Exercise 3-6

Item(a)

Type of Adjustment(b)

Accounts before Adjustment

1. Accrued Revenues Assets UnderstatedRevenues Understated

2. Prepaid Expenses Assets OverstatedExpenses Understated

3. Accrued Expenses Expenses UnderstatedLiabilities Understated

4. Unearned Revenues Liabilities OverstatedRevenues Understated

5. Accrued Expenses Expenses UnderstatedLiabilities Understated

6. Prepaid Expenses Assets OverstatedExpenses Understated

Exercise 3-7

Mar. 31 Depreciation Expense ($300 X 3) 900

Accumulated Depreciation  Equipment...............................................................  

900

31 Unearned Rent Revenue.............................................. 3,300Rent Revenue ($9,900 X 1/3)......................................

3,300

31 Interest Expense....................................................................   500Interest Payable...........................................................  

500

31 Supplies Expense................................................................... 2,150Supplies ($2,800 – $650)............................................

2,150

31 Insurance Expense ($200 X 3)..............................................   600Prepaid Insurance........................................................  

600

Exercise 3-11

(a) Supplies expense $ 950Add: Supplies (1/31)   850Less: Supplies purchase (670 )

Supplies (1/1) $ 1,130Therefore supplies balance = $1,130

b.Total premium = Monthly premium X 12 $400 X 12 = $4,800

Purchase date is: On Jan. 31, from Aug. 1, 2013 there are 6 months’ coverage remaining ($400 X 6). Thus, the purchase date was 6 months earlier on Aug. 1, 2013

c.

Cash paid $3,300Salaries and wages  payable (1/31/14) 800

4,100Less: Salaries and wages expense 2,500Salaries and wages  payable (12/31/13) $1,600

Problem 3-2A

(a)

Date Debit Credit

Aug. 31 Insurance Expense ($400 X 3)...............................Prepaid Insurance.........................................

1,2001,200

31 Supplies Expense ($3,300 – $900)............................Supplies........................................................

2,4002,400

31 Depreciation Expense  ($4,500 X 1/4) + ($2,400 X 1/4)........................

Accumulated Depreciation—  Buildings..................................................

1,725

1,125Accumulated Depreciation—  Equipment................................................   600

31 Unearned Rent Revenue.........................................Rent Revenue...............................................

4,1004,100

31 Salaries and Wages Expense..................................Salaries and Wages Payable.........................

  400  400

31 Accounts Receivable..............................................Rent Revenue...............................................

3,7003,700

31 Interest Expense.....................................................Interest Payable  [($80,000 X 9%) X 1/12].........................

  600

  600

(b)

Cash

Date Debit Credit Balance

Aug. 31 Balance 19,600

Accounts Receivable

Date Debit Credit Balance

Aug. 31 Adjusting 3,700   3,700

Supplies

Date Debit Credit Balance

Aug. 3131

BalanceAdjusting 2,400

  3,300    900

Prepaid Insurance

Date Debit Credit Balance

Aug. 3131

BalanceAdjusting 1,200

  6,000  4,800

Land

Date Debit Credit Balance

Aug. 31 Balance  25,000

Buildings

Date Debit Credit Balance

Aug. 31 Balance 125,000

Accumulated Depreciation—Buildings

Date Debit Credit Balance

Aug. 31 Adjusting 1,125 1,125

Equipment

Date Debit Credit Balance

Aug. 31 Balance  26,000

Accumulated Depreciation—Equipment

Date Debit Credit Balance

Aug. 31 Adjusting 600     600

Accounts Payable

Date Debit Credit Balance

Aug. 31 Balance   6,500

Unearned Rent Revenue

Date Debit Credit Balance

Aug. 3131

BalanceAdjusting 4,100

  7,400  3,300

Salaries and Wages Payable

Date Debit Credit Balance

Aug. 31 Adjusting 400     400

Interest Payable

Date Debit Credit Balance

Aug. 31 Adjusting 600     600

Mortgage Payable

Date Debit Credit Balance

Aug. 31 Balance  80,000

Common Stock

Date Debit Credit Balance

Aug. 31 Balance 100,000

Dividends

Date Debit Credit Balance

Aug. 31 Balance  5,000

Rent Revenue

Date Debit Credit Balance

Aug. 313131

BalanceAdjustingAdjusting

4,1003,700

80,00084,10087,800

Maintenance and Repairs Expense

Date Debit Credit Balance

Aug. 31 Balance  3,600

Supplies Expense

Date Debit Credit Balance

Aug. 31 Adjusting 2,400  2,400

Depreciation Expense

Date Debit Credit Balance

Aug. 31 Adjusting 1,725 1,725

Interest Expense

Date Debit Credit Balance

Aug. 31 Adjusting   600    600

Insurance Expense

Date Debit Credit Balance

Aug. 31 Adjusting 1,200  1,200

Salaries and Wages Expense

Date Debit Credit Balance

Aug. 3131

BalanceAdjusting   400

51,00051,400

Utilities Expense

Date Explanation Debit Credit Balance

Aug. 31 Balance  9,400

(c)

