Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077632991
Author: Wild
Publisher: MCG
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Chapter 3, Problem 3BPSB
To determine

Concept introduction:

In accounting, journal entry refers to the posting of transaction into journal items. Such entry
comprises of either debit or credit transaction. The transaction posted in the journal entry can be rechecked because the debit side of the journal must be equivalent to the credit side of the journal.
A T-account is a graphical representation of a general ledger account. Debit entries are shown on the left side of T-account and Credit entries are shown on right side of T-account.

Requirement 1:

To prepare:

We have to prepare unadjusted T-accounts from the unadjusted trial balance given in the question.

Expert Solution
Check Mark

Explanation of Solution

Explanation:

T account :

    Cash account
    Bal.
    60,000










    Accounts receivable
    Bal.
    0










    Teaching supplies
    Bal.
    70,000










    Prepaid rent
    Bal.
    3,800










    Prepaid Insurance
    Bal.
    19,000






    Professional library
    Bal.
    12,000






    Accumulated depreciation- Professional library


    Bal.
    2,500




    Equipment
    Bal.
    40,000






    Accumulated depreciation- Equipment


    Bal.
    20,000




    Accounts payable


    Bal.
    11,200




    Salary payable


    Bal.
    0




    Unearned training fee


    Bal.
    28,600




    C.Alonzo, capital


    Bal.
    71,500




    C.Alonzo, withdrawals
    Bal.
    20,000






    Tuition fee earned


    Bal.
    129,200








    Training fee earned


    Bal.
    68,000




    Depreciation expenses- equipment
    Bal.
    0










    Depreciation expenses- professional library
    Bal.
    0










    Salaries expenses
    Bal.
    44,200










    Insurance expenses
    Bal.
    0






    Rent expenses
    Bal.
    29,600






    Teaching supplies expenses
    Bal.
    0










    Advertising expenses
    Bal.
    19,000






    Utilities expenses
    Bal.
    13,400






Requirement 2:

To determine

To determine:

We have to record the adjustment entry for various transactions from “a to h” affecting company.

Requirement 2:

Expert Solution
Check Mark

Answer to Problem 3BPSB

Solution:

    Date Journal titlesDebit($)Credit($)
    a.dec.31Insurance expenses
    9,500

    Prepaid insurance

    9,500
    ( to record insurance expenses)





    b.dec 31
    Teaching supplies expenses
    50,000


    Teaching supplies

    50,000

    ( to record Teaching supply expense)






    c. dec.31
    Depreciation on equipment
    5,000


    Accumulated depreciation-equipment

    5,000

    ( to record depreciation on equipment)






    d. dec 31
    Depreciation on professional library
    2,400


    Accumulated depreciation-professional library

    2,400

    ( to record depreciation on professional library)






    e. Dec 31
    Unearned training fees
    28,600


    Training fee earned

    28,600

    (to record unearned training fee earned)






    f.dec.31
    Account receivable
    5,750


    Tuition fee earned

    5,750

    (to record tuition fee earned)






    g. dec.31
    Salary expenses
    450


    Salary payable

    450

    ( to accrue salary expenses)






    h. dec.31
    Rent expenses
    3,800


    Prepaid rent

    3,800

    ( to accrue rent expenses)










Explanation of Solution

Explanation:

  1. In this case, the period of Insurance policies has been expired and insurance expenses will be booked so, insurance expenses will be debited and prepaid insurance will be credited by $9,500.
  2. In this case, the balance of teaching supplies is $70,000 in unadjusted trial balance and in adjustment the actual balance is $20,000. The teaching supplies expenses will be calculated as below:
  3. Teaching supply expenses = Unadjusted balance- actual balance 

    Teaching supply expenses = $70,000 - $20,000 = $50,000 

  4. When depreciation is to be recorded then depreciation on equipment will be debited with the respective account and accumulated depreciation account will be credited by $5,000.
  5. Depreciation on professional library will be debited by $2,400 and accumulated depreciation account will be credited by $2,400 and will be shown in credit side in balance sheet.
  6. The client paid 2 month fee in advance on 1st Nov. As on Dec 31, two months has been passed so, we have to book the revenue and unearned account will be debited. The amount to be booked as income as below:
  7. Training fee earned =  fee per month &*#x00A0;no. of months till dec 31

    Training fee earned =  $14,300*2 = $28,600

  8. WTI has agreed to provide 4 month classes started on Oct 15 to an individual and fee is payable at the 4 months. Till Dec 31, the revenue has been accrued but the fee is not paid. We have to book revenue as per below details:
  9. Accrued tuition fee =  fee per month &*#x00A0;no. of months till dec 31

    Accrued tuition fee =  $2,300 &*#x00A0;2.5 months = $5,750

  10. In this adjustment entry expenditures on salaries account will be debited and salaries payable account will be credited with their respective amount.
  11. Calculation of salary expenses:

      Particulars
      Amount($)
      Salary expense for 1 day per employee
      100
      Salary expense for 1 employees for 3 days (150*1 employee*3 days)
      450

  12. In this case, the balance in unadjusted account rent expense account $3,800 represents to rent expenses so rent expenses will be debited and prepaid rent account will be credited.

