Chapter 3, Problem 3PSB

1

To determine

Concept Introduction:

Income Statement:

The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues

Statement of retained earnings:

Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.

Balance Sheet:

The balance Sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity.

To prepare:

The t-accounts from the given unadjusted trial balance

Explanation of Solution

Cash
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount $
31-Dec	balance c/d	60,000
Accounts Receivable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0

Teaching supplies
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	70,000
Prepaid Insurance
Dr					Cr
Date	Balance	Amount $	Date	Balance	Amount$
31-Dec	balance c/d	19,000
Prepaid Rent
Dr					Cr
Date	Balance	Amount $	Date	Balance	Amount$
31-Dec	balance c/d	3,800
Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	12,000
Accumulated Depreciation-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	2,500
Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	40,000
Accumulated Depreciation-Equipment
Dr					Cr
Date	Balance	Amount $	Date	Balance	Amount$
			31-Dec	balance c/d	20000
Accounts Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	11,200
Salaries Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	0
Unearned training fees
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	28,600
Common stock
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	11,000
Retained Earnings
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	60,500
Dividends
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	20,000
Tuition fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	129,200
Training fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	68,000
Depreciation expenses-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
Depreciation expenses-Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
Salaries expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	44,200
Insurance expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
Rent expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	29,600
Teaching supplies expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
Advertising expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	19,000
Utilities expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	13,400

2

To determine

Concept Introduction:

Income Statement:

The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues

Statement of retained earnings:

Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.

Balance Sheet:

The balance sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity

To prepare:

The adjusting journal entries for the given transactions and posting them to t-accounts

Explanation of Solution

	Date	Accounts & explanation	Debit $	Credit $
a	31-Dec	Insurance expenses	9,500
		Prepaid Insurance		9,500
		To record insurance expenses
b	31-Dec	Teaching supplies expenses	50,000
		Teaching supplies		50,000
		To record teaching supplies expenses
c	31-Dec	Depreciation expenses-Equipment	5,000
		Accumulated depreciation-Equipment		5,000
		To record depreciation expenses-equipment
d	31-Dec	Depreciation expenses-professional library	2,400
		Accumulated depreciation-professional library		2,400
		To record depreciation expenses-professional library
e	31-Dec	Unearned Training fees	28,600
		Training fees earned		28,600
		To record training fees earned
f	31-Dec	Account Receivable	5,750
		Tuition fees earned		5,750
		To record tuition fees earned
g	31-Dec	Salaries expenses	450
		Salaries payable		450
		To record salaries payable
h	31-Dec	Rent expenses	3,800
		Prepaid Rent		3,800
		To record rent expenses accrued

The adjustment entries have been posted to T-accounts as follows

Cash
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	60,000
Accounts Receivable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
31-Dec	Tuition fees earned	5,750
Teaching supplies
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	70,000	31-Dec	Teaching supplies expenses	50,000
Prepaid Insurance
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	19,000	31-Dec	Insurance expenses	9,500
Prepaid Rent
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	3,800	31-Dec	Rent expenses	3,800
Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	12,000
Accumulated Depreciation-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	2,500
			31-Dec	Depreciation expenses-Professional library	2,400
Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	40,000
Accumulated Depreciation-Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	20,000
			31-Dec	Depreciation expenses-Equipment	5,000
Accounts Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	11,200
Salaries Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	0
			31-Dec	Salaries expenses	450
Unearned training fees
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	Training fees earned	28,600	31-Dec	balance c/d	28,600
Common stock
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	11,000
Retained Earnings
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	60,500
Dividends
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	20,000
Tuition fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	129,200
			31-Dec	Accounts Receivable	5,750
Training fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	68,000
			31-Dec	Unearned training fees	28,600
Depreciation expenses-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
31-Dec	Accumulated Depreciation-Professional library	2,400
Depreciation expenses-Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
31-Dec	Accumulated Depreciation-Equipment	5,000
Salaries expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	44,200
31-Dec	Salaries Payable	450
Insurance expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
31-Dec	Prepaid Insurance	9,500
Rent expenses
Dr					Cr
Date	Balance	Amount $	Date	Balance	Amount$
31-Dec	balance c/d	29,600
31-Dec	Prepaid rent	3,800
Teaching supplies expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	0
31-Dec	Teaching supplies	50,000
Advertising expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	19,000
Utilities expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance c/d	13,400

3

To determine

Concept Introduction:

Income Statement:

The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues

Statement of retained earnings:

Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.

