid .................. 82,500**
Cost of goods sold .................... 59,500***
Salaries and wages ......................... 9,600 12,600
Rent .................................................. 6,000 2,000
Other operating expenses .............. 8,400 10,400
Total expenses ........................ 106,500 84,500
Net income (loss) ....................................... £(31,500) £13,900
*(£2,550 X 30) + (£3,600 X 4) + (£500 X 15)

**(£1,500 X 40) + (£2,500 X 6) + (£300 X 25)
***(£1,500 X 30) + (£2,500 X 4) + (£300 X 15)
Note: The headings for the cash basis income statement should technically
be cash receipts and cash payments.
(b) LAKELAND SALES AND SERVICE

As of January 31, 2015
(1) (2)
Cash Basis Accrual Basis
Assets
Prepaid rent .................................... £ 4,000
Inventory......................................... 23,000b
Accounts receivable ...................... 23,400
Cash ................................................ £58,500a 58,500a
Total assets .............................. £58,500 £108,900

Equity .............................................. £58,500c £103,900d
Salaries and wages payable ......... 3,000
Accounts payable .......................... 2,000
Total equity and liabilities ......... £58,500 £108,900
a
Original investment £ 90,000
Cash sales 75,000
Cash purchases (82,500)
Rent paid (6,000)
Salaries and wages paid (9,600)
Other operating expenses (8,400)
Cash balance Jan. 31 £ 58,500
b
(10 @ £1,500) + (2 @ £2,500) + (10 @ £300).
c
Initial investment minus net loss: £90,000 – £31,500.
d
Initial investment plus net income: £90,000 + £13,900.
(c) 1. The £23,400 in receivables from customers is an asset and a future

cash flow resulting from sales that is ignored. The cash basis
under-states the amount of revenues and inflow of assets in
January from the sale of computers and printers by £23,400.
2. The cost of computers and printers sold in January is overstated

by £23,000. The unsold computers and printers are an asset of
£23,000 in the form of inventory.
3. The cash basis ignores £3,000 of the salaries and wages that have
been earned by the employees in January and will be paid in
February.
4. Rent expense on the cash basis is overstated by £4,000 under the

cash basis. This prepayment is an asset in the form of two
months’ future right to the use of office, showroom, and repair
space and should appear on the statement of financial position.
5. Other operating expenses on a cash basis are understated by

£2,000 as is the liability for the unpaid portion of these expenses
incurred in January.
(a) COOKE COMPANY
3-72
Worksheet
For the Year Ended September 30, 2015
Statement of
Account Titles Trial Balance Adjustments Balance Statement Position
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 37,400 37,400 37,400
Supplies 18,600 (b) 14,400 4,200 4,200
Prepaid Insurance 31,900 (a) 28,000 3,900 3,900
Land 80,000 80,000 80,000
Equipment 120,000 120,000 120,000
Accum. Depreciation—
Equipment 36,200 (c) 5,800 42,000 42,000
Accounts Payable 14,600 14,600 14,600
Unearned Service Rev. 2,700 (d) 2,000 700 700
Mortgage Payable 50,000 50,000 50,000
Copyright © 2014 John Wiley & Sons, Inc.

Cooke, Capital 109,700 109,700 109,700
Cooke, Drawing 14,000 14,000 14,000
Service Revenue 278,500 (d) 2,000 280,500 280,500
Salaries and Wages Expense 109,000 109,000 109,000
Maintenance and Repairs
Expense 30,500 30,500 30,500
*PROBLEM 3-11
Advertising Expense 9,400 9,400 9,400

Utilities Expense 16,900 16,900 16,900
Prop. Taxes Expense 18,000 (e) 3,000 21,000 21,000
Interest Expense 6,000 ______ (f) 6,000 12,000 12,000
Totals 491,700 491,700
Insurance Expense (a) 28,000 28,000 28,000
Kieso, IFRS, 2/e, Solutions Manual

Supplies Expense (b) 14,400 14,400 14,400
Interest Payable (f) 6,000 6,000 6,000
Depreciation Expense (c) 5,800 5,800 5,800
Prop. Taxes Payable _____ (e) 3,000 ______ 3,000 ______ ______ ______ 3,000
Totals 59,200 59,200 506,500 506,500 247,000 280,500 259,500 226,000
Net Income 33,500 ______ ______ 33,500
Totals 280,500 280,500 259,500 259,500
Key: (a) Expired Insurance; (b) Supplies Used; (c) Depreciation Expensed; (d) Admission Revenue Earned; (e) Accrued Property
(For Instructor Use Only)

Taxes; (f) Accrued Interest Payable.
(b) COOKE COMPANY

September 30, 2015
Assets
Noncurrent assets
Land ................................................ €80,000
Equipment ...................................... €120,000
Less: Accum. depreciation—
equip. ........................................... 42,000 78,000 €158,000
Current assets
Supplies ......................................... 4,200
Prepaid insurance ......................... 3,900
Cash................................................ 37,400
Total current assets ............. 45,500
Total assets .......................... €203,500

