Chapter 3 and 4 solutions Essays - , Term Papers

AP32 Req. 1 April 2Office supplies (+A) 2,600 Accounts payable (+L) 2,600 3Utilities expense (+E SE) 1,950 Accounts payable (+L) 1,950 5Trade receivables (+A) 23,500 Service revenue (+R+SE) 23,500 8Accounts payable (L) 3,005 Cash (A) 3,005 8Advertising expense (+E SE) 1,400 Cash (A) 1,400 9Equipment (+A) 2,300 Cash (A) 2,300 10Wages expense (+E SE) Wages payable (L) 8,100 3,800 Cash (A) 11,900 11Cash (+A) 12,500 Trade receivables (A) 12,500 12Land (+A) 50,000 Cash (A) Note payable (+L) 10,000 40,000 13Cash (+A) 135,000 Contributed capital (+SE) 135,000 14Trade receivables (+A) 14,500 Service revenue (+R+SE) 14,500 AP32 (continued) Req. 2 Statement of Financial PositionStatement of Earnings Date Assets LiabilitiesShareholders Equity Revenues ExpensesNet Earnings April 2+$2,600+$2,600NNNN April 3N+$1,950$1950N+$1,950$1,950 April 5+$23,500N+$23,500+$23,500N+$23,500 April 8$3,005$3,005NNNN April 8$1,400N$1,400N+$1,400$1,400 April 9+$2,300 $2,300NNNNN April 10$11,900$3,800$8,100N+$8,100$8,100 April 11+$12,500 $12,500NNNNN April 12+$50,000 $10,000+$40,000NNNN April 13+$135,000N+$135,000NNN April 14+$14,500N+$14,500+$14,500N+$14,500 AP33 Req. 1 and 2 CashTrade ReceivablesSupplies (a) 30,000 (e) 20,000 (h) 3,050 (k) 100 (m) 5,200 4,800 (b) 800 (c) 20,000 (f) 850 (g) 1,000 (i) 2,520 (j) 268 (l)(h) 550 100 (k)(c) 800 28,112450800 Merchandise InventoryPrepaid RentEquipment (d) 10,000 2,000 (h) 2,800 (m)(b) 4,800(f) 4,000 5,2004,8004,000 AP33 (continued) Furniture and FixturesTrade Payables (f) 16,000(i) 1,00010,000 (d) 16,000 9,000 Contributed CapitalSales RevenueCost of Sales 30,000 (a) 20,000 (e)3,600 (h) 5,200 (m)(h) 2,000 (m) 2,800 50,0008,8004,800 Advertising ExpenseWages ExpenseRepair Expense (g) 850 (j) 2,520(l) 268 8502,520268 Req. 3 NINAS CHOCOLATES INC. Statement of Earnings (unadjusted) For the Month Ended March 31, 2014 Sales revenue Cost of sales Gross margin Operating expenses: Advertising expense Wages expense Repair expense Total expenses$8,800 4,800 4,000 850 2,520 268 3,638 Net earnings$ 362 Note: Income taxes have been ignored. AP42 Req. 1 a.Deferred revenuee.Deferred expense b.Accrued expensef.Accrued revenue c.Deferred expenseg.Accrued expense d.Deferred revenueh.Accrued expense Req. 2 a.Deferred rent revenue (L)5,600 Rent revenue (+R +SE)5,600 $8,400 6 months = $1,400 per month for 4 months. This entry reduces (debits) the liability for the amount earned and records revenue. b.Interest expense (+E SE)225 Interest payable (+L)225 To accrue interest expense incurred but not yet paid, $18,000 x 5% x 3/12 = $225. c.Depreciation expense (+E SE)2,500 Accumulated depreciation, service truck (+XA A)2,500 To record depreciation expense for the year: d.Deferred service revenue (L) 500 Service revenue (+R +SE)500 To recognize revenue earned during the year ($3,000 x 2/12). e.Insurance expense (+E SE)1,500 Prepaid insurance (A)1,500 $9,000 12 months = $750 per month for 2 months of coverage. This entry reduces the asset (prepaid insurance) because part of it has been used and only $7,500 represents future benefits (an asset) to the company. f.Trade receivables (+A)4,000 Service revenue (+R +SE)4,000 This entry records an asset for the amount due from customers and recognizes the revenue because it was earned in 2015. g.Wage expense (+E SE)14,000 Wages payable (+L)14,000 Wage expense is increased (debited) because this expense was incurred in 2015. A liability (wages payable) is credited because this amount is owed to the employees as at December 31, 2015. h.Property tax expense (+E SE)500 Property tax payable (+L)500 To record expense incurred but not yet paid. AP42 (continued) Req. 3 TransactionEffect on Net EarningsEffect on Cash a. 5,600N b. 225N c. 2,500N d. 500N e. 1,500N f. 4,000N g. 14,000N h. 500N Note that adjusting entries are internal transactions that do not involve an exchange with others. The Cash account is not affected by these transactions. AP43 Req. 1 a.Deferred expensee.Deferred expense b.Accrued revenuef.Deferred expense c.Deferred expenseg.Accrued revenue d.Accrued expenseh.Accrued expense AP43 (continued) Req. 2 a.Supplies expense (+E SE)1,250 Supplies inventory (A)1,250 Supplies inventory is decreased (credited) to record the use of supplies during the year because this expense was incurred in 2015, calculated as Beg. Inventory of $450 + Purchases $1,200 Ending Inventory $400 b.Trade receivables (+A)7,500 Sales revenue (+R +SE)7,500 This entry records an asset for the amount due from customers and recognizes the revenue because it was earned in 2015. c.Insurance expense (+E SE)200 Prepaid insurance (A)200 $1,200 12 months x 2 months of coverage. This entry reduces the asset (prepaid insurance) because part of it has been used while $1,000 represents future benefits (an asset) to the company. d.Repairs and maintenance expense (+E SE)600 Accrued liabilities (+L)600 Repairs and maintenance expense is increased (debited) because this expense was incurred in 2015. A liability (accrued expenses payable) is credited because this amount is owed but will not be paid until 2016. e.Rent expense (+E SE)700 Prepaid rent (A)700 $2,100 3 months x 1 month of expired rent. This entry reduces the asset (prepaid rent) because part of it has been used while $1,400 represents future benefits (an asset) to the company. f.Depreciation expense (+E SE)2,600 Accumulated depreciation, display counters (+XA A)2,600 g.Interest receivable (+A)20 Interest revenue (+R +SE)20 To accrue interest income earned but not yet received, $4,000 x 3% x 2/12 = $20. AP43 (continued) h.Income tax expense (+E SE)7,371 Income tax payable (+L)7,371 To accrue income tax expense incurred but not yet paid: Earnings before adjustments (given) $22,400 Effect of adjustments (a) through (g) +2,170 ( 1,250 + 7,500 200 Earnings before income taxes24,570 600 700 2,600 + 20) Income tax rate 30% Income tax expense$ 7,371 Req.