Exercise 3-6

(a)
Type of Adjustment

(b)
Accounts before Adjustment

1.

Accrued Revenues

Assets Understated
Revenues Understated

2.

Prepaid Expenses

Assets Overstated
Expenses Understated

3.

Accrued Expenses

Expenses Understated
Liabilities Understated

4.

Unearned Revenues

Liabilities Overstated
Revenues Understated

5.

Accrued Expenses

Expenses Understated
Liabilities Understated

6.

Prepaid Expenses

Assets Overstated
Expenses Understated

Item

Exercise 3-7
Mar. 31

Depreciation Expense ($300 X 3)

900

Accumulated Depreciation
Equipment ...............................................................
31

31

31

900

Unearned Rent Revenue ..............................................

Rent Revenue ($9,900 X 1/3) ......................................

3,300

Interest Expense ....................................................................

Interest Payable ...........................................................

500

Supplies Expense...................................................................
Supplies ($2,800 $650) ............................................

2,150

3,300

500

2,150

31

Insurance Expense ($200 X 3) ..............................................

Prepaid Insurance ........................................................

600
600

Exercise 3-11
(a)

Supplies expense
Add: Supplies (1/31)
Less: Supplies purchase
Supplies (1/1)

950
850
(670)
$ 1,130

Therefore supplies balance = $1,130

b.
Total premium = Monthly premium X 12
$400 X 12 = $4,800
Purchase date is: On Jan. 31, from Aug. 1, 2013 there are 6 months coverage remaining
($400 X 6). Thus, the purchase date was 6 months earlier on Aug. 1, 2013

c.
Cash paid
Salaries and wages payable (1/31/14)
Less: Salaries and wages expense
Salaries and wages
payable (12/31/13)

$3,300
800
4,100
2,500
$1,600

Problem 3-2A
(a)
Date
Aug.

Debit
31

31

Insurance Expense ($400 X 3)...............................

Prepaid Insurance ........................................

1,200

Supplies Expense ($3,300 $900)................................

Supplies .......................................................

2,400

Credit
1,200

2,400

31

31

31

31

31

Depreciation Expense
($4,500 X 1/4) + ($2,400 X 1/4) ........................
Accumulated Depreciation
Buildings ..................................................
Accumulated Depreciation
Equipment ................................................

1,725
1,125
600

Unearned Rent Revenue ........................................

Rent Revenue ...............................................

4,100

Salaries and Wages Expense .................................

Salaries and Wages Payable ........................

400

Accounts Receivable .............................................

Rent Revenue ...............................................

3,700

Interest Expense .....................................................

Interest Payable
[($80,000 X 9%) X 1/12] .........................

600

4,100

400

3,700

600

(b)
Cash
Date
Aug.

Debit
31

Credit

Balance

Balance
19,600

Accounts Receivable
Date
Aug.

Debit
31

Adjusting

Credit

3,700

Balance
3,700

Supplies
Date
Aug.

Debit
31
31

Balance
Adjusting

Prepaid Insurance

Credit

Balance

2,400

3,300
900

Date
Aug.

Debit
31
31

Balance
Adjusting

Credit

Balance

1,200

6,000
4,800

Credit

Balance

Land
Date
Aug.

Debit
31

Balance

25,000

Buildings
Date
Aug.

Debit
31

Credit

Balance

Balance
125,000

Accumulated DepreciationBuildings
Date
Aug.

Debit
31

Adjusting

Credit

Balance

1,125

1,125

Credit

Balance

Equipment
Date
Aug.

Debit
31

Balance

26,000

Accumulated DepreciationEquipment
Date
Aug.

Debit
31

Adjusting

Credit

Balance

600

600

Credit

Balance

Accounts Payable
Date
Aug.

Debit
31

Balance

6,500

Unearned Rent Revenue

Date
Aug.

Debit
31
31

Balance
Adjusting

Credit

Balance
7,400
3,300

4,100

Salaries and Wages Payable

Date
Aug.

Debit
31

Adjusting

Credit

Balance

400

400

Credit

Balance

600

600

Credit

Balance

Interest Payable
Date
Aug.

Debit
31

Adjusting

Mortgage Payable
Date
Aug.

Debit
31

Balance

80,000

Common Stock
Date
Aug.

Debit
31

Credit

Balance

Balance
100,000

Dividends
Date
Aug.

