Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Textbook Question
Chapter 3, Problem 71APSA

Problem 3-71 A Preparing a Worksheet (Appendix 3A)

Marsteller Properties Inc. owns apartments that it rents to university students. At December 31,

2019, the following unadjusted account balances were available:

Chapter 3, Problem 71APSA, Problem 3-71 A Preparing a Worksheet (Appendix 3A) Marsteller Properties Inc. owns apartments that

The following information is available for adjusting entries:

  1. An analysis of apartment rental contracts indicates that S3,800 of apartment rent is unbilled and unrecorded at year end.
  2. A physical count Of supplies reveals that $1,400 of supplies are on hand at December 31 , 2019.
  3. Annual depreciation on the buildings is $204,250.
  4. An examination of insurance policies indicates that $12,000 Of the prepaid insurance applies to coverage for 2019.
  5. Six months' interest at 9% is unrecorded and unpaid on the notes payable.

1.

Expert Solution
Check Mark
To determine

To prepare: Worksheet of the company A.

Introduction:.Worksheet is a statement that represents the unadjusted balances of ledgers, adjustment entries and the balances after such adjustments. Adjusted balances are the final balances that are presented in the financial statements of a company.

Explanation of Solution

Preparation of worksheet for the period ending 31st December, 2019:

    Account TitleUnadjustedTrial balanceAdjustmentsAdjustedTrial balance
    Dr.Cr.Dr.Cr.Dr.Cr.
    Cash4,6004,600
    Rent receivable32,5003,80036,300
    Supplies4,7003,3001,400
    Prepaid insurance60,00012,00048,000
    Land274,000274,000
    Building4,560,0004,560,000
    Accumulated depriciation-building1,015,000204,2501,219,250
    Other assets26,10026,100
    Accounts payable57,30057,300
    Interest payable90,00090,000
    Notes payable2,000,0002,000,000
    Common stock1,500,0001,500,000
    Retained earnings opening39,20039,200
    Rent revenue660,0003,800663,800
    Repair and maintenance expense73,20073,200
    Advertising expense58,70058,700
    Wages expense84,30084,300
    Utilities expense3,4003,400
    Interest expense90,00090,000180,000
    Supplies expense3,3003,300
    Depreciation expense204,250204,250
    Insurance expense12,00012,000
    Total5,271,5005,271,500313,350313,3505,569,5505,569,550

   Table (1)

2.

Expert Solution
Check Mark
To determine

To prepare: Income statement, statement of retained earnings and balance sheet.

Introduction: Income statement, statement of retained earnings and balance sheet are financial statements. These statements are prepared for reporting purposes.

Explanation of Solution

Preparation of income statement for the Year ending 31st December, 2019:

    CompanyA
    Income Statement,For the Year ending on 31stDecember, 2019
    Amount ($)Amount ($)
    Revenues:
    Rent revenue663,800
    Total Revenue663,800
    Expenses:
    Repair and maintenance expense73,200
    Advertising expense58,700
    Wages Expense84,300
    Utilities Expense3,400
    Insurance Expense12,000
    Interest Expense180,000
    Supplies expense3,300
    Depreciation expense204,250
    Total Expenses619,150
    Net Income44,650

   Table (2)

Preparation of balance sheet as on 31st December, 2019:

    Company A
    Balance Sheet as on 31stDecember 2019
    Amount ($)Amount($)
    Liabilities and Owners Equity
    Current Liabilities
    Accounts Payable57,300
    Interest Payable90,000
    Total Current Liabilities147,300
    Non-Current Liabilities
    Note Payable2,000,000
    Total Non-Current Liabilities2,000,000
    Total Liabilities
    Common Stock1,500,000
    Retained Earnings83,8501,583,850
    Total Liabilities and Owner’s Equity3,731,150
    Current Assets
    Cash4,600
    Rent Receivable36,300
    Supplies1,400
    Prepaid insurance48,000
    Other Assets26,100
    Total Current Assets116,400
    Property, Plant and Equipment
    Land274,000
    Building4,560,000
    Less: accumulated depreciation(1,219,250)
    Total Property, Plant and Equipment3,614,750
    Total Assets3,731,150

   Table (3)

Preparation of statement of retained earnings as on 31st December, 2019:

    Company A
    Statement of Retained Earning
    Amount($)Amount($)
    Owner’s Equity opening balance39,200
    Add: Capital introduced by owner
    Add: Net income44,650
    Total:83,850
    Less: Withdrawals
    Closing Balance83,850

   Table (4)

6.

