Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 3, Problem 81.6C
To determine
To prepare: Income statement, statement of
Introduction: Income statement, statement of retained earnings and balance sheet are financial statements. These statements are prepared for reporting purposes.
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Problem 3. Raymond opened the Muscles Fitness Gym in August. The Following transactionsoccurred during the first month of the business:a) Raymond invested P100,000 in cash and 30,000 in gym equipment in the business.b) Paid P10,000 for the first month’s rent.c) Purchased supplies costing P4,000 on credit.d) Purchased exercise equipment costing P25,000 for 15,000 cash and the rest on account.e) Recorded income for the first half of the month of P6,500 in cash and P3,500 on account.f) Paid P2,750 to a creditor on account.g) Received payment from a customer on account for P1600.h) Raymond withdrew P500 for a graduation gift.i) Paid aerobics instructor her salary, P3,000.j) Paid miscellaneous expense P1,500k) Recorded income for the second half of the month of P5,600 in cash.Prepare a new accounting equation every time a transaction occurs.
Question 3- PART A REQUIREMENT Discuss the difference between the Management Letter and the Legal Representation Letter
PART B QUESTIONKLB plc is one of your audit clients for the previous 8 years. The following information are available. The audit team included a manager and two juniors. The client was asking to finish the audit work early this year otherwise they are going to change the auditor next year. One-week bonus was paid to the audit team through their payroll as the client was happy that they finished auditing 5 days earlier than the planned audit time. The audit team got 10% discounts on the client’s products. The same discount is normally given to the client’s staff. Your firm offered this client a bookkeeping service for this year. To reduce the audit cost, the engagement letter was not updated this year as there is no big changes in the audit tasks from last year. Audit fees are based on a percentage of the net profit before tax. One of the audit team received an offer…
CASE 2: Margarita Gonzales Law Office
Margarita Gonzales Law office was established on January 1, 2X20, and the following events occurred during
the first month of operation:
• Margarita invested P100,000 cash as working capital to start her business
• Purchase of furniture’s for P30,000, 50% paid in cash and 50% taken as a credit
• She signed two (2) service contracts:
1) with XYZ for services performed during the month in the amount of P4,000; and
2) with ABC for services that will be performed during the first week of next month for
P5,000. Margarita received an advance of P20,000 with the signature of this contract.
• The furniture bought has a useful life of 30-month and should be depreciated straight line.
• Margarita agreed to pay her assistant P15,000 for the service performed of which she paid already
P10,000
• XYZ paid P20,000
• Rent for the month of P10,000 was paid through a bank transfer
• An electricity bill for P3,000 was received by mail
Requirement:…
Chapter 3 Solutions
Cornerstones of Financial Accounting
Ch. 3 - How does accural-basis net income differ from...Ch. 3 - Explain when revenue may be recognized and give an...Ch. 3 - What happens during the accounting cycle?Ch. 3 - Prob. 4DQCh. 3 - Why are adjusting entries needed?Ch. 3 - What accounting concepts require that adjusting...Ch. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - What is the difference between an accural and a...Ch. 3 - Prob. 10DQ
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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Problem 3-65B Preparation of Adjusting Entries West Beach Resort operates a resort complex that specializes in hosting small business and professional meetings. West Beach closes its fiscal year on January 31, a time when it has few meetings under way. At January 31, 2020, the following data are available: A training meeting is under way for 16 individuals from Fashion Design. Fashion Design paid $4,500 in advance for each attending the 10-day training session. The meeting began on January 28 and will end on February 6. Twenty-one people from Northern Publishing are attending a sales meeting. The daily fee for each person attending the meeting is $280 (charged for each night a stays at the resort). The meeting began on January 29, and guests will depart on February 2. Northern will be billed at the end of the meeting. Depreciation on the golf carts used to transport the guests' luggage to and from their rooms is $11,250 for the year. West Beach records depreciation yearly. At January 31, Friedrich Catering is owed $1,795 for food provided for guests through that date. This amount is unrecorded. West Beach classifies the cost of food as an other expense on the income statement. An examination indicates that the cost of office supplies on hand at January 31 is $189. During the year, $850 of office supplies was purchased from Supply Depot. The cost of supplies purchased was debited to Office Supplies Inventory. No office supplies were on hand on January 31, 2019. Required: Prepare adjusting entries at January 31 for each of these items. CONCEPTUAL CONNECTION By how much would net income be overstated or understated if the accountant failed to make the adjusting entries?