Debit
31

Credit

Balance

Balance
5,000

Rent Revenue
Date
Aug.

Debit
31
31

Balance
Adjusting

Credit

Balance

4,100

80,000
84,100

31

Adjusting

3,700

87,800

Credit

Balance

Maintenance and Repairs Expense

Date
Aug.

Debit
31

Balance

3,600

Supplies Expense
Date
Aug.

Debit
31

Adjusting

Credit

2,400

Balance
2,400

Depreciation Expense
Date
Aug.

Debit
31

Adjusting

Credit

1,725

Balance
1,725

Interest Expense
Date
Aug.

Debit
31

Adjusting

Credit

600

Balance
600

Insurance Expense
Date
Aug.

Debit
31

Adjusting

Credit

1,200

Balance
1,200

Salaries and Wages Expense

Date
Aug.

Debit
31
31

Balance
Adjusting

Credit

Balance
51,000
51,400

400

Utilities Expense
Date
Aug.

Explanation
31

Balance

Debit

Credit

Balance
9,400

(c)
Lazy River Resort, Inc.
Adjusted Trial Balance
August 31, 2014

Cash ..............................................................................................
Accounts Receivable ....................................................................
Supplies ........................................................................................
Prepaid Insurance .........................................................................
Land ..............................................................................................
Buildings.......................................................................................
Accumulated DepreciationBuildings........................................
Equipment.....................................................................................
Accumulated DepreciationEquipment......................................
Accounts Payable .........................................................................
Unearned Rent Revenue ...............................................................
Salaries and Wages Payable .........................................................
Interest Payable ............................................................................
Mortgage Payable .........................................................................
Common Stock .............................................................................
Dividends......................................................................................
Rent Revenue................................................................................
Maintenance and Repairs Expense ...............................................
Supplies Expense ..........................................................................
Depreciation Expense ...................................................................
Interest Expense............................................................................
Insurance Expense ........................................................................
Salaries and Wages Expense ........................................................

Debit
$ 19,600
3,700
900
4,800
25,000
125,000

Credit

1,125

26,000
600
6,500
3,300
400
600
80,000
100,000
5,000
87,800
3,600
2,400
1,725
600
1,200
51,400

Utilities Expense...........................................................................

9,400
$280,325

$280,325

d.
Lazy River Resort, Inc.
Income Statement
For the Three Months Ended August 31, 2014
Revenues
Rent revenue ..........................................................................
Expenses
Salaries and wages expense ...................................................
Utilities expense .....................................................................
Maintenance and repairs expense ..........................................
Supplies expense ....................................................................
Depreciation expense .............................................................
Insurance expense ..................................................................
Interest expense ......................................................................
Total expenses ..............................................................
Net income ......................................................................................

$87,800
$51,400
9,400
3,600
2,400
1,725
1,200
600
70,325
$17,475

Lazy River Resort, Inc.

Retained Earnings Statement
For the Three Months Ended August 31, 2014
Retained Earnings, June 1 ......................................................................................
Add: Net income ..................................................................................................
Less: Dividends .....................................................................................................
Retained Earnings, August 31................................................................................

0
17,475
17,475
5,000
$ 12,475

Lazy River Resort, Inc.

Balance Sheet
August 31, 2014
Assets
Cash ..........................................................................................
Accounts receivable ...................................................................
Supplies ......................................................................................
Prepaid insurance .......................................................................
Land ..........................................................................................
Buildings ....................................................................................

$ 19,600
3,700
900
4,800
25,000
$125,000

Less: Accum. Depreciation buildings .......................................

Equipment ..................................................................................
Less: Accum. Depreciation equipment .....................................
Total assets .............................................................

1,125
26,000
600

123,875
25,400
$203,275

Liabilities and Stockholders' Equity

Liabilities
Accounts payable .............................................................
Mortgage payable.............................................................
Unearned rent revenue .....................................................
Interest payable ................................................................
Salaries and wages payable ..............................................
Total liabilities .......................................................
Stockholders equity
Common stock .................................................................
Retained earnings .............................................................
Total stockholders equity......................................
Total liabilities and stockholders
equity..................................................................