Lazy River Resort, Inc.Adjusted Trial Balance

August 31, 2014

Debit Credit

Cash..............................................................................................Accounts Receivable....................................................................Supplies........................................................................................Prepaid Insurance.........................................................................Land..............................................................................................Buildings.......................................................................................Accumulated Depreciation—Buildings........................................Equipment.....................................................................................Accumulated Depreciation—Equipment......................................Accounts Payable.........................................................................Unearned Rent Revenue...............................................................Salaries and Wages Payable.........................................................Interest Payable.............................................................................Mortgage Payable.........................................................................Common Stock.............................................................................Dividends......................................................................................Rent Revenue................................................................................Maintenance and Repairs Expense...............................................

$ 19,6003,700

     900   4,800  25,000 125,000

  26,000

   5,000

   3,600

$  1,125

     600   6,500   3,300     400     600  80,000 100,000

  87,800

Supplies Expense..........................................................................Depreciation Expense...................................................................Interest Expense............................................................................Insurance Expense........................................................................Salaries and Wages Expense........................................................Utilities Expense...........................................................................

   2,4001,725

     600   1,200  51,400 9,400$280,325

                              $280,325

d. Lazy River Resort, Inc.

Income StatementFor the Three Months Ended August 31, 2014

RevenuesRent revenue.......................................................................... $87,800

ExpensesSalaries and wages expense................................................... $51,400Utilities expense.....................................................................   9,400Maintenance and repairs expense..........................................   3,600Supplies expense....................................................................   2,400Depreciation expense.............................................................    1,725Insurance expense..................................................................   1,200Interest expense......................................................................     600

Total expenses.............................................................. 70,325Net income ........................................................... $17,475

Lazy River Resort, Inc.Retained Earnings Statement

For the Three Months Ended August 31, 2014

Retained Earnings, June 1...................................................................................... $      0Add: Net income.................................................................................................. 17,475

 17,475Less: Dividends..................................................................................................... 5,000Retained Earnings, August 31................................................................................ $ 12,475

Lazy River Resort, Inc.Balance Sheet

August 31, 2014

AssetsCash .......................................................................................... $ 19,600Accounts receivable...................................................................     

3,700Supplies......................................................................................      900Prepaid insurance.......................................................................    4,800

Land ..........................................................................................   25,000Buildings.................................................................................... $125,000Less: Accum. Depreciation buildings....................................... 1,125  123,875Equipment..................................................................................   26,000Less: Accum. Depreciation equipment..................................... 600 25,400

Total assets............................................................. $203,275

Liabilities and Stockholders' EquityLiabilities

Accounts payable............................................................. $  6,500Mortgage payable............................................................. 80,000Unearned rent revenue.....................................................    3,300Interest payable................................................................      600Salaries and wages payable..............................................      400

Total liabilities.......................................................   90,800Stockholders’ equity

Common stock................................................................. $100,000Retained earnings.............................................................         12,475

Total stockholders’ equity...................................... 112,475Total liabilities and stockholders’  equity.................................................................. $203,275

CHAPTER 3 HW SCREENSHOT

Exercise 3-6

Your answer is correct.

Orwell Company accumulates the following adjustment data at December 31.

1. Services provided but not recorded total $1,420.

2. Supplies of $300 have been used.

3. Utility expenses of $225 are unpaid.

4. Unearned service revenue of $260 is recognized for services performed.

5. Salaries of $800 are unpaid.

6. Prepaid insurance totaling $380 has expired.

For each of the above items indicate the following. (Answer for account balances before

adjustment should be entered in alphabetical order.)

(a)The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).

(b) The status of accounts before adjustment (overstatement or understatement).

