1、.：.；CHAPTER 3Adjusting the AccountsASSIGNMENT CLASSIFICATION TABLEBriefABStudy ObjectivesQuestionsExercisesExercisesProblemsProblems*1.Explain the time periodassumption.1, 2*2.Explain the accrual basis3, 4, 51, 6of accounting.*3.Explain why adjusting1, 6, 71entries are needed.*4.Identify the major t

2、ypes8, 9, 10, 182, 82, 7of adjusting entries.*5.Prepare adjusting entriesfor prepayments.8, 9, 10,11, 12, 13,3, 4, 5, 62, 3, 4, 5,6, 7, 8, 9,1A, 2A,3A,1B, 2B,3B,18, 19, 20114A, 5A, 6A4B, 5B*6.Prepare adjusting entriesfor accruals.8, 14, 15,16, 17, 18,72, 3, 4, 5,6, 7, 8, 9,1A, 2A,3A,1B, 2B,3B,19, 20

3、114A, 5A, 6A4B, 5B*7.Describe the nature and219, 103, 4, 5, 6,1A, 2A,1B, 2B,purpose of an adjustedtrial balance.7, 8, 9, 103A,5A, 6A3B,5B*8.Prepare adjusting entries2211126Afor the alternativetreatment ofprepayments.*Note: All asterisked Questions, Exercises, and Problems relate to material containe

4、d in theappendix *to the chapter.3-1ASSIGNMENT CHARACTERISTICS TABLEProblemDifficultyTimeNumber1ADescriptionPrepare adjusting entries, post to ledger accounts, andLevelSimpleAllotted (min.)4050prepare an adjusted trial balance.2APrepare adjusting entries, post, and prepare an adjustedSimple5060trial

5、 balance and financial statements.3A4A5APrepare adjusting entries and financial statements.Prepare adjusting entries.Journalize transactions and follow through accountingModerateModerateModerate405030406070cycle to preparation of financial statements.*6A*Prepare adjusting entries, an adjusted trial

6、balance, andModerate4050financial statements using appendix.1BPrepare adjusting entries, post to ledger accounts, andSimple4050prepare an adjusted trial balance.2BPrepare adjusting entries, post, and prepare an adjustedSimple5060trial balance and financial statements.3B4B5BPrepare adjusting entries

7、and financial statements.Prepare adjusting entries.Journalize transactions and follow through accountingModerateModerateModerate405030406070cycle to preparation of financial statements.3-2BLOOMS TAXONOMY TABLE3-3Correlation Chart between Blooms Taxonomy, Study Objectives and End-of-Chapter Exercises

8、 and ProblemsStudy ObjectiveQ3-1Q3-3Q3-4Q3-1Q3-6Q3-8Q3-9Q3-8Q3-9Q3-10Q3-11Q3-12Q3-13Q3-19Q3-20Q3-17Q3-18BE3-3BE3-4BE3-5BE3-6E3-2E3-3E3-4E3-5E3-6E3-7E3-8E3-9E3-11P3-1AP3-2AP3-3AQ3-10Q3-18BE3-2BE3-8 E3-7E3-2P3-4A E3-11P3-5AP3-6AP3-1BP3-2BP3-3BP3-4BP3-5BQ3-7BE3-1Q3-5E3-6Q3-2E3-1KnowledgeComprehensionAp

9、plicationAnalysisSynthesisEvaluation*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.Q3-8Q3-14Q3-15Q3-19Q3-20Prepare adjusting

10、entries for accruals.Q3-21CommunicationResearch CaseQ3-16Q3-18BE3-7E3-2E3-3E3-4E3-5E3-6BE3-9BE3-10E3-10E3-3E3-4E3-5E3-6E3-7E3-8Q3-22CookieChronicleE3-7E3-8E3-9E3-11P3-1AP3-2AP3-3AP3-4AE3-9P3-1AP3-2AP3-3AP3-5ABE3-11 P3-6AE3-12P3-5A E3-11P3-6AP3-1BP3-2BP3-3BP3-4BP3-5BP3-6AP3-1BP3-2BP3-3BP3-5B*7.Descri

11、be the nature and purpose of anadjusted trial balance.*8.Prepare adjusting entries for the alternativetreatment of prepayments.Broadening Your PerspectiveGroup Decision Ethics CaseFinancial ReportingInterpretingCaseComparative AnalysisFinancialInterpretingExploring the WebStatementsFinancialGlobal F

12、ocusStatementsANSWERS TO QUESTIONS1.(a)Under the time period assumption, an accountant is required to determine the relevanceof 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 fiscalyear that extends from

13、 January 1 to December 31 is referred to as a calendar year.Accounting periods of less than one year are called interim periods...10.11.The two generally accepted accounting principles that relate to adjusting the accounts are:The revenue recognition principle, which states that revenu

14、e should be recognized in theaccounting 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 statesthat revenue should be recognized in

15、 the accounting period in which it is earned.Information presented on an accrual basis is more useful than on a cash basis because itreveals relationships that are likely to be important in predicting future results. To illustrate,under accrual accounting, revenues are recognized when earned so they

