西方财务会计课后答案(第三章).docx

CHAPTER 3

Adjusting the Accounts

ASSIGNMENT CLASSIFICATION TABLE

Brief


A


B

Study Objectives
Questions
Exercises
Exercises
Problems
Problems

*1.

Explain the time period
assumption.

1, 2

*2.

Explain the accrual basis

3, 4, 5

1, 6

of accounting.

*3.

Explain why adjusting

1, 6, 7

1

entries are needed.

*4.

Identify the major types

8, 9, 10, 18

2, 8

2, 7

of adjusting entries.

*5.

Prepare adjusting entries
for prepayments.

8, 9, 10,
11, 12, 13,

3, 4, 5, 6

2, 3, 4, 5,
6, 7, 8, 9,

1A, 2A,
3A,

1B, 2B,
3B,

18, 19, 20
11
4A, 5A, 6A
4B, 5B

*6.

Prepare adjusting entries
for accruals.

8, 14, 15,
16, 17, 18,

7

2, 3, 4, 5,
6, 7, 8, 9,

1A, 2A,
3A,

1B, 2B,
3B,

19, 20
11
4A, 5A, 6A
4B, 5B

*7.

Describe the nature and

21

9, 10

3, 4, 5, 6,

1A, 2A,

1B, 2B,

purpose of an adjusted
trial balance.
7, 8, 9, 10
3A,
5A, 6A
3B,
5B

*8.

Prepare adjusting entries

22

11

12

6A

for the alternative
treatment of
prepayments.

*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the
appendix *to the chapter.

3-1

ASSIGNMENT CHARACTERISTICS TABLE

Problem


Difficulty


Time

Number

1A
Description

Prepare adjusting entries, post to ledger accounts, and
Level

Simple
Allotted (min.)

40−50

prepare an adjusted trial balance.

2A

Prepare adjusting entries, post, and prepare an adjusted

Simple

50−60

trial balance and financial statements.

3A

4A

5A

Prepare adjusting entries and financial statements.

Prepare adjusting entries.

Journalize transactions and follow through accounting

Moderate

Moderate

Moderate

40−50

30−40

60−70

cycle to preparation of financial statements.

*6A*

Prepare adjusting entries, an adjusted trial balance, and

Moderate

40−50

financial statements using appendix.

1B

Prepare adjusting entries, post to ledger accounts, and

Simple

40−50

prepare an adjusted trial balance.

2B

Prepare adjusting entries, post, and prepare an adjusted

Simple

50−60

trial balance and financial statements.

3B

4B

5B

Prepare adjusting entries and financial statements.

Prepare adjusting entries.

Journalize transactions and follow through accounting

Moderate

Moderate

Moderate

40−50

30−40

60−70

cycle to preparation of financial statements.

3-2

BLOOM'S TAXONOMY TABLE

3-3

Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems
Study Objective
Q3-1
Q3-3
Q3-4
Q3-1
Q3-6
Q3-8
Q3-9
Q3-8
Q3-9
Q3-10
Q3-11
Q3-12
Q3-13
Q3-19
Q3-20
Q3-17
Q3-18
BE3-3
BE3-4
BE3-5
BE3-6
E3-2
E3-3
E3-4
E3-5
E3-6
E3-7
E3-8
E3-9
E3-11
P3-1A
P3-2A
P3-3A
Q3-10
Q3-18
BE3-2
BE3-8 E3-7
E3-2
P3-4A E3-11
P3-5A
P3-6A
P3-1B
P3-2B
P3-3B
P3-4B
P3-5B
Q3-7
BE3-1
Q3-5
E3-6
Q3-2
E3-1
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
*1.
Explain the time period assumption.
*2.
Explain the accrual basis of accounting.
*3.
Explain why adjusting entries are needed.
*4.
Identify the major types of adjusting entries.
*5.
Prepare adjusting entries for prepayments.
*6.
Q3-8
Q3-14
Q3-15
Q3-19
Q3-20
Prepare adjusting entries for accruals.
Q3-21
Communication
Research Case
Q3-16
Q3-18
BE3-7
E3-2
E3-3
E3-4
E3-5
E3-6
BE3-9
BE3-10
E3-10
E3-3
E3-4
E3-5
E3-6
E3-7
E3-8
Q3-22
Cookie
Chronicle
E3-7
E3-8
E3-9
E3-11
P3-1A
P3-2A
P3-3A
P3-4A
E3-9
P3-1A
P3-2A
P3-3A
P3-5A
BE3-11 P3-6A
E3-12
P3-5A E3-11
P3-6A
P3-1B
P3-2B
P3-3B
P3-4B
P3-5B
P3-6A
P3-1B
P3-2B
P3-3B
P3-5B
*7.
Describe the nature and purpose of an
adjusted trial balance.
*8.
Prepare adjusting entries for the alternative
treatment of prepayments.
Broadening Your Perspective
Group Decision Ethics Case
Financial Reporting
Interpreting
Case
Comparative Analysis
Financial
Interpreting
Exploring the Web
Statements
Financial
Global Focus
Statements