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Question 3 - PART A REQUIREMENT
Discuss the difference between the Management Letter and the Legal Representation Letter
PART B - QUESTION B. KLB plc is one of your audit clients for the previous 8 years. The following information are available. The audit team included a manager and two juniors. The client was asking to finish the audit work early this year otherwise they are going to change the auditor next year. One-week bonus was paid to the audit team through their payroll as the client was happy that they finished auditing 5 days earlier than the planned audit time. The audit team got 10% discounts on the client’s products. The same discount is normally given to the client’s staff. Your firm offered this client a bookkeeping service for this year. To reduce the audit cost, the engagement letter was not updated this year as there is no big changes in the audit tasks from last year. Audit fees are based on a percentage of the net profit before tax. One of the audit team received…
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Exercise 2-9
Manny Gill is an entrepreneur who started West Secure, a business that provides a number of security guard services.
West Secure incurred the following transactions during July 2020, its first month of operations:
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Required1. Set up the following general ledger accounts using either the T-account format or the balance column format: Cash, 101; Accounts Receivable, 106; Equipment, 150; Accounts Payable, 201; Manny Gill, Capital, 301; Manny Gill, Withdrawals, 302; Revenue, 401; Expenses, 501.
Record the journal entries for the month of July.
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CASE 2: Margarita Gonzales Law Office (THIS IS THE ONLY CASE I NEED HELP) :((
Margarita Gonzales Law office was established on January 1, 2X20, and the following events occurred during the first month of operation:
Margarita invested P100,000 cash as working capital to start her business
Purchase of furniture’s for P30,000, 50% paid in cash and 50% taken as a credit
She signed two (2) service contracts:
with XYZ for services performed during the month in the amount of P4,000; and
with ABC for services that will be performed during the first week of next month for P5,000. Margarita received an advance of P20,000 with the signature of this contract.
The furniture bought has a useful life of 30-month and should be depreciated straight line.
Margarita agreed to pay her assistant P15,000 for the service performed of which she paid already P10,000
XYZ paid P20,000
Rent for the month of P10,000 was paid through a bank transfer
An electricity bill for P3,000 was received by mail…
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Comprehensive Problem 1Part 1:
The following is a comprehensive problem which encompasses all of the elements learned in previous chapters. You can refer to the objectives for each chapter covered as a review of the concepts.
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 20Y8. The chart of accounts for Kelly Consulting is shown below:
11
Cash
32
Retained Earnings
12
Accounts Receivable
33
Dividends
14
Supplies
41
Fees Earned
15
Prepaid Rent
51
Salary Expense
16
Prepaid Insurance
52
Rent Expense
18
Office Equipment
53
Supplies Expense
19
Accumulated Depreciation
54
Depreciation Expense
21
Accounts Payable
55
Insurance Expense
22
Salaries Payable
59
Miscellaneous Expense
23
Unearned Fees
31
Common Stock
The post-closing trial balance as of April 30, 20Y8, is shown below:
Kelly ConsultingPost-Closing Trial BalanceApril 30, 20Y8
Account No.
Debit
Credit
Cash
11
22,100
Accounts Receivable
12
3,400
Supplies
14…
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PROBLEM 1: Bob Sample opened the Campus Laundromat on September 1, 2010. During the first month of operations the following transactions occurred.
Sept
1. Bob invested $20,000 cash in the business
2. The company paid $1,000 cash for store rent for September
3. Purchased washers and dryers for $25,000, paying $10,000 in cash and signing a $15,000, 6-month, 12% note payable. 4 Paid $1,200 for a one-year accident insurance policy.
10. Received a bill from the Daily News for advertising the opening of the laundromat $200.
20. Bob withdrew $700 cash for personal use.
30. The company determined that cash receipts for laundry services for the month were $6,200.
REQUIRED:
• Journal Entry
• Ledger
• T- accounts (format provided)
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Maurice Sabio is a financial planning consultant. She completed transactions during themonth of December of the current year:
Dec.
