Chapter 1

Solutions

Exercise 1.1

General Journal: Rent expense 200 under debit; Prepaid rent 200 under credit (a to adjust prepaid rent account to the proper balance); Office supplies expense 400 under debit; Unused office supplies 400 under credit (b to record the ending balance of supplies on hand); Income taxes expense 5,000 under debit ; Income taxes payable 5,000 under credit (c to record income taxes for the period); Unearned commissions 1000 under debit; Commissions earned 1000 under credit (d to record the proper balance in the unearned commissions account); salaries expense 300 under debit; salaries payable 300 under credit (e to accrue salaries for the period)

Exercise 1.2

  1. General Journal: Accounts receivable DR under debit. Revenue CR under credit

  2. General Journal: Cash Dr under debit Unearned revenue CR under credit

  3. General Journal: Unearned revenue DR under debit Revenue CR under credit

  4. General Journal Repairs expense DR under debit Accounts payable CR under credit

  5. General Journal Prepaid repairs expense DR under debit Cash CR under Credit.

  6. General Journal Repeairs expense DR under debit Prepaid repairs expense CR under credit

  7. General Journal Salaries expense DR under debit Accrued salaries payable CR under Credit

  8. General Journal Deprecia on expense DR under debit Accumulated depreciation on equipment CR under credit

Exercise 1.3

    Debit Credit
1 Service Revenue 13,450
Unearned Revenue 13,450
2 Accounts Receivable 15,200
Service Revenue 15,200
3 Bad Debt Expense 1,700
Allowance for Doubtful Accounts 1,700
4 Prepaid Insurance 5,200
Insurance Expense 5,200
5 Depreciation Expense 8,650
Accumulated Depreciation - Equipment 8,650
6 Interest Expense 83
Interest Payable 83
7 Prepaid Rent 2,100
Rent Expense 2,100
8 Salaries and Wages Expense 3,500
Salaries and Wages Payable 3,500
9 Dividends 1,000
Dividends Payable 1,000

Exercise 1.4

Adjusting Journal Entries
1 Depreciation Expense 2,000
Accumulated Depreciation 2,000
$12,000 / 6 years = $2,000
2 Insurance Expense 725
Prepaid Insurance 725
$4,350 / 12 month policy x 2 month expired = $725
3 Supplies Expense 555
Supplies 555
$1,520 on trial balance - $965 on hand = $555 used (expensed)
4 Unearned Revenue 1,780
Service Revenue 1,780
$3,560 x 1/2 = $1,780 earned
5 Accounts Receivable 2,345
Service Revenue 2,345
record the amount earned but not invoiced or recorded
6 Telephone Expense 580
Accounts Payable 580
record the amount of telephone expense incurred but not recorded

Worksheet

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 7,465 7,465 7,465
Accounts Receivables 3,560 2,345 5,905 5,905
Prepaid insurance 4,350 725 3,625 3,625
Supplies 1,520 555 965 965
Equipment 12,000 12,000 12,000
Accumulated Depreciation - Equipment 1,200 2,000 3,200 3,200
Accounts Payable 3,060 580 3,640 3,640
Unearned revenue 3,560 1,780 1,780 1,780
Common Shares 10,000 10,000 10,000
Retained earnings 8,633 8,633 8,633
Service revenue 6,320 4,125 10,445 10,445
Advertising expense 328 328 328
Depreciation Expense 2,000 2,000 2,000
Insurance Expense 725 725 725
Office expense 450 450 450
Salaries and wage expense 3,100 3,100 3,100
Supplies Expense 555 555 555
Telephone Expense 580 580 580
Totals $32,773 $32,773 $7,985 $7,985 $37,698 $37,698 $7,738 $10,445 $29,960 $27,253
$2,707 $2,707
$10,445 $10,445 $29,960 $29,960

Exercise 1.5

Edit

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet
Account Name

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr
Cash 46,984 46,984
Inventory 125,499 125,499
Accounts Receivable 365,941 365,941
Prepaid Rent 45,000 45,000
Land 632,500 632,500
Equipment 839,641 839,641
Equipment – Accumulated Depreciation 369,852 – 369,852
Accounts Payable 98,654 98,654
Sales Tax Payable 4,655 4,655
Bank Loan 350,000 350,000
Common Shares 250,000 250,000
Retained Earnings 483,449 483,449
Service Revenue 1,864,411 1,864,411
Depreciation Expense – Equipment 89,641 89,641
Interest Expense 35,000 35,000
Rent Expense 540,000 540,000
Salaries and Wages Expense 654,944 654,944
Utility Expense 45,871 45,871
– – – – 3,421,021 3,421,021 1,365,456 1,864,411 2,055,565 1,556,610
498,955 498,955
$1,864,411 $1,864,411 $2,055,565 $2,055,565

Exercise 1.6

1 Interest Expense 3,200.00
Interest Payable 3,200.00
$320,000 × 4% × 3/12
2 Insurance Expense 13,541.67
Prepaid Insurance 13,541.67
$32,500 × 5/12 expired (used up)
3 Unearned Revenue 17,433.33
Revenue 17,433.33
$52,300 × 1/3 earned
4 Wages Expense 25,000.00
Wages Payable 25,000.00
$62,500 × 2/5 (Tuesday = 2 days expense incurred from 1 weeks wage)
5 Depreciation Expense 6,000.00
Accumulated Depreciation 6,000.00
($32,000 ÷ 4 years) × 9/ 12 (April - December)
6 Accounts Receivable 31,800.00
Revenue 31,800.00
record the amount earned - but not yet recorded
7 Supplies Expense 2,121.00
Supplies (Inventory) 2,121.00
$4,265 unadjusted - $2,144 on hand = the amount used
8 Advertising Expense 3,200.00
Accounts Payable 3,200.00
record expense incurred but not recorded.
9 Revenue 21,000.00
Unearned Revenue 21,000.00
the revenue has not been earned and should not be included in revenue
10 Bad Debt Expense 12,560.00
Allowance for Doubtful Accounts 12,560.00
record the estimated expense

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