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Accounting 23rd Edition Carl S. Warren - Solutions

=+EX 3-27 Adjusting entries from trial balances obj. 4✔ Corrected trial balance totals,$621,900 Chapter 3 The Adjusting Process 133 The following data (in millions) is taken from the financial statements of WilliamsSonoma for the years ending 2007 and 2006:2007 2006 Net sales (revenues) $3,728
=+a. Determine the amount of change (in millions) and percent of change in net income for 2007.
=+b. Determine the percentage relationship between net income and net sales (net income divided by net sales) for 2007 and 2008.
=+c. What conclusions can you draw from your analysis?
=+EX 3-28 Vertical analysis of income statement The following income statement data (in thousands) for Dell Inc. and Gateway, Inc., were taken from their recent annual reports:Dell Gateway Net sales $35,404,000 $ 4,171,325 Cost of goods sold (expense) (29,055,000) (3,605,120)Operating expenses
=+a. Prepare a vertical analysis of the income statement for Dell.
=+b. Prepare a vertical analysis of the income statement for Gateway.
=+c. Based on (a) and (b), how does Dell compare to Gateway?
=+EX 3-29 Vertical analysis of income statement Problems Series A On August 31, 2010, the following data were accumulated to assist the accountant in preparing the adjusting entries for Cobalt Realty:a. Fees accrued but unbilled at August 31 are $9,560.b. The supplies account balance on August 31
=+c. Wages accrued but not paid at August 31 are $1,200.
=+d. The unearned rent account balance at August 31 is $9,375, representing the receipt of an advance payment on August 1 of three months’ rent from tenants.
=+e. Depreciation of office equipment is $1,600.Instructions
=+1. Journalize the adjusting entries required at August 31, 2010.
=+2. Briefly explain the difference between adjusting entries and entries that would be made to correct errors.
=+PR 3-1A Adjusting entries Debits Credits Accounts Receivable $ 65,000 Accumulated Depreciation $ 10,000 Depreciation Expense —Equipment 100,000 Fees Earned 379,500 Prepaid Rent 8,200 Rent Expense —Supplies 1,950 Supplies Expense —Unearned Fees 9,000 Wages Expense 128,000 Wages Payable —
=+Data needed for year-end adjustments are as follows:a. Supplies on hand at April 30, $600.b. Depreciation of equipment during year, $1,000.c. Rent expired during year, $6,000.d. Wages accrued but not paid at April 30, $1,900.e. Unearned fees at April 30, $3, 750.f. Unbilled fees at April 30, $4,
=+Journalize the six adjusting entries required at April 30, based on the data presented.Wind River Outfitters Co., an outfitter store for fishing treks, prepared the following unadjusted trial balance at the end of its first year of operations:Wind River Outfitters Co.Unadjusted Trial Balance
=+For preparing the adjusting entries, the following data were assembled:a. Supplies on hand on February 28 were $750.b. Fees earned but unbilled on February 28 were $2,900.c. Depreciation of equipment was estimated to be $5,400 for the year.
=+d. Unpaid wages accrued on February 28 were $800.e. The balance in unearned fees represented the February 1 receipt in advance for services to be provided. Only $1,600 of the services was provided between February 1
=+and February 28.Instructions Journalize the adjusting entries necessary on February 28.
=+PR 3-3A Adjusting entries obj. 2 Chapter 3 The Adjusting Process 135 Billy Board Company specializes in the maintenance and repair of signs, such as billboards. On March 31, 2010, the accountant for Billy Board Company prepared the following trial balances:Billy Board Company Trial Balance
=+Journalize the seven entries that adjusted the accounts at March 31. None of the accounts were affected by more than one adjusting entry.2
=+PR 3-4A Adjusting entries objs. 2, 3, 4 Jacksonville Financial Services Co., which specializes in appliance repair services, is owned and operated by Cindy Latty. Jacksonville Financial Services Co.’s accounting clerk prepared the unadjusted trial balance at December 31, 2010, shown
=+PR 3-5A Adjusting entries and adjusted trial balances objs. 2, 3, 4✔ 2. Total of Debit column: $333,050 136 Chapter 3 The Adjusting Process The data needed to determine year-end adjustments are as follows:a. Depreciation of building for the year, $2,100.b. Depreciation of equipment for the
=+1. Journalize the adjusting entries. Add additional accounts as needed.