Expert Solution
Check Mark
To determine

To record: closing journal entries.

Introduction: Closing entries are posted to close all the temporary accounts of the accounting books. Closing entries zeros the balances of income statement items, drawings, and dividends.

Explanation of Solution

Recording closing entry for expense accounts:

    DateAccount Title and ExplanationPost Ref.Debit($)Credit($)
    Income summary 619,150
    Repair and maintenance expense 73,200
    Advertising expense58,700
    Wages expense84,300
    Utilities expense3,400
    Insurance expense12,000
    Interest expense180,000
    Supplies expense3,300
    Depreciation expense204,250
    (to record closing of expense accounts)

   Table (5)

  • Since income summary is a temporary income account, temporary income is decreased. Hence, income summary account is debited.
  • Since repair and maintenance expense is an expense, expense is decreased. Hence, repair and maintenance expense account is credited.
  • Since advertising expense is an expense, expense is decreased. Hence, advertising expense account is credited.
  • Since wages expense is an expense, expense is decreased. Hence, wages expense account is credited.
  • Since utilities expense is an expense, expense is decreased. Hence, utilities expense account is credited.
  • Since insurance expense is an expense, expense is decreased. Hence, insurance expense account is credited.
  • Since interest expense is an expense, expense is decreased. Hence, interest expense account is credited.
  • Since supplies expense is an expense, expense is decreased. Hence, supplies expense account is credited.
  • Since depreceiation expense is an expense, expense is decreased. Hence, depreceiation -building expense account is credited.

Recording closing entry for revenue accounts:

    DateAccount Title and ExplanationPost Ref.Debit($)Credit($)
    Rent revenue 663,800
    Income summary663,800
    (to record closing of revenue account)

   Table (6)

  • Since rent revenue is an income, income is decreased. Hence, rent revenue account is debited.
  • Since income summary is a temporary income account, temporary income is increased. Hence, income summary account is credited.

Recording transfer of income summary account:

    DateAccount Title and ExplanationPost Ref.Debit($)Credit($)
    Income summary44,650
    Retained earnings44,650
    (to record closing entry)

   Table (7)

  • Since income summary is a temporary income account, temporary income is decreased. Hence, income summary account is debited.
  • Since retained earnings is a reserve, reserve is increased. Hence, retained earnings account is credited.