$100,000
12,475

CHAPTER 3 HW SCREENSHOT

Exercise 3-6
Your answer is correct.
Orwell Company accumulates the following adjustment data at December 31.
1. Services provided but not recorded total $1,420.
2. Supplies of $300 have been used.
3. Utility expenses of $225 are unpaid.
4. Unearned service revenue of $260 is recognized for services performed.
5. Salaries of $800 are unpaid.
6. Prepaid insurance totaling $380 has expired.
For each of the above items indicate the following. (Answer for account balances before
adjustment should be entered in alphabetical order.)
(a)

6,500
80,000
3,300
600
400
90,800

The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued
expense).

112,475
$203,275

(b) The status of accounts before adjustment (overstatement or understatement).

Item

Type of Adjustment

Accrued Revenues

Accounts before Adjustment

Assets Understated

1.

res_EAT_131943

res_EAT_131943
Revenues Understated
res_EAT_131943

Prepaid Expenses

Assets Overstated

2.

res_EAT_131943

res_EAT_131943
Expenses Understated
res_EAT_131943

Accrued Expenses

Expenses Understated

3.

res_EAT_131943

res_EAT_131943
Liabilities Understated
res_EAT_131943

Unearned Revenues

Liabilities Overstated

4.

res_EAT_131943

res_EAT_131943
Revenues Understated
res_EAT_131943

Accrued Expenses

Expenses Understated

5.

res_EAT_131943

res_EAT_131943
Liabilities Understated
res_EAT_131943

Prepaid Expenses

Assets Overstated

6.

res_EAT_131943

res_EAT_131943
Expenses Understated
res_EAT_131943

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Exercise 3-7
Your answer is correct.
The ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts,
shown below, before adjusting entries have been prepared.
Debit
Prepaid Insurance
Supplies
Equipment

Credit

$ 3,600
2,800
25,000

Accumulated DepreciationEquipment

$ 8,400

Notes Payable

20,000

Unearned Rent Revenue

9,900

Rent Revenue
Interest Expense
Salaries and Wages Expense

60,000
0
14,000

An analysis of the accounts shows the following

1.

The equipment depreciates $300 per month.

2.

One-third of the unearned rent revenue was recognized during the quarter.

3.

Interest of $500 is accrued on the notes payable.

4.

Supplies on hand total $650.

5.

Insurance expires at the rate of $200 per month.

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.
Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies
Expense. (Credit account titles are automatically indented when the amount is entered. Do
not indent manually.)
No.
1.

Date
Mar. 31

Account Titles and Explanation

Depreciation E

Debit

900

Accumulated D
2.

Mar. 31

Unearned Ren

900
3300

Rent Revenue
3.

Mar. 31

Interest Expen

3300
500

Interest Payab
4.

Mar. 31

Supplies Expe

500
2150

Supplies
5.

Mar. 31

Insurance Exp

Credit

2150
600

Prepaid Insura

600

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Exercise 3-11
Your answer is correct.
A partial adjusted trial balance of Ruiz Company at January 31, 2014, shows the following.
Ruiz Company
Adjusted Trial Balance
January 31, 2014
Debit
Supplies

$ 850

Prepaid Insurance

2,400

Credit

Salaries and Wages Payable

$ 800

Unearned Service Revenue

750

Supplies Expense

950

Insurance Expense

400

Salaries and Wages Expense

2,500

Service Revenue

2,000

Answer the following questions, assuming the year begins January 1.

(a) If the amount in Supplies Expense is the January 31 adjusting entry, and $670 of supplies was
purchased in January, what was the balance in Supplies on January 1?
The balance in Supplies on January 1

1130

(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance
premium was for one year, what was the total premium and when was the policy purchased?
The total premium

The policy purchased

4800

Aug. 1, 2013

res_EAT_131943

(c) If $3,300 of salaries was paid in January, what was the balance in Salaries and Wages Payable at
December 31, 2013?
The balance in Salaries and Wages Payable at December 31, 2013

1600

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Problem 3-2A
Lazy River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance
before adjustment on August 31 is as follows.
Lazy River Resort, Inc.
Trial Balance
August 31, 2014
Account Number

Debit

101

Cash

$ 19,600

126

Supplies

3,300

130

Prepaid Insurance

6,000

Credit

140

Land

143

Buildings

157

Equipment

201

Accounts Payable

208

Unearned Rent Revenue

275

Mortgage Payable

311

Common Stock

332

Dividends

429

Rent Revenue

622

Maintenance and Repairs Expense

726

Salaries and Wages Expense

732

Utilities Expense

25,000
125,000
26,000
$ 6,500
7,400
80,000
100,000
5,000
80,000
3,600
51,000
9,400
$273,900

$273,900

In addition to those accounts listed on the trial balance, the chart of accounts for Lazy River Resort
also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144
Accumulated DepreciationBuildings, No. 158 Accumulated DepreciationEquipment, No. 212
Salaries and Wages Payable, No. 230 Interest Payable, No. 631 Supplies Expense, No. 711
Depreciation Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other data:
1.