ANSWERS TO QUESTIONS

1.


(a)


Under the time period assumption, an accountant is required to determine the relevance

of each business transaction to specific accounting periods.
(b) An accounting time period of one year in length is referred to as a fiscal year. A fiscal
year that extends from January 1 to December 31 is referred to as a calendar year.
Accounting periods of less than one year are called interim periods.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

The two generally accepted accounting principles that relate to adjusting the accounts are:
The revenue recognition principle, which states that revenue should be recognized in the
accounting period in which it is earned.
The matching principle, which states that efforts (expenses) be matched with accomplishments
(revenues).

The law firm should recognize the revenue in April. The revenue recognition principle states
that revenue should be recognized in the accounting period in which it is earned.

Information presented on an accrual basis is more useful than on a cash basis because it
reveals relationships that are likely to be important in predicting future results. To illustrate,
under accrual accounting, revenues are recognized when earned so they can be related to the
economic environment in which they occur. Trends in revenues are thus more meaningful.

Expenses of $4,500 should be deducted from the revenues in April. Under the matching
principle efforts (expenses) should be matched with accomplishments (revenues).

No, adjusting entries are required by the revenue recognition and matching principles.

A trial balance may not contain up-to-date information for financial statements because:
(1) Some events are not journalized daily because it is inexpedient to do so.
(2) The expiration of some costs occurs with the passage of time rather than as a result of
recurring daily transactions.
(3) Some items may be unrecorded because the transaction data are not known.

The two categories of adjusting entries are prepayments and accruals. Prepayments consist of
prepaid expenses and unearned revenues. Accruals consist of accrued revenues and accrued
expenses.

In the adjusting entry for a prepaid expense, an expense is debited and an asset is credited.

No. Depreciation is the process of allocating the cost of an asset to expense over its useful
life in a rational and systematic manner. Depreciation results in the presentation of the
book value of the asset, not its market value.

Depreciation expense is an expense account whose normal balance is a debit. This account
shows the cost that has expired during the current accounting period. Accumulated depreciation
is a contra asset account whose normal balance is a credit. The balance in this account is the
depreciation that has been recognized from the date of acquisition to the balance sheet date.

12.

Equipment ................................................................................................

$18,000

Less: Accumulated Depreciation ..............................................................

3-4
7,000
$11,000

Questions Chapter 3 (Continued)

*13.

*14.

*15.

*16.

*17.


In the adjusting entry for an unearned revenue, a liability is debited and a revenue is credited.

Asset and revenue. An asset would be debited and a revenue would be credited.

An expense is debited and a liability is credited.

Net income was understated $300 because prior to adjustment, revenues are understated by
$900 and expenses are understated by $600. The difference in this case is $300 ($900 –
$600).

The entry is:

Jan. 9 Salaries Payable...........................................................................
Salaries Expense..........................................................................
Cash.....................................................................................
2,000
4,000


6,000

*18.

*19.

(a)
(b)
(c)

(a)
(b)
(c)

Accrued revenues.
Unearned revenues.
Accrued expenses.

Salaries Payable.
Accumulated Depreciation.
Interest Expense.

(d)
(e)
(f)

(d)
(e)
(f)

Accrued expenses or prepaid expenses.
Prepaid expenses.
Accrued revenues or unearned revenues.

Supplies Expense.
Service Revenue.
Service Revenue.

*20.

*21.

*22.

Disagree. An adjusting entry affects only one balance sheet account and one income statement
account.

Financial statements can be prepared directly from an adjusted trial balance because the
balances of all accounts have been adjusted to show the effects of all financial events that
have occurred during the accounting period.