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Chapter 3 Solutions

Cornerstones of Financial Accounting

Ch. 3 - Prob. 11DQCh. 3 - Describe the effect on the financial statements...Ch. 3 - Prob. 13DQCh. 3 - Prob. 14DQCh. 3 - Prob. 15DQCh. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - ( Appendix 3A) What is the relationship between...Ch. 3 - Prob. 20DQCh. 3 - Which of the following statements is true? Under...Ch. 3 - In December 2019, Swanstrom Inc. receives a cash...Ch. 3 - Which transaction would require adjustment at...Ch. 3 - Which of the following statements is false?...Ch. 3 - Dallas Company loaned to Ewing Company on December...Ch. 3 - Rons Diner received the following bills for...Ch. 3 - In September 2019, GolfWorld Magazine obtained...Ch. 3 - Hurd Inc. prepays rent every 3 months on March 1,...Ch. 3 - Which of the following statements is incorrect...Ch. 3 - Reinhardt Company reported revenues of $122,000...Ch. 3 - Prob. 11MCQCh. 3 - Cornerstone Exercise 3-12 Accrual- and Cash-Basis...Ch. 3 - Cornerstone Exercise 3-13 Accrual- and Cash-Basis...Ch. 3 - Prob. 14CECh. 3 - Prob. 15CECh. 3 - Cornerstone Exercise 3-16 Identification of...Ch. 3 - Cornerstone Exercise 3-17 Accrued Revenue...Ch. 3 - Cornerstone Exercise 3-18 Accrued Expense...Ch. 3 - Cornerstone Exercise 3-19 Deferred Revenue...Ch. 3 - Cornerstone Exercise 3-20 Deferred Expense...Ch. 3 - Cornerstone Exercise 3-21 Adjustment for Supplies...Ch. 3 - Cornerstone Exercise 3-22 Adjustment for...Ch. 3 - Prob. 23CECh. 3 - Cornerstone Exercise 3-24 Preparing an Income...Ch. 3 - Cornerstone Exercise 3-25 Preparing a Retained...Ch. 3 - Cornerstone Exercise 3-26 Preparing a Balance...Ch. 3 - Cornerstone Exercise 3-27 Preparing and Analyzing...Ch. 3 - Brief Exercise 3-28 Accrual- and Cash-Basis...Ch. 3 - Brief Exercise 3-29 Revenue and Expense...Ch. 3 - Brief Exercise 3-30 Identification of Adjusting...Ch. 3 - Brief Exercise 3-31 Adjusting Entries-Accruals...Ch. 3 - Brief Exercise 3-32 Adjusting Entries-Deferrals...Ch. 3 - Brief Exercise 3-33 Preparing an Income Statement...Ch. 3 - Brief Exercise 3-34 Preparing a Retained Earnings...Ch. 3 - Prob. 35BECh. 3 - Brief Exercise 3-36 Preparing and Analyzing...Ch. 3 - Prob. 37BECh. 3 - Exercise 3-38 Accrual- and Cash-Basis Expense...Ch. 3 - Exercise 3-39 Revenue Recognition Each of the...Ch. 3 - Exercise 3-40 Revenue and Expense Recognition...Ch. 3 - Exercise 3-41 Cash-Basis and Accrual-Basis...Ch. 3 - Exercise 3-42 Revenue and Expense Recognition...Ch. 3 - Exercise 3-43 Recognizing Expenses Treadway Dental...Ch. 3 - Exercise 3-44 Revenue Expense and Recognition...Ch. 3 - Exercise 3-45 Identification of Adjusting Entries...Ch. 3 - Exercise 3-46 Identification and Analysis of...Ch. 3 - Exercise 3-47 Revenue Adjustments Sentry Transport...Ch. 3 - Expense Adjustments Faraday Electronic Service...Ch. 3 - Prob. 49ECh. 3 - Exercise 3-50 Prepayment of Expenses JDM Inc. made...Ch. 3 - Exercise 3-51 Adjustment for Supplies The downtown...Ch. 3 - Adjusting Entries Exercise 3-52 Allentown Services...Ch. 3 - Prob. 53ECh. 3 - Exercise 3-54 Recreating Adjusting Entries...Ch. 3 - Exercise 3-55 Effect of Adjustments on the...Ch. 3 - Exercise 3-56 Preparing an Income Statement Oxmoor...Ch. 3 - Exercise 3-57 Preparing a Retained Earnings...Ch. 3 - Exercise 3-58 Preparing a Balance Sheet Refer to...Ch. 3 - Exercise 3-59 Preparation of Closing Entries Grand...Ch. 3 - Exercise 3-60 Preparation of Closing Entries James...Ch. 3 - Exercise 3-61 Preparation of a Worksheet (Appendix...Ch. 3 - Problem 3-62A Cash-Basis and Accrual-Basis Income...Ch. 3 - Problem 3-63A Revenue and Expense Recognition...Ch. 3 - Problem 3-64A Identification and Preparation of...Ch. 3 - Problem 3-65A Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67A Adjusting Entries and Financial...Ch. 3 - Problem 3-68A Inferring Adjusting Entries from...Ch. 3 - Problem 3-69A Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71 A Preparing a Worksheet (Appendix 3A)...Ch. 3 - Prob. 62BPSBCh. 3 - Problem 3-63B Revenue and Expense Recognition Aunt...Ch. 3 - Problem 3-64B Identification and Preparation of...Ch. 3 - Problem 3-65B Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67B Adjusting Entries and Financial...Ch. 3 - Problem 3-68B Inferring Adjusting Entries from...Ch. 3 - Problem 3-69B Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71B Preparing a Worksheet (Appendix 3A)...Ch. 3 - Case 3-72 Cash- or Accrual-Basis Accounting Karen...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-74 Revenue Recognition Melaney Parks...Ch. 3 - Prob. 74.2CCh. 3 - Prob. 75CCh. 3 - Prob. 76CCh. 3 - Prob. 77.1CCh. 3 - Prob. 77.2CCh. 3 - Prob. 78.1CCh. 3 - Prob. 78.2CCh. 3 - Case 3-78 Interpreting Closing Entries Barnes...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Prob. 79.2CCh. 3 - Prob. 79.3CCh. 3 - Prob. 79.4CCh. 3 - Prob. 79.5CCh. 3 - Prob. 80.1CCh. 3 - Refer to the 10-K reports of Under Armour, Inc.,...Ch. 3 - Prob. 80.3CCh. 3 - Prob. 80.4CCh. 3 - Prob. 81.1CCh. 3 - Prob. 81.2CCh. 3 - Prob. 81.3CCh. 3 - Prob. 81.4CCh. 3 - Prob. 81.5CCh. 3 - Prob. 81.6CCh. 3 - Prob. 81.7C
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