Insurance expires at the rate of $400 per month.

2.

A count on August 31 shows $900 of supplies on hand.

3.

Annual depreciation is $4,500 on buildings and $2,400 on equipment.

4.

Unearned rent revenue of $4,100 was recognized for services performed prior to August 31.

5.

Salaries of $400 were unpaid at August 31.

6.

Rentals of $3,700 were due from tenants at August 31. (Use Accounts Receivable.)

7.

The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

(a)
Your answer is correct.
Journalize the adjusting entries on August 31 for the 3-month period June 1August 31. (Credit
account titles are automatically indented when the amount is entered. Do not indent

manually.)
No.
1.

Date
Aug. 31

Account Titles and Explanation

Insurance Exp

Debit

1200

Prepaid Insura
2.

Aug. 31

Supplies Expe

1200
2400

Supplies
3.

4.

Aug. 31

Aug. 31

Depreciation E

2400
1725

Accumulated D

1125

Accumulated D

600

Unearned Ren

4100

Rent Revenue
5.

Aug. 31

Salaries and W

4100
400

Salaries and W
6.

Aug. 31

Accounts Rec

400
3700

Rent Revenue
7.

Aug. 31

Credit

Interest Expen

3700
600

Interest Payab

600

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(b)

Your answer is correct.

Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post
the adjusting entries. (Post entries in the order of journal entries posted in the previous part
of the question.)
Cash
Date
Aug. 31