Requirement 3:

To determine

To prepare:

We have to prepare the T accounts after adjustments and prepare a updated trial balance.

Requirement 3:

Expert Solution
Check Mark

Answer to Problem 3BPSB

Solution:

T account :

    Cash account
    Bal.
    60,000


    Adjusted balance
    60,000






    Accounts receivable
    Bal.
    0


    f.
    5,750


    Adjusted balance
    5,750


    Teaching supplies
    Bal.
    70,000
    b.
    50,000
    Adjusted balance
    20,000






    Prepaid rent
    Bal.
    3,800
    h.
    3,800
    Adjusted balance
    0






    Prepaid Insurance
    Bal.
    19,000
    a.
    9,500
    Adjusted balance
    9,500


    Professional library
    Bal.
    12,000


    Adjusted balance
    12,000


    Accumulated depreciation- Professional library


    Bal.
    2,500


    d.
    2,400


    Adjusted balance
    4,900

    Equipment
    Bal.
    40,000






    Adjusted balance
    40,000


    Accumulated depreciation- Equipment


    Bal.
    20,000


    c.
    5,000


    Adjusted balance
    25,000

    Accounts payable


    Bal.
    11,200


    Adjusted balance
    11,200

    Salary payable


    Bal.
    0


    g.
    450


    Adjusted balance
    450

    Unearned training fee
    e.
    28,600
    Bal.
    28,600


    Adjusted balance
    0

    C.Alonzo, capital


    Bal.
    71,500


    Adjusted balance
    71,500
    C.Alonzo, withdrawals
    Bal.
    20,000


    Adjusted balance
    20,000


    Tuition fee earned


    Bal.
    129,200


    f.
    5,750


    Adjusted balance
    134,950

    Training fee earned


    Bal.
    68,000


    e.
    28,600


    Adjusted balance
    96,600

    Depreciation expenses- equipment
    Bal.
    0


    c.
    5,000


    Adjusted balance
    5,000


    Depreciation expenses- professional library
    Bal.
    0


    d.
    2,400


    Adjusted balance
    2,400


    Salaries expenses
    Bal.
    44,200


    g.
    450


    Adjusted balance
    44,650


    Insurance expenses
    Bal.
    0


    a.
    9,500


    Adjusted balance
    9,500


    Rent expenses
    Bal.
    29,600


    h.
    3,800


    Adjusted balance
    33,400


    Teaching supplies expenses
    Bal.
    0


    b.
    50,000


    Adjusted balance
    50,000


    Advertising expenses
    Bal.
    19,000


    Adjusted balance
    19,000


    Utilities expenses
    Bal.
    13,400


    Adjusted balance
    13,400


Adjusted trial balance- December 31, 2015

    ParticularsDebitCredit
    Cash
    60,000

    Accounts receivable
    5,750

    Teaching supplies
    20,000

    Prepaid insurance
    9,500

    Prepaid rent
    0

    Professional library
    12,000

    Accumulated depreciation- professional library

    4,900
    Equipment
    40,000

    Accumulated depreciation- equipment

    25,000
    Accounts payable

    11,200
    Salary payable

    450
    Unearned training fee

    0
    C.Alonzo, Capital

    71,500
    C. Alonzo, Withdrawal
    20,000

    Tuition fee earned

    134,950
    Training fee earned

    96,600
    Depreciation expense- professional library
    2,400

    Depreciation expense- equipment
    5,000

    Salaries expenses
    44,650

    Insurance expenses
    9,500

    Rent expenses
    33,400

    Teaching supplies expenses
    50,000

    Advertising expenses
    19,000

    Utilities expenses
    13,400

    Total344,600344,600

Explanation of Solution

Explanation:

  1. Cash account- the balance of cash is given in unadjusted trial balance and there is no adjustment related to cash. Thus the balance of cash will be $60,000.
  2. Accounts receivable − accrued revenue has been adjusted $5,750 and adjusted balance of accounts receivable will be $5,750.
  3. The adjusted closing balance in teaching supplies after supplies expenses will be $20,000.
  4. Prepaid Insurance: the balance of prepaid insurance after adjustment is $9,500.
  5. Prepaid rent: the entire prepaid rent expenses $3,800 have been booked as an expense and adjusted balance in prepaid rent expenses is NIL.
  6. The balance in Professional library will remain same as there is no adjustment.
  7. Accumulated depreciation: depreciation on professional library has been charged $2,400 and the adjusted closing balance is $4,900.
  8. The balance in equipment will remain same as there is no adjustment.
  9. Accumulated depreciation on equipment has been charged $5,000 and the adjusted closing balance is $25,000.
  10. Accounts payable- the balance of accounts payable is $11,200 and there is no adjustment.
  11. Salaries payable- adjustment of $450 is recorded therefore its balance will be $450.
  12. Unearned training fee: The adjustment of $28,600 has been made and the adjusted balance is NIL.
  13. C.Alonzo, Capital: There is no adjustment and balance will remain same.
  14. C.Alonzo, Withdrawal: There is no adjustment and balance will remain same.
  15. Tuition fee earned: accrued revenue has been adjusted $5,750 and adjusted balance of tuition fee earned will be $134,950.
  16. Training fee earned: accrued revenue has been adjusted $28,600 and adjusted balance of tuition fee earned will be $96,600.
  17. Accumulated depreciation on professional library has been charged $2,400 and the adjusted closing balance is $2,400.
  18. Depreciation on equipment has been charged $5,000 and the adjusted closing balance is $5,000.
  19. Salaries expenses- adjustment of $450 is recorded therefore its balance will be $44,650.
  20. Insurance expenses- adjustment of $9,500 is recorded therefore its balance will be $9,500.
  21. Rent expenses- adjustment of $3,800 is recorded therefore its balance will be $33,400.
  22. Teaching supplies expenses- adjustment of $50,000 is recorded therefore its balance will be $50,000.
  23. Advertising expenses-there is no adjustment and balance will remain same.
  24. Utilities expenses- there is no adjustment and balance will remain same.

Requirement 4:

To determine

To prepare:

We have to prepare Income statement, Statement of Owners Equity and balance sheet as of December 31, 2015 after all adjustments.

Requirement 4:

Expert Solution
Check Mark

Answer to Problem 3BPSB

Solution:

Income statement for December 31, 2015

    Particulars
    Tuition fee earned
    134,950

    Training fee earned
    96,600

    Total revenue

    231,550
    Expenses


    Depreciation expense- professional library
    2,400

    Depreciation expense- equipment
    5,000

    Salaries expenses
    44,650

    Insurance expenses
    9,500

    Rent expenses
    33,400

    Teaching supplies expenses
    50,000

    Advertising expenses
    19,000

    Utilities expenses
    13,400

    Total expenses

    177,350
    Net income54,200

Statement of Owner’s equity for year ended December 31, 2015

    C.Alonzo Capital 71,500
    Add: Net income
    54,200
    Less: Withdrawal
    20,000
    C.Alonzo capital as on December 31,2015105,700

Balance sheet as on December 31, 2015

    Assets
    Cash

    60,000
    Accounts receivable

    5,750
    Teaching supplies

    20,000
    Prepaid insurance

    9,500
    Prepaid rent

    0
    Professional library
    12,000

    Accumulated depreciation- professional library
    4,900
    7,100
    Equipment
    40,000

    Accumulated depreciation- equipment
    25,000
    15,000
    Total assets117,350
    Liabilities

    Accounts payable

    11,200
    Salary payable

    450
    Unearned training fee

    0
    Total liabilities11,650
    Equity
    C.Alonzo capital
    105,700
    Total liability and equity117,350

Explanation of Solution

Explanation:

  1. Income statement: Total revenue is $231,550 and total expenses are $177,350 and the net income is $54,200 calculated as below:
  2. Net income = Total revenue - total expenses

    Net income = 231,550-177,350 = $54,200

  3. Statement of Owners equity shows the total owner’s funds invested in the company. The net fund invested by owner is $105,700.
  4. Owner’s equity = Opening balance + net income - owner withdrawal

    Owner’s equity = 71,500+54,20050,000=$105,700

  5. Balance sheet represents the financial position of a company on a particular date.
  6. The accounting equation of balance sheet is as below:
    Total assets = total equity + total liabilities

    $117,350 = $105,700 + $11,650$117,350= $117,350

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