16、 can be related to theeconomic 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 matchingprinciple efforts (expenses) should be matched with accomplishments (revenues).No, adjusting entries are req

17、uired 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 a

18、s a result ofrecurring 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 ofprepaid expenses and unearned revenues. Accruals consist of accrued revenues and accruedex

19、penses.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 usefullife in a rational and systematic manner. Depreciation results in the presentation of thebook value of the

20、asset, not its market value.Depreciation expense is an expense account whose normal balance is a debit. This accountshows the cost that has expired during the current accounting period. Accumulated depreciationis a contra asset account whose normal balance is a credit. The balance in this account is

21、 thedepreciation that has been recognized from the date of acquisition to the balance sheet date.12.Equipment .$18,000Less: Accumulated Depreciation .3-47,000$11,000Questions Chapter 3 (Continued)*13.*14.*15.*16.*17.In the adjusting entry for an unearned revenue, a liability is debited and a revenue

22、 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 i

23、s $300 ($900 $600).The entry is:Jan. 9 Salaries Payable.Salaries Expense.Cash.2,0004,0006,000*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 expense

24、s.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 statementaccount.Financial statements can be prepared directly from an adjusted trial balance because thebalances of

25、 all accounts have been adjusted to show the effects of all financial events thathave occurred during the accounting period.For Supplies Expense (prepaid expense): expenses are overstated and assets are understated.The adjusting entry is:Assets (Supplies) . XXExpenses (Supplies Expense).XXFor Rent R

26、evenue (unearned revenues): revenues are overstated and liabilities areunderstated. The adjusting entry is:Revenues (Rent Revenue) . XXLiabilities (Unearned Rent Revenue) . XX3-5SOLUTIONS TO BRIEF EXERCISESBRIEF EXERCISE 3-1(a) Prepaid Insuranceto recognize insurance expired during theperiod.(b) Dep

27、reciation Expenseto account for the depreciation that hasoccurred on the asset during the period.(c) Unearned Revenueto record revenue earned for services provided.(d) Interest Payableto recognize interest accrued but unpaid onnotes payable.BRIEF EXERCISE 3-2(a)(b)Item.Type of AdjustmentPrepa

28、id ExpensesAccrued RevenuesAccrued ExpensesUnearned RevenuesAccounts before AdjustmentAssets OverstatedExpenses UnderstatedAssets UnderstatedRevenues UnderstatedExpenses UnderstatedLiabilities UnderstatedLiabilities OverstatedRevenues UnderstatedBRIEF EXERCISE 3-3Dec. 31Advertising Supplies Expense

29、.Advertising Supplies ($6,700 $1,700) .5,0005,000Advertising Supplies6,700 12/31 5,00012/31 Bal. 1,7003-6Advertising Supplies Expense12/31 5,000BRIEF EXERCISE 3-4Dec. 31Depreciation ExpenseEquipment.Accumulated DepreciationEquipment.6,0006,000Depr. ExpenseEquipment12/31 6,000Balance Sheet:Accum. Dep

30、reciationEquipment12/31 6,000Equipment.$30,000Less: Accumulated Depreciation .BRIEF EXERCISE 3-56,000$24,000July 1Dec. 31Prepaid Insurance.Cash .Insurance Expense ($12,000 3) X 1/2 .Prepaid Insurance.12,0002,00012,0002,000Prepaid InsuranceInsurance Expense7/1 12,000 12/312,00012/312,00012/31 Bal. 10

31、,000BRIEF EXERCISE 3-6July 1Dec. 31Cash .Unearned Insurance Revenue .Unearned Insurance Revenue .Insurance Revenue .12,0002,00012,0002,000Unearned Insurance Revenue12/31 2,000 7/1 12,00012/31 Bal. 10,0003-7Insurance Revenue12/31 2,000BRIEF EXERCISE 3-71.2.3.Dec. 313131Interest Expense .Interest Paya

32、ble .Accounts Receivable.Service Revenue .Salaries Expense .Salaries Payable.4001,2509004001,250900BRIEF EXERCISE 3-8(a)(b)AccountAccounts ReceivablePrepaid InsuranceAccum. Depr.EquipmentInterest PayableUnearned Service RevenueType of AdjustmentAccrued RevenuesPrepaid ExpensesPrepaid ExpensesAccrued

33、 ExpensesUnearned RevenuesRelated AccountService RevenueInsurance ExpenseDepreciation ExpenseInterest ExpenseService RevenueBRIEF EXERCISE 3-9LUCILLE CORPORATIONIncome StatementFor the Year Ended December 31, 2006RevenuesService revenue .ExpensesSalaries expense.Rent expense.Insurance expense .Suppl

34、ies expense .Depreciation expense.Total expenses .Net income .3-8$16,0004,0002,0001,5001,100$38,40024,600$13,800BRIEF EXERCISE 3-10LUCILLE CORPORATIONRetained Earnings StatementFor the Year Ended December 31, 2006Retained earnings, January 1.Add: Net income .Less: Dividends .Retained earnings, Decem