Item Type of Adjustment Accounts before Adjustment

1. Accrued Revenues res_EAT_131943 Assets Understated res_EAT_131943

Revenues Understated res_EAT_131943

2. Prepaid Expenses res_EAT_131943 Assets Overstated res_EAT_131943

Expenses Understated res_EAT_131943

3. Accrued Expenses res_EAT_131943 Expenses Understated res_EAT_131943

Liabilities Understated res_EAT_131943

4. Unearned Revenues res_EAT_131943 Liabilities Overstated res_EAT_131943

Revenues Understated res_EAT_131943

5. Accrued Expenses res_EAT_131943 Expenses Understated res_EAT_131943

Liabilities Understated res_EAT_131943

6. Prepaid Expenses res_EAT_131943 Assets Overstated res_EAT_131943

Expenses Understated res_EAT_131943

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a

Exercise 3-7

Your answer is correct.

The ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts, shown below, 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 9,900

Rent Revenue 60,000

Interest Expense 0

Salaries and Wages Expense 14,000

An analysis of the accounts shows the following

1. The equipment depreciates $300 per month.

2. One-third of the unearned rent revenue was recognized 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 $200 per month.

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. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.

DateAccount Titles and Explanation

Debit Credit

1. Mar. 31 Depreciation E 900

Accumulated D 900

2. Mar. 31 Unearned Ren 3300

Rent Revenue 3300

3. Mar. 31 Interest Expen 500

Interest Payab 500

4. Mar. 31 Supplies Expe 2150

Supplies 2150

5. Mar. 31 Insurance Exp 600

Prepaid Insura 600

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a

Exercise 3-11

Your answer is correct.

A partial adjusted trial balance of Ruiz Company at January 31, 2014, shows the following.

Ruiz CompanyAdjusted Trial Balance

January 31, 2014

Debit Credit

Supplies $ 850

Prepaid Insurance 2,400

Salaries and Wages Payable $ 800

Unearned Service Revenue 750

Supplies Expense 950

Insurance Expense 400

Salaries and Wages Expense 2,500

Service Revenue 2,000

Answer the following questions, assuming the year begins January 1.

(a) If the amount in Supplies Expense is the January 31 adjusting entry, and $670 of supplies was purchased in January, what was the balance in Supplies on January 1?

The balance in Supplies on January 1$

1130

(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?

The total premium$

4800

The policy purchased

Aug. 1, 2013 res_EAT_131943

(c) If $3,300 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2013?

The balance in Salaries and Wages Payable at December 31, 2013$

1600

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Problem 3-2A

Lazy River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows.

Lazy River Resort, Inc.Trial Balance

August 31, 2014

Account Number Debit Credit

101 Cash $ 19,600

126 Supplies 3,300

130 Prepaid Insurance 6,000

140 Land 25,000

143 Buildings 125,000

157 Equipment 26,000

201 Accounts Payable $ 6,500

208 Unearned Rent Revenue 7,400

275 Mortgage Payable 80,000

311 Common Stock 100,000

332 Dividends 5,000

429 Rent Revenue 80,000

622 Maintenance and Repairs Expense 3,600

726 Salaries and Wages Expense 51,000

732 Utilities Expense 9,400

$273,900 $273,900

In addition to those accounts listed on the trial balance, the chart of accounts for Lazy River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation—Buildings, No. 158 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:

1. Insurance expires at the rate of $400 per month.

2. A count on August 31 shows $900 of supplies on hand.

3. Annual depreciation is $4,500 on buildings and $2,400 on equipment.

4. Unearned rent revenue of $4,100 was recognized for services performed prior to August 31.

5. Salaries of $400 were unpaid at August 31.

6. Rentals of $3,700 were due from tenants at August 31. (Use Accounts Receivable.)

7. The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

(a)

Your answer is correct.

Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.

DateAccount Titles and Explanation

Debit Credit

1. Aug. 31 Insurance Exp 1200

Prepaid Insura 1200

2. Aug. 31 Supplies Expe 2400

Supplies 2400

3. Aug. 31 Depreciation E 1725

Accumulated D 1125

Accumulated D 600

4. Aug. 31 Unearned Ren 4100

Rent Revenue 4100

5. Aug. 31 Salaries and W 400

Salaries and W 400

6. Aug. 31 Accounts Rec 3700

Rent Revenue 3700

7. Aug. 31 Interest Expen 600

Interest Payab 600

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(b)

Your answer is correct.

Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Post entries in the order of journal entries posted in the previous part of the question.)