No. 101
Explanation
Balance

Ref

Debit

Credit

Balance

19600

Accounts Receivable
Date
Aug. 31

Explanation
Adjusting

No. 112
Ref
J1

Debit

Credit

3700

Balance

3700

Supplies
Date

No. 126
Explanation

Ref

Aug. 31

Balance

Aug. 31

Adjusting

J1

Debit

Credit

Balance

3300
2400

900

Prepaid Insurance
Date

Explanation

No. 130
Ref

Aug. 31

Balance

Aug. 31

Adjusting

J1

Debit

Credit

Balance

6000
1200

4800

Land
Date
Aug. 31

No. 140
Explanation
Balance

Ref

Debit

Credit

Balance

25000

Buildings
Date
Aug. 31

No. 143
Explanation
Balance

Ref

Debit

Credit

Balance

125000

Accumulated DepreciationBuildings
Date
Aug. 31

Explanation
Adjusting

No. 144
Ref

Debit

J1

Credit

1125

Equipment
Date
Aug. 31

1125
No. 157

Explanation
Balance

Ref

Debit

Credit

Explanation

Balance

26000

Accumulated DepreciationEquipment
Date

Balance

No. 158
Ref

Debit

Credit

Balance

Aug. 31

Adjusting

J1

600

600

Accounts Payable
Date
Aug. 31

Explanation
Balance

No. 201
Ref

Debit

Credit

Balance

6500

Unearned Rent Revenue

Date

Explanation

No. 208
Ref

Aug. 31

Balance

Aug. 31

Adjusting

J1

Debit

Credit

Balance

7400
4100

3300

Salaries and Wages Payable

Date
Aug. 31

Explanation
Adjusting

No. 212
Ref

Debit

J1

Credit

400

Balance

400

Interest Payable
Date
Aug. 31

Explanation
Adjusting

No. 230
Ref

Debit

J1

Credit

600

Balance

600

Mortgage Payable
Date
Aug. 31

Explanation
Balance

No. 275
Ref

Debit

Credit

Balance

80000

Common Stock
Date
Aug. 31

No. 311
Explanation
Balance

Ref

Debit

Credit

Balance

100000

Dividends
Date
Aug. 31

No. 332
Explanation
Balance

Ref

Debit

Credit

Balance

5000

Rent Revenue
Date

No. 429
Explanation

Ref

Debit

Credit

Balance

Aug. 31

Balance

Aug. 31

Adjusting

J1

4100

84100

Aug. 31

Adjusting

J1

3700

87800

80000

Depreciation Expense
Date
Aug. 31

Explanation
Adjusting

No. 711
Ref
J1

Debit

1725

Credit

Balance

1725

Maintenance and Repairs Expense

Date
Aug. 31

Explanation
Balance

No. 622
Ref

Debit

Credit

Balance

3600

Supplies Expense
Date
Aug. 31

Explanation
Adjusting

No. 631
Ref
J1

Debit

Credit

2400

Balance

2400

Interest Expense
Date
Aug. 31

Explanation
Adjusting

No. 718
Ref
J1

Debit

Credit

600

Balance

600

Insurance Expense
Date
Aug. 31

Explanation
Adjusting

No. 722
Ref
J1

Debit

Credit

1200

Balance

1200

Salaries and Wages Expense

Date

Explanation

No. 726
Ref

Aug. 31

Balance

Aug. 31

Adjusting

J1

Debit

Credit

Balance

51000
400

51400

Utilities Expense
Date
Aug. 31

Explanation
Balance

No. 732
Ref

Debit

Credit

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Attempts: 1 of 3 used

(c)

Balance

9400

Your answer is correct.

Prepare an adjusted trial balance on August 31.
LAZY RIVER RESORT, INC.
Adjusted Trial Balance
August 31, 2014
Debit

Cash

19600

Accounts Rec

3700

Supplies

900

Prepaid Insura

4800

Land

25000

Buildings

125000

Accumulated D
Equipment

Credit
$

1125
26000

Accumulated D

600

Accounts Pay

6500

Unearned Ren

3300

Salaries and W

400

Interest Payab

600

Mortgage Paya

80000

Common Stock

100000

Dividends

5000

Rent Revenue

87800

Maintenance a

3600

Supplies Expe

2400

Depreciation E

1725

Interest Expen

600

Insurance Exp

1200

Salaries and W

51400

Utilities Expens

9400
$

280325

280325

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Attempts: 1 of 3 used

(d)
Your answer is correct.
Prepare an income statement for the 3 months ending August 31.
LAZY RIVER RESORT, INC.
Income Statement
For the Three Months Ended August 31, 2014

Revenues

res_EAT_131943

Rent Revenue
Expenses
Salaries and W

res_EAT_131943
$

51400

Utilities Expens

9400

Maintenance a

3600

Supplies Expe

2400

Depreciation E

1725

Insurance Exp

1200

87800

Interest Expen

600

Total Expenses

res_EAT_131943

Net Income / (Loss)

res_EAT_131943

70325
$

17475

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(e)
Your answer is correct.
Prepare a retained earnings statement for the 3 months ending August 31. (List items that
increase retained earnings first.)
LAZY RIVER RESORT, INC.
Retained Earnings Statement
For the Three Months Ended August 31, 2014
$

Retained Earnings, June 1

Add

res_EAT_131943

res_EAT_131943

Net Income / (Loss)

17475

res_EAT_131943
17475
Less

res_EAT_131943

Dividends
5000

res_EAT_131943
$

Retained Earnings, August 31

res_EAT_131943

12475

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Attempts: 1 of 3 used

(f)
Your answer is correct.
Prepare a balance sheet as of August 31. (List assets in order of liquidity. List Property, plant
and equipment in order of land, buildings and equipment.)
LAZY RIVER RESORT, INC.
Balance Sheet
August 31, 2014
Assets
$

Cash

19600

Accounts Rec

3700

Supplies

900

Prepaid Insura

4800

Land

25000
$

Buildings
Less

125000
res_EAT_131943

Accumulated D

Equipment
Less

1125

123875

26000
res_EAT_131943

Accumulated D

600

25400
$

Total Assets

203275

res_EAT_131943
Liabilities and Stockholders Equity

Liabilities
res_EAT_131943
$

Accounts Pay

6500

Mortgage Paya

80000

Unearned Ren

3300

Interest Payab

600

Salaries and W

400

Total Liabilities
90800
res_EAT_131943
Stockholders' Equity
res_EAT_131943
Common Stock

100000

Retained Earn

12475

Total Stockholders' Equity

112475
res_EAT_131943
$

Total Liabilities and Stockholders' Equity

203275

res_EAT_131943

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