1 Sabio invested cash in the business, P200,000.3 Paid December office rent, P10,000.4 Received P25,000 from a client, Rowena Carpio, for services rendered.7 Received P20,000 from Olive Oabel, a client, for services rendered.12 Paid cash to Shell Super Service for gasoline purchases, P600.14 Paid cash to Tulungan Manpower Services in payment for contractualsecretarial services during the past two weeks, P6,000.17 Bought office supplies on account, P2,800.20 Paid telephone bills, P1,000.21 Sabio withdrew cash for personal use, P11,000.24 Donated cash to the Phil. National Red Cross, P1,000.27 Received P20,000 from Vivian De Guzman, a client, for servicesrendered.28 Paid cash to Tulungan Manpower Services in payment for contractualsecretarial services during the past two weeks, P6,000.28 Paid…
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ANALYSIS OF TRANSACTIONS
Jona passed the bar exam in April and immediately set up her own law practice. During the first month of operation, she completed the following transactions:
Began the law practice by placing P2,000,000 in a bank account establish for the business
Purchase a Law Library for P290,000 cash
Purchase office supplies for P30,000 on credit
Accepted P50,000 in cash for completing a contract
Billed clients for P39,500 for service rendered during the month
Paid P20,000 of the amount owed for office supplies
Received P30,000 in cash from clients who had been previously billed
Paid rent expense for the month in the amount of P10,000
Withdrew P50,000 for personal use
Paid utilities for P15,000
Office supplies that were consumed for the period is 90%.
REQUIREMENTS:
Analysis of Transaction (increase/decrease)
Statement of Financial Position
Statement of Comprehensive Income
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Comprehensive Problem 1Part 1:
The following is a comprehensive problem which encompasses all of the elements learned in previous chapters. You can refer to the objectives for each chapter covered as a review of the concepts.
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2018. The chart of accounts for Kelly Consulting is shown below:
11
Cash
32
Retained Earnings
12
Accounts Receivable
33
Dividends
14
Supplies
34
Income Summary
15
Prepaid Rent
41
Fees Earned
16
Prepaid Insurance
51
Salary Expense
18
Office Equipment
52
Rent Expense
19
Accumulated Depreciation
53
Supplies Expense
21
Accounts Payable
54
Depreciation Expense
22
Salaries Payable
55
Insurance Expense
23
Unearned Fees
59
Miscellaneous Expense
31
Common Stock
The post-closing trial balance as of April 30, 2018, is shown below:
Kelly ConsultingPost-Closing Trial BalanceApril 30, 2018
Account No.
Debit
Credit
Cash
11
22,100
Accounts Receivable
12
3,400…
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QUESTION ONEJuan Cruz began professional practice as a system analyst on July 1. He plans to prepare a monthly financial statement. During July, the owner completed these transactionsJuly 1. Owner invested sh 500,000 cash along with computer equipment that had a market value of php. 120,000July 2. Paid sh. 15,000 cash for the rent of office space for the month.July 4. Purchased sh 12,000 of additional equipment on credit (due within 30 days).July 8. He completed a work for Mr. Patrick and immediately he was paid the sh. 32,000 cash.July 10. Completed work for Mr. simon and sent a bill for sh. 27,000 to be paid within 30 days.July 12. Purchased additional equipment for sh. 8,000 in cash.July 15. Paid assistant sh. 6,200 cash as wages for 15 days.July 18. Collected sh. 15,000 on the amount owed by Mr. simon.July 25. Paid sh 12,000 cash to settle the liability on the equipment purchased.July 28. Owner withdrew sh. 500 cash for personal use.July 30. Completed work for Miss Akinyi who paid…
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Hi,
Need some help with this one as well
Brief Exercise 3-29 (Algorithmic)Revenue and Expense Recognition
Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions:
On April 1, Lauhl received $69,000 from Metro Corporation to provide cleaning services over the next 6 months.
On April 5, Lauhl purchased and received $8,500 of supplies on credit from Eagle Supply Company. During the month, Lauhl paid $5,000 to Eagle and used $1,300 of the supplies.
On April 20, Lauhl performed one-time cleaning services of $3,000 for Jones Company. Jones paid Lauhl the full amount on May 10.
On April 30, Lauhl paid employees wages of $4,900. An additional $850 was owed to employees for work performed in April.
Required:
1. Calculate the amount of net income that Lauhl should recognize in April under cash-basis accounting.$
2. Calculate the amount of net income that Lauhl should recognize in April under accrual-basis…
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