Cash No. 101

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 19600

Accounts Receivable No. 112

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 3700 3700

Supplies No. 126

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 3300

Aug. 31 Adjusting J1 2400 900

Prepaid Insurance No. 130

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 6000

Aug. 31 Adjusting J1 1200 4800

Land No. 140

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 25000

Buildings No. 143

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 125000

Accumulated Depreciation—Buildings

No. 144

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 1125 1125

Equipment No. 157

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 26000

Accumulated Depreciation—Equipment

No. 158

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 600 600

Accounts Payable No. 201

Date Explanation Re Debit Credit Balance

f

Aug. 31 Balance √ 6500

Unearned Rent Revenue No. 208

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 7400

Aug. 31 Adjusting J1 4100 3300

Salaries and Wages Payable No. 212

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 400 400

Interest Payable No. 230

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 600 600

Mortgage Payable No. 275

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 80000

Common Stock No. 311

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 100000

Dividends No. 332

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 5000

Rent Revenue No. 429

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 80000

Aug. 31 Adjusting J1 4100 84100

Aug. 31 Adjusting J1 3700 87800

Depreciation Expense No. 711

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 1725 1725

Maintenance and Repairs Expense No. 622

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 3600

Supplies Expense No. 631

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 2400 2400

Interest Expense No. 718

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 600 600

Insurance Expense No. 722

Date ExplanationRef

Debit Credit Balance

Aug. 31 Adjusting J1 1200 1200

Salaries and Wages Expense No. 726

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 51000

Aug. 31 Adjusting J1 400 51400

Utilities Expense No. 732

Date ExplanationRef

Debit Credit Balance

Aug. 31 Balance √ 9400

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(c)

Your answer is correct.

Prepare an adjusted trial balance on August 31.

LAZY RIVER RESORT, INC.Adjusted Trial Balance

August 31, 2014

Debit Credit

Cash$

19600$

Accounts Rec 3700

Supplies 900

Prepaid Insura 4800

Land 25000

Buildings 125000

Accumulated D 1125

Equipment 26000

Accumulated D 600

Accounts Pay 6500

Unearned Ren 3300

Salaries and W 400

Interest Payab 600

Mortgage Paya 80000

Common Stock 100000

Dividends 5000

Rent Revenue 87800

Maintenance a 3600

Supplies Expe 2400

Depreciation E 1725

Interest Expen 600

Insurance Exp 1200

Salaries and W 51400

Utilities Expens 9400

$280325

$280325

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(d)

Your answer is correct.

Prepare an income statement for the 3 months ending August 31.

LAZY RIVER RESORT, INC.Income Statement

For the Three Months Ended August 31, 2014

Revenues res_EAT_131943

Rent Revenue$

87800

Expenses res_EAT_131943

Salaries and W$

51400

Utilities Expens 9400

Maintenance a 3600

Supplies Expe 2400

Depreciation E 1725

Insurance Exp 1200

Interest Expen 600

Total Expenses res_EAT_131943 70325

Net Income / (Loss) res_EAT_131943$

17475

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(e)

Your answer is correct.

Prepare a retained earnings statement for the 3 months ending August 31. (List items that increase retained earnings first.)

LAZY RIVER RESORT, INC.Retained Earnings Statement

For the Three Months Ended August 31, 2014

Retained Earnings, June 1 res_EAT_131943$

0

Add res_EAT_131943:

Net Income / (Loss)

res_EAT_13194317475

17475

Less res_EAT_131943:

Dividends 5000

res_EAT_131943

Retained Earnings, August 31 res_EAT_131943$

12475

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(f)

Your answer is correct.

Prepare a balance sheet as of August 31. (List assets in order of liquidity. List Property, plant and equipment in order of land, buildings and equipment.)

LAZY RIVER RESORT, INC.Balance Sheet

August 31, 2014

Assets

Cash$

19600

Accounts Rec 3700

Supplies 900

Prepaid Insura 4800

Land 25000

Buildings$

125000

Less res_EAT_131943:

Accumulated D 1125 123875

Equipment 26000

Less res_EAT_131943:

Accumulated D 600 25400

Total Assets

res_EAT_131943

$

203275

Liabilities and Stockholders’ Equity

Liabilities

res_EAT_131943

Accounts Pay$

6500

Mortgage Paya 80000

Unearned Ren 3300

Interest Payab 600

Salaries and W 400

Total Liabilities

res_EAT_13194390800

Stockholders' Equity

res_EAT_131943

Common Stock 100000

Retained Earn 12475

Total Stockholders' Equity

res_EAT_131943112475

Total Liabilities and Stockholders' Equity

res_EAT_131943

$

203275

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