For Supplies Expense (prepaid expense): expenses are overstated and assets are understated.
The adjusting entry is:
Assets (Supplies) .......................................................................................... XX

Expenses (Supplies Expense).................................................................
XX

For Rent Revenue (unearned revenues): revenues are overstated and liabilities are
understated. The adjusting entry is:
Revenues (Rent Revenue) ............................................................................ XX
Liabilities (Unearned Rent Revenue) ....................................................... XX

3-5

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

(a) Prepaid Insurance—to recognize insurance expired during the
period.

(b) Depreciation Expense—to account for the depreciation that has
occurred on the asset during the period.

(c) Unearned Revenue—to record revenue earned for services provided.

(d) Interest Payable—to recognize interest accrued but unpaid on
notes payable.

BRIEF EXERCISE 3-2

(a)

(b)

Item

1.

2.

3.

4.
Type of Adjustment

Prepaid Expenses

Accrued Revenues

Accrued Expenses

Unearned Revenues
Accounts before Adjustment

Assets Overstated
Expenses Understated

Assets Understated
Revenues Understated

Expenses Understated
Liabilities Understated

Liabilities Overstated

Revenues Understated

BRIEF EXERCISE 3-3

Dec. 31

Advertising Supplies Expense .............................
Advertising Supplies ($6,700 – $1,700) .......

5,000


5,000

Advertising Supplies
6,700 12/31 5,000
12/31 Bal. 1,700


3-6


Advertising Supplies Expense
12/31 5,000

BRIEF EXERCISE 3-4

Dec. 31

Depreciation Expense—Equipment.....................
Accumulated Depreciation—
Equipment...................................................

6,000


6,000

Depr. Expense—Equipment
12/31 6,000

Balance Sheet:


Accum. Depreciation—Equipment
12/31 6,000

Equipment..............................................................
$30,000

Less: Accumulated Depreciation .......................

BRIEF EXERCISE 3-5
6,000
$24,000

July 1

Dec. 31

Prepaid Insurance.............................................
Cash ...........................................................

Insurance Expense ($12,000 ÷ 3) X 1/2 ...........
Prepaid Insurance.....................................

12,000

2,000


12,000

2,000

Prepaid Insurance


Insurance Expense

7/1 12,000 12/31
2,000
12/31
2,000

12/31 Bal. 10,000

BRIEF EXERCISE 3-6

July 1

Dec. 31

Cash ...................................................................
Unearned Insurance Revenue .................

Unearned Insurance Revenue .........................
Insurance Revenue ...................................

12,000

2,000


12,000

2,000

Unearned Insurance Revenue
12/31 2,000 7/1 12,000
12/31 Bal. 10,000


3-7


Insurance Revenue
12/31 2,000

BRIEF EXERCISE 3-7

1.

2.

3.

Dec. 31

31

31

Interest Expense ............................................
Interest Payable .....................................

Accounts Receivable.....................................
Service Revenue ....................................

Salaries Expense ...........................................
Salaries Payable.....................................

400

1,250

900


400

1,250

900

BRIEF EXERCISE 3-8

(a)

(b)

Account
Accounts Receivable
Prepaid Insurance
Accum. Depr.—Equipment
Interest Payable
Unearned Service Revenue
Type of Adjustment
Accrued Revenues
Prepaid Expenses
Prepaid Expenses
Accrued Expenses
Unearned Revenues
Related Account
Service Revenue
Insurance Expense
Depreciation Expense
Interest Expense
Service Revenue

BRIEF EXERCISE 3-9

LUCILLE CORPORATION
Income Statement
For the Year Ended December 31, 2006

Revenues

Service revenue ......................................................
Expenses
Salaries expense.....................................................
Rent expense...........................................................
Insurance expense .................................................
Supplies expense ...................................................
Depreciation expense.............................................
Total expenses ................................................
Net income ......................................................................

3-8


$16,000
4,000
2,000
1,500
1,100
$38,400

24,600
$13,800

BRIEF EXERCISE 3-10

LUCILLE CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2006

Retained earnings, January 1...........................................................
Add: Net income ..............................................................................

Less: Dividends ................................................................................
Retained earnings, December 31 .....................................................

*BRIEF EXERCISE 3-11

$15,600
13,800
29,400
6,000
$23,400

(a) Apr. 30

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