=+2. Determine the balances of the accounts affected by the adjusting entries and prepare an adjusted trial balance.
=+At the end of July, the first month of operations, the following selected data were taken from the financial statements of Monita Forche, an attorney:Net income for July $135,800 Total assets at July 31 750,000 Total liabilities at July 31 250,000 Total owner’s equity at July 31 500,000 In
=+1. Journalize the entries to record the omitted adjustments.
=+2. Determine the correct amount of net income for July and the total assets, liabilities, and owner’s equity at July 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following.
=+(a) is presented as an example.Net Total Total Total Income Assets Liabilities Owner’s Equity Reported amounts $135,800 $750,000 $250,000 $500,000 Corrections:Adjustment (a) 6,700 6,700 0 6,700 Adjustment (b) _________ _________ _________ _________ Adjustment (c) _________ _________
=+PR 3-6A Adjusting entries and errors obj. 3✔ 2. Corrected Net Income: $135,375 Problems Series B On March 31, 2010, the following data were accumulated to assist the accountant in preparing the adjusting entries for Hackney Realty:
=+a. The supplies account balance on March 31 is $2,315. The supplies on hand on March 31 are $990.
=+b. The unearned rent account balance on March 31 is $7,950, representing the receipt
=+of an advance payment on March 1 of three months’ rent from tenants.
=+c. Wages accrued but not paid at March 31 are $800.
=+PR 3-1B Adjusting entries obj. 2 Chapter 3 The Adjusting Process 137d. Fees accrued but unbilled at March 31 are $7,100.e. Depreciation of office equipment is $700.Instructions
=+1. Journalize the adjusting entries required at March 31, 2010.
=+2. Briefly explain the difference between adjusting entries and entries that would be made to correct errors.Selected account balances before adjustment for Perfect Realty at October 31, 2010, the end of the current year, are as follows:Debits Credits Accounts Receivable $ 40,000 Equipment
=+Data needed for year-end adjustments are as follows:a. Unbilled fees at October 31, $2,900.
=+b. Supplies on hand at October 31, $400.c. Rent expired, $6,000.
=+d. Depreciation of equipment during year, $3,000.e. Unearned fees at October 31, $800.f. Wages accrued but not paid at October 31, $1,400.Instructions Journalize the six adjusting entries required at October 31, based on the data presented.
=+PR 3-2B Adjusting entries obj. 2 Chinook Company, an electronics repair store, prepared the unadjusted trial balance shown below at the end of its first year of operations.Chinook Company Unadjusted Trial Balance November 30, 2010 Debit Credit Balances Balances Cash . . . . . . . . . . . . . . .
=+PR 3-3B Adjusting entries obj. 2 138 Chapter 3 The Adjusting Process For preparing the adjusting entries, the following data were assembled:a. Fees earned but unbilled on November 30 were $1,300.b. Supplies on hand on November 30 were $3,100.c. Depreciation of equipment was estimated to be $3,500
=+e. Unpaid wages accrued on November 30 were $900.Instructions
=+Journalize the adjusting entries necessary on November 30, 2010.
=+Luxor Company specializes in the repair of music equipment and is owned and operated by Amy Busby. On November 30, 2010, the end of the current year, the accountant for Luxor Company prepared the following trial balances:Luxor Company Trial Balance November 30, 2010 Unadjusted Adjusted Debit
=+Journalize the seven entries that adjusted the accounts at November 30. None of the accounts were affected by more than one adjusting entry.