Equity
Cooke, capital (€109,700 + €33,500 – €14,000) .. €129,200
Liabilities
Mortgage payable............................................. €40,000
Current liabilities
Accounts payable ............................. €14,600
Current maturity of long-term debt.. 10,000
Interest payable ................................. 6,000
Property taxes payable ..................... 3,000
Unearned service revenue ............... 700
Total current liabilities............. 34,300
Total liabilities .......................... 74,300
Total equity and liabilities ........................... €203,500
(c) Sep. 30 Insurance Expense ..................................... 28,000

Prepaid Insurance ................................ 28,000
30 Supplies Expense ....................................... 14,400

Supplies ................................................ 14,400
30 Depreciation Expense ................................. 5,800

Equipment ........................................ 5,800
30 Unearned Service Revenue ........................ 2,000

Service Revenue .................................. 2,000
30 Property Tax Expense ................................ 3,000

Property Taxes Payable ...................... 3,000
30 Interest Expense ......................................... 6,000

Interest Payable ................................... 6,000
(d) Sep. 30 Service Revenue ......................................... 280,500

Income Summary ................................. 280,500
30 Income Summary ........................................ 247,000

Salaries and Wages Expense ............. 109,000
Maintenance and Repairs Expense .... 30,500
Insurance Expense .............................. 28,000
Property Tax Expense ......................... 21,000
Supplies Expense ................................ 14,400
Utilities Expense .................................. 16,900
Interest Expense .................................. 12,000
Advertising Expense ........................... 9,400
Depreciation Expense ......................... 5,800
30 Income Summary ................................... 33,500

Cooke, Capital ................................ 33,500
30 Cooke, Capital ........................................ 14,000

Cooke, Drawing .............................. 14,000
(e) COOKE COMPANY

September 30, 2015
Debit Credit
Cash .............................................................. € 37,400
Supplies ........................................................ 4,200
Prepaid Insurance........................................ 3,900
Land .............................................................. 80,000
Equipment .................................................... 120,000
Accumulated Depreciation—Equipment ... € 42,000
Accounts Payable ........................................ 14,600
Unearned Service Revenue ........................ 700
Interest Payable ........................................... 6,000
Property Taxes Payable .............................. 3,000
Mortgage Payable ........................................ 50,000
Cooke, Capital .............................................. 129,200
€245,500 €245,500

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Intermediate Accounting

An examination of the ledger shows these errors.

An analysis of the accounts shows the following.

Beg. Bal. 800 10 ⁄ 31 470 10 ⁄ 17 2,100

Salaries and Wages Expense Salaries and Wages Payable

Unearned Service Revenue Supplies Expense

10 ⁄ 31 400 10 ⁄ 20 650 10 ⁄ 31 470

FLYNN DESIGN AGENCY

Shabbona Company Jenkins Company

Inventory 12/31/15 $ 60,000 Cost of Goods Sold $235,700

18 Received golf fees of £1,200 in cash.

January 1, 2015 December 31, 2015

(a) Supplies on hand €515

MASON ADVERTISING AGENCY

BELLEMY FASHION CENTER

YORKIS PEREZ, CONSULTING ENGINEER

1. Fees received in advance from clients R$6,000.

SORENSTAM ADVERTISING CORP.

(c) Answer the following questions.

KO GOLF CLUB, INC.

NEW YORK BOUTIQUE

BRIEF EXERCISE 3-1

May 1 Cash ................................................................. 4,000

3 Equipment ....................................................... 1,100

13 Rent Expense .................................................. 400

21 Accounts Receivable ...................................... 500

BRIEF EXERCISE 3-2

Aug. 2 Cash .................................................................. 12,000

7 Supplies ............................................................ 500

12 Cash .................................................................. 1,300

15 Rent Expense .................................................... 600

19 Supplies Expense ............................................. 230

BRIEF EXERCISE 3-3

July 1 Prepaid Insurance ............................................ 15,000

Dec. 31 Insurance Expense ........................................... 2,500

BRIEF EXERCISE 3-4

July 1 Cash ................................................................... 15,000

Dec. 31 Unearned Insurance Revenue ......................... 2,500

Feb. 1 Prepaid Insurance ............................................ 72,000

June 30 Insurance Expense .......................................... 15,000

BRIEF EXERCISE 3-6

Nov. 1 Cash .................................................................. 2,400

Dec. 31 Unearned Rent Revenue.................................. 1,600

BRIEF EXERCISE 3-7

Dec. 31 Salaries and Wages Expense.......................... 4,800

Jan. 2 Salaries and Wages Payable ........................... 4,800

Dec. 31 Interest Receivable ........................................... 300

Feb. 1 Cash ................................................................... 12,400

BRIEF EXERCISE 3-9

Aug. 31 Interest Expense ............................................... 300

31 Accounts Receivable ....................................... 1,400

31 Salaries and Wages Expense .......................... 700

31 Bad Debt Expense ............................................ 900

BRIEF EXERCISE 3-10

Depreciation Expense ....................................................... 2,000

Equipment .......................................................................... €30,000

Sales Revenue ........................................................... 808,900

Income Summary ...................................................... 780,300

Income Summary ...................................................... 42,100