Exercises
(10 min.)
E 3-1|
Amount of Revenue (Expense) for January |
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Date |
Revenue (or Expense) Accrual-Basis Amount |
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Jan. |
1 |
Expense |
$ 0 |
|
5 |
Expense |
(400) |
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|
9 |
Revenue |
1,400 |
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14 |
Expense |
0 |
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23 |
Revenue |
1,600 |
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31 |
Expense ($2,700 ) 3) |
(900) |
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31 |
Expense |
(900) |
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(5-10 min.)
E 3-2
(5-10 min.)
E 3-4|
Missing amounts in italics. |
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A |
B |
C |
D |
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Beginning Prepaid Insurance |
$ 450 |
$ 500 |
$ 900 |
$ 600 |
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Payments for Prepaid |
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Insurance during the year |
1,400 |
800 |
1,100 |
900 |
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Total amount to account for |
1,850 |
1,300 |
2,000 |
1,500 |
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Ending Prepaid Insurance |
250 |
400 |
800 |
700 |
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Insurance Expense |
$1,600 |
$ 900 |
$1,200 |
$ 800 |
Journal entries:
Situation A: Insurance Expense 1,600
Prepaid Insurance 1,600
B: Prepaid Insurance 800
Cash 800
(5-10 min.)
E 3-5|
Journal |
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DATE |
DESCRIPTION |
POST. REF. |
DEBIT |
CREDIT |
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a. |
Salary Expense ($15,000 ´ 2/5) |
6,000 |
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Salary Payable |
6,000 |
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b. |
Unearned Service Revenue |
800 |
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Service Revenue |
800 |
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c. |
Depreciation Expense |
3,200 |
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Accumulated Depreciation |
3,200 |
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d. |
Insurance Expense |
300 |
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Prepaid Insurance |
300 |
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e. |
Interest Receivable |
4,400 |
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Interest Revenue |
4,400 |
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(10 min.
E 3-6Net income:
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Overstated by omission of: |
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Salary expense |
$6,000 |
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Depreciation expense |
3,200 |
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Insurance expense |
300 |
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Total overstatement |
$9,500 |
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Understated by omission of: |
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|
Service revenue |
$ 800 |
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Interest revenue |
4,400 |
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Total understatement |
5,200 |
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Overall effectnet income overstated by |
$4,300 |
(10-15 min.)
E 3-7|
Journal |
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DATE |
ACCOUNTS AND EXPLANATIONS |
POST. REF. |
DEBIT |
CREDIT |
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a. |
Unearned Rent Revenue ($10,000 ´ 6/12) |
5,000 |
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Rent Revenue |
5,000 |
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b. |
Interest Expense |
400 |
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Interest Payable |
400 |
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c. |
Interest Receivable |
700 |
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Interest Revenue |
700 |
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d. |
Salary Expense ($1,500 ´ 3) |
4,500 |
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Salary Payable |
4,500 |
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e. |
Supplies Expense |
1,900 |
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Supplies ($3,100 ! $1,200) |
1,900 |
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f. |
Depreciation Expense ($10,000 / 4) |
2,500 |
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Accumulated Depreciation |
2,500 |
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g. |
Insurance Expense |
200 |
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Prepaid Insurance ($1,200 / 2 ´ 4/12) |
200 |
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(15-20 min.)
E 3-15The easiest way to solve this exercise is to reason that, apart from any cash receipts during August,
($2,500 ! $1,900) means that revenue
increased $ 600
($1,200 ! $300) means that revenue
increased 900
came from a customer (client) 7,000
Total revenue for the month $8,500