Balance Sheet:

The Balance Sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity

The closing balances of t-accounts and prepare the adjusted trial balance

Explanation of Solution

The T-accounts with updated balances have been presented below

Cash
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	60,000	31-Dec	balance c/d	60,000
		60,000			60,000
Accounts Receivable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	0	31-Dec	balance c/d	5,750
31-Dec	Tuition fees earned	5,750
		5,750			5,750
Teaching supplies
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	70,000	31-Dec	Teaching supplies expenses	50,000
			31-Dec	balance c/d	20,000
		70,000			70,000
Prepaid Insurance
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	19000	31-Dec	Insurance expenses	9500
			31-Dec	balance c/d	9500
		19,000			19,000
Prepaid Rent
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	3800	31-Dec	Rent expenses	3800
			31-Dec	balance c/d	0
		3800			3800
Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	12,000
			31-Dec	balance c/d	12,000
		12,000			12,000
Accumulated Depreciation-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	2500
31-Dec	balance c/d	4,900	31-Dec	Depreciation expenses-Professional library	2400
		4,900			4,900
Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	40000
			31-Dec	balance c/d	40000
		40,000			40,000
Accumulated Depreciation-Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	20,000
31-Dec	balance c/d	25,000	31-Dec	Depreciation expenses-Equipment	5,000
		25,000			25,000
Accounts Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	11,200
31-Dec	balance c/d	11,200
		11,200			11,200
Salaries Payable
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance c/d	0
31-Dec	balance c/d	450	31-Dec	Salaries expenses	450
		450			450
Unearned training fees
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	Training fees earned	28,600	31-Dec	balance b/d	28,600
31-Dec	balance c/d	0
		28,600			28,600
Common stock
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	11,000
31-Dec	balance c/d	11,000
		11,000			11,000
Retained Earnings
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	60,500
31-Dec	balance c/d	60,500
		60,500			60,500
Dividends
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	20,000
			31-Dec	balance c/d	20,000
		20,000			20,000
Tuition fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	129200
31-Dec	balance c/d	134,950	31-Dec	Accounts Receivable	5750
		134,950			134,950
Training fees earned
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
			31-Dec	balance b/d	68,000
31-Dec	balance c/d	96,600	31-Dec	Unearned training fees	28,600
		96,600			96,600
Depreciation expenses-Professional library
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	0
31-Dec	Accumulated Depreciation-Professional library	2,400	31-Dec	balance c/d	2,400
		2,400			2,400
Depreciation expenses-Equipment
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	0
31-Dec	Accumulated Depreciation-Equipment	5000	31-Dec	balance c/d	5000
		5000			5000
Salaries expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec		44,200
31-Dec	Salaries Payable	450	31-Dec	balance c/d	44,650
		44,650			44,650
Insurance expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	0
31-Dec	Prepaid Insurance	9,500	31-Dec	balance c/d	9,500
		9,500			9,500
Rent expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	29,600
31-Dec	Prepaid rent	3,800	31-Dec	balance c/d	33,400
		33,400			33,400
Teaching supplies expenses
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	0
31-Dec	Teaching supplies	50,000	31-Dec	balance c/d	50,000
		50,000			50,000
Advertising expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	19,000
			31-Dec	balance c/d	19000
		19,000			19,000
Utilities expense
Dr					Cr
Date	Balance	Amount$	Date	Balance	Amount$
31-Dec	balance b/d	13,400
			31-Dec	balance c/d	13400
		13,400			13,400

The Adjusted Trial Balance has been prepared below

A I
Adjusted Trial Balance
December 31
	Debit ($)	Credit ($)
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
Salaries Payable		450
Unearned training fees		0
Common stock		11,000
Retained Earnings		60,500
Dividends	20,000
Tuition fees earned		134,950
Training fees earned		96,600
Depreciation expenses-Professional library	2,400
Depreciation expenses-Equipment	5,000
Salaries expenses	44,650
Insurance expenses	9,500
Rent expenses	33,400
Teaching supplies expenses	50,000
Advertising expense	19,000
Utilities expense	13,400
Totals	344,600	344,600

4

To determine

Concept Introduction:

Income Statement:

The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues

Statement of retained earnings:

Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.

Balance Sheet:

The balance sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity

To prepare:

The income statement, statement of retained earnings and balance sheet

Explanation of Solution

The income statement has been presented below

A I
Income statement
for the year ended December 31
	Amount $	Amount $
Tuition fees earned	134,950
Training fees earned	96,600
Total revenues		231,550
less. Expenses
Depreciation expenses-Professional library	2,400
Depreciation expenses-Equipment	5,000
Salaries expenses	44,650
Insurance expenses	9,500
Rent expenses	33,400
Teaching supplies expenses	50,000
Advertising expense	19,000
Utilities expense	13,400
Total expenses		177,350
Net profit		54,200

The statement of retained earnings has been presented below

A I
Statement of retained earnings
for the year ended December 31
		Amount $
Opening balance		60,500
Add profits earned during the year		54,200
less dividends paid		-20,000
Ending balance		94,700

The Balance Sheet has been prepared as follows

A I
Balance Sheet
as ofDecember 31
	Amount $	Amount $
Assets
Current Assets
Cash	60,000
Accounts Receivable	5,750
Current Assets	20,000
Prepaid Insurance	9,500
Total Current Assets		95,250
Non-Current Assets
Professional library	12,000
less:Accumulated Depreciation-Professional library	-4,900	7,100
Equipment	40,000
less:Accumulated Depreciation-Equipment	-25,000	15,000
Total non-current Assets		22,100
Total Assets		117,350
Liability & owner's Equity
Liabilities
Accounts Payable		11,200
Salaries Payable		450
Total liabilities		11,650
Owner's equity
Common stock		11,000
Retained Earnings		94,700
Total Equity		105,700
Total Liability & owner's Equity		117,350