=+PR 3-4B Adjusting entries objs. 2, 3, 4 Misfire Company is a small editorial services company owned and operated by Pedro Borman. On August 31, 2010, the end of the current year, Misfire Company’s accounting clerk prepared the unadjusted trial balance shown on the next page.The data needed to
=+PR 3-5B Adjusting entries and adjusted trial balances objs. 2, 3, 4✔ 2. Total of Debit column: $822,180 Chapter 3 The Adjusting Process 139f. Accrued salaries and wages at August 31, $2,800.
=+g. Fees earned but unbilled on August 31, $12,380.Misfire Company Unadjusted Trial Balance August 31, 2010
=+Debit Credit Balances Balances Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,400 Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
=+Instructions 1. Journalize the adjusting entries. Add additional accounts as needed.2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.At the end of April, the first month of operations, the following selected data were taken from
=+Instructions 1. Journalize the entries to record the omitted adjustments.
=+2. Determine the correct amount of net income for April and the total assets, liabilities, and owner’s equity at April 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following.
=+Reported amounts $125,750 $500,000 $180,000 $320,000 Corrections:Adjustment (a) 3,100 3,100 0 3,100 Adjustment (b) _________ _________ _________ _________ Adjustment (c) _________ _________ _________ _________ Adjustment (d) _________ _________ _________ _________ Corrected amounts _________
=+140 Chapter 3 The Adjusting Process Continuing Problem The unadjusted trial balance that you prepared for Music Depot at the end of Chapter 2 should appear as follows:Music Depot Unadjusted Trial Balance July 31, 2010 Debit Credit Balances Balances Cash . . . . . . . . . . . . . . . . . . . . . .
=+a. During July, Music Depot provided guest disc jockeys for WHBD for a total of 120 hours. For information on the amount of the accrued revenue to be billed to WHBD, see the contract described in the July 3, 2010, transaction at the end of Chapter 2.
=+b. Supplies on hand at July 31, $175.c. The balance of the prepaid insurance account relates to the July 1, 2010, transaction at the end of Chapter 2.
=+d. Depreciation of the office equipment is $60.e. The balance of the unearned revenue account relates to the contract between Music
=+Depot and WHBD, described in the July 3, 2010, transaction at the end of Chapter 2.
=+f. Accrued wages as of July 31, 2010, were $120.Instructions
=+1. Prepare adjusting journal entries. You will need the following additional accounts:18 Accumulated Depreciation—Office Equipment 22 Wages Payable
=+57 Insurance Expense 58 Depreciation Expense 2. Post the adjusting entries, inserting balances in the accounts affected.
=+3. Prepare an adjusted trial balance.✔ 3. Total of Debit column: $40,460 Special Activities
=+Cliff Hall opened Meridian Co. on January 1, 2009. At the end of the first year, the business needed additional capital. On behalf of Meridian, Cliff applied to Federal National Bank for a loan of $300,000. Based on Meridian financial statements, which had been prepared on a cash basis, the
=+SA 3-1 Ethics and professional conduct in business Chapter 3 The Adjusting Process 141 receivable and $15,650 in accounts payable. Cliff then instructed his accountant to record an additional $20,000 of accounts receivable for commissions on property for which a contract had been signed on
=+The following is an excerpt from a conversation between Joel Loomis and Krista Truitt just before they boarded a flight to Paris on Delta Air Lines. They are going to Paris to attend their company’s annual sales conference.Joel: Krista, aren’t you taking an introductory accounting course at
=+Krista: Yes, but it didn’t do any good. Ashley, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figure I’d take the accounting course and find out whether she’s just jerking me around.Joel: I
=+Discuss when Delta Air Lines should recognize the revenue from ticket sales to properly match revenues and expenses.
