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Lecture

FFA_3e_Solutions_ch03.doc

53 Pages
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Department
Accounting
Course Code
ACC 110
Professor
Marla Spergel

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Description
CHAPTER 3 The Accounting Cycle EXERCISES E31. a. adjusting entry b. transactional entry c. no entry or adjusting (allowed by IFRS) d. adjusting entry e. no entry f. transactional entry g. adjusting entry h. transactional entry i. transactional entry j. transactional entry k. no entry E33. a. Retained Revenue Expenses Earnings Balance before closing entry on (2,900,000 December 31, 2014 17,500,000 3,750,000 ) (3,750,000 Closing entry 3,750,000 ) Closing entry (2,900,000) 2,900,000 Balance after closing entry on December 31, 2014 18,350,000 0 0 b. Dr. Revenue 3,750,000 Cr. Expenses 2,900,000 Cr. Retained earnings 850,000 c. The primary purposes of closing entries are to reset the balances in the temporary (income statement) accounts to zero and to transfer the amounts in those accounts to retained earnings. The closing entry is prepared at the end of a reporting period when financial statements must be prepared. d. Net income for 2015 would be overstated by $850,000 because all revenues and expenses from 2014 would be included in 2015 revenues and expenses. E35. a. No impact (cash increases, land decreases) 1 Copyright 2010 McGraw-Hill Ryerson Ltd. John Friedlan, Financial Accounting: A Critical Approach, 3e b. Increase assets, increase liabilities c. Increase assets, increase retained earnings (increase in revenue) d. Decrease assets, decrease liabilities e. No impact (cash decreases, prepaid rent increases) f. Increase assets, increase liabilities (unearned revenue) g. Increase assets, increase common shares h. No impact (cash increases, accounts receivable decreases) i. Decrease assets, decrease retained earnings E37. a. Accrued expense/accrued liability since the expense must be recognized before the cash is paid. b. Accrued revenue/accrued asset since the revenues must be recognized before the cash is received. c. Deferred revenue since cash was received before the revenue is recognized. d. Accrued expense/accrued liability since the expense must be recognized before the cash is paid. e. Deferred expense/prepaid expense since the cash was paid before the expense will be recognized. The adjusting entry would be needed to depreciate the computers over their useful lives. f. Accrued revenue/accrued asset since the revenues must be recognized before the cash is received. g. Deferred expense/prepaid expense since the cash was paid before the expense will be recognized. E39. Trans DR CR a Furniture and fixtures 100,000 Cash 100,000 b Furniture and fixtures 18,000 Cash 10,000 Accounts payable 8,000 c Supplies 900 Cash 900 d Bank loan 5,000 Cash 5,000 e Cash 55,000 Common shares 55,000 f Advertising expense 500 Cash 500 g Cash 32,000 Sales 32,000 Cost of Sales 15,000 2 Copyright 2010 McGraw-Hill Ryerson Ltd. John Friedlan, Financial Accounting: A Critical Approach, 3e Inventory 15,000 h Accounts receivable 8,000 Sales 8,000 Cost of sales 5,200 Inventory 5,200 i Cash 5,000 Accounts receivable 5,000 j Prepaid expenses 4,500 Cash 4,500 Cash Accounts receivable Supplies a 100,000 h 8,000 c 900 b 10,000 i 5,000 c 900 d 5,000 e 55,000 f 500 g 32,000 h 8,000 i 5,000 j 4,500 Prepaid expenses Inventory Furniture and fixtures j 4,500 g 15,000 a 100,000 h 5,200 b 18,000 Bank loan Accounts payable Common shares d 5,000 b 8,000 e 55,000 Sales Cost of sales Advertising expense g 32,000 g 15,000 f 500 h 8,000 h 5,200 3 Copyright 2010 McGraw-Hill Ryerson Ltd. John Friedlan, Financial Accounting: A Critical Approach, 3e E311. Trans DR CR a Accounts receivable 5,000 Professional fees 5,000 b Building 425,000 Real estate 425,000 c Accounts payable 2,500 Cash 2,500 d Cash 50,000 Partners equity 50,000 e Cash 18,000 Bank loan 18,000 f Wage expense 25,000 Wages payable 25,000 g No entry h Cash 7,000 Unearned revenue 7,000 i Cash 3,700 Accounts receivable 3,700 j Other expenses 1,500 Cash 1,500 Accounts Cash receivable Building c 2,500 a 5,000 b 425,000 d 50,000 i 3,700 e 18,000 h 7,000 i 3,700 j 1,500 Real estate Bank loan Accounts payable b 425,000 e 18,000 c 2,500 4 Copyright 2010 McGraw-Hill Ryerson Ltd. John Friedlan, Financial Accounting: A Critical Approach, 3e
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