=+Several years ago, your brother opened Niagara Appliance Repairs. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular intervals. As the business grew, he hired an assistant. He is now considering adding
=+After reviewing the financial statements, the loan officer at the bank asked your brother if he used the accrual basis of accounting for revenues and expenses. Your brother responded that he did and that is why he included an account for “Amounts Due from Customers.” The loan officer then
=+a. Why do you think the loan officer suspected that the accounts had not been adjusted prior to the preparation of the statements?
=+b. Indicate possible accounts that might need to be adjusted before an accurate set of financial statements could be prepared.
=+Obtain a copy of your college or university’s student code of conduct. In groups of three or four, answer the following question:
=+1. Compare this code of conduct with the accountant’s Codes of Professional Conduct, which is linked to the text Web site at academic.cengage.com/accounting/warren.
=+2. One of your classmates asks you for permission to copy your homework, which your instructor will be collecting and grading for part of your overall term grade.
=+Although your instructor has not stated whether one student may or may not copy another student’s homework, is it ethical for you to allow your classmate to copy your homework?
=+Is it ethical for your classmate to copy your homework?
=+1. Which of the following accounts in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet) would be extended to the Balance Sheet columns?A. Utilities Expense C. M. E. Jones, Drawing B. Rent Revenue D. Miscellaneous Expense
=+3. Which of the following entries closes the owner’s drawing account at the end of the period?A. Debit the drawing account, credit the income summary account.B. Debit the owner’s capital account, credit the drawing account.C. Debit the income summary account, credit the drawing account.D.
=+5. Which of the following accounts would not be included in a post-closing trial balance?A. Cash B. Fees Earned C. Accumulated Depreciation D. J. C. Smith, Capital
=+3. In the Income Statement columns of the end-of-period spreadsheet (work sheet) for Steward Consulting Co. for the current year, the Debit column total
=+is $675,450 and the Credit column total is $915,800 before the amount for net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet (work sheet), what is the amount of net income or net loss?
=+10. What is the purpose of the post-closing trial balance?
=+11. (a) What is the most important output of the accounting cycle? (b) Do all companies have an accounting cycle? Explain.
=+12. What is the natural business year?
=+13. Why might a department store select a fiscal year ending January 31, rather than a fiscal year ending December 31?
=+14. The fiscal years for several well-known companies are as follows:Company Fiscal Year Ending Company Fiscal Year Ending
=+Kmart January 30 Toys “R” Us, Inc. February 3 JCPenney January 26 Federated Department February 3 Stores, Inc.
=+Target Corp. January 28 The Limited, Inc. February 2
=+What general characteristic shared by these companies explains why they do not have fiscal years ending December 31?
=+The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should
=+be extended to (a) an Income Statement column or (b) a Balance Sheet column.
=+1. Accumulated Depreciation—Equipment 5. Prepaid Rent 2. Cash 6. Supplies 3. Commissions Earned 7. Svend Tisdale, Drawing 4. Insurance Expense 8. Wages Expense
=+PE 4-1A Flow of accounts into financial statements obj. 1 EE 4-1 p. 146 Practice Exercises The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be extended to (a) an Income
=+1. Accounts Payable 5. Rent Revenue 2. Depreciation Expense—Equipment 6. Supplies Expense
=+3. Josh Neville, Capital 7. Unearned Service Revenue 4. Office Equipment 8. Wages Payable
=+PE 4-1B Flow of accounts into financial statements obj. 1 EE 4-1 p. 146 In the Income Statement columns of the end-of-period spreadsheet (work sheet) for El Dorado Consulting Co. for the current year, the Debit column total is $186,200 and the Credit column total is $233,400 before the amount for
=+PE 4-2A Determining net income from the end-of-period spreadsheet (work sheet)obj. 2 In the Balance Sheet columns of the end-of-period spreadsheet (work sheet) for Lancaster Consulting Co. for the current year, the Debit column total is $375,000 and the Credit column total is $505,200 before the
=+what is the amount of net income or net loss?

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