35、ber 31 .*BRIEF EXERCISE 3-11$15,60013,80029,4006,000$23,400(a) Apr. 30Supplies .Supplies Expense.1,0001,000(b)30Service Revenue.Unearned Service Revenue .2,0002,0003-9SOLUTIONS TO EXERCISESEXERCISE 3-1(a) Accrual-basis accounting records the events that change a companysfinancial statements in the p

36、eriods in which the events occur ratherthan in the periods in which the company receives or pays cash.Information presented on an accrual basis is useful because it revealsrelationships that are likely to be important in predicting futureresults. Conversely, under cash-basis accounting, revenue isre

37、corded only when cash is received, and an expense is recognizedonly when cash is paid. As a result, the cash basis of accounting oftenleads to misleading financial statements.(b) Politicians might desire a cash-basis accounting system over anaccrual-basis system because if an accrual-accounting syst

38、em isused, it could mean that billions of dollars in government liabilitiespresently unrecorded would have to be reported in the federalbudget immediately. The recognition of these additional liabilitieswould make the deficit even worse. This is not what politicianswould like to see and be held resp

39、onsible for.(c) Dear Senator,It is my understanding, after having taken a beginning course infinancial accounting, that the Federal government uses a cash-basis system rather than an accrual-basis accounting system.I am shocked at such a practice! There must be billions of dollarsof liabilities hidd

40、en in many contracts that have not been recordedyet for the mere reason that they havent been paid yet. I realizethat the deficit would dramatically increase if we were to implementan accrual system, but in all fairness, we citizens should be given amore accurate picture of what our government is up

41、 to.Sincerely,CONCERNED STUDENT3-10EXERCISE 3-2(a)(b)Item.5.6.Type of AdjustmentAccrued RevenuesPrepaid ExpensesAccrued ExpensesUnearned RevenuesAccrued ExpensesPrepaid ExpensesAccounts before AdjustmentAssets UnderstatedRevenues UnderstatedAssets OverstatedExpenses UnderstatedExpenses Unders

42、tatedLiabilities UnderstatedLiabilities OverstatedRevenues UnderstatedExpenses UnderstatedLiabilities UnderstatedAssets OverstatedExpenses UnderstatedEXERCISE 3-31.Mar. 31Depreciation Expense ($300 X 3).900Accumulated DepreciationEquipment .900.31313131Unearned Rent.Rent Revenue ($12,000 X 1/

43、3).Interest Expense.Interest Payable .Supplies Expense.Supplies ($2,800 $1,100) .Insurance Expense ($200 X 3).Prepaid Insurance .4,0005001,7006004,0005001,7006003-11EXERCISE 3-41.2.3.Jan. 313131Accounts Receivable .Service Revenue.Utilities Expense .Utilities Payable.Depreciation Expense.87563040087

44、5630Accumulated DepreciationDental Equipment.40031Interest Expense .Interest Payable.5005004.5.3131Insurance Expense ($21,000 12).Prepaid Insurance .Supplies Expense ($1,600 $600).Supplies .1,7501,0001,7501,000EXERCISE 3-51.Oct. 31Advertising Supplies Expense .Advertising Supplies.1,6501,650($2,500

45、$850)2.3.3131Insurance Expense .Prepaid Insurance .Depreciation Expense.10050100Accumulated DepreciationOffice Equipment.504.5.3131Unearned Revenue.Service Revenue.Accounts Receivable .Service Revenue.6004506004503-12EXERCISE 3-5 (Continued)6.7.Oct. 3131Interest Expense.Interest Payable .Salaries Ex

46、pense.Salaries Payable .701,200701,200EXERCISE 3-6OLYMPIC CORP.Income StatementFor the Month Ended July 31, 2006RevenuesService revenue ($5,500 + $1,000).ExpensesWages expense ($2,300 + $300) .Supplies expense ($1,200 $300) .Utilities expense.Insurance expense.Depreciation expense.Total expenses .Ne

47、t income.EXERCISE 3-7$2,600900600400150$6,5004,650$1,850AnswerComputation(a) Supplies balance = $1,150Supplies expenseAdd: Supplies (1/31)Less: Supplies purchasedSupplies (1/1)$ 950)850)(650)$1,150)(b) Total premium = $4,800Purchase date = Aug. 1, 2005Total premium = Monthly premium X12; $400 X 12 =

48、 $4,800Purchase date: On Jan. 31, there are6 months coverage remaining ($400X 6). Thus, the purchase date was 6months earlier on Aug. 1, 2005.3-13EXERCISE 3-7 (Continued)(c) Salaries payable = $2,000(d) Unearned revenue = $1,150EXERCISE 3-8Cash paidSalaries payable (1/31/06)Less: Salaries expenseSal

49、aries payable (12/31/05)Service revenueUnearned service revenue(1/31/06)Cash received in JanuaryUnearned service revenue(12/31/05)$3,0008003,8001,800$2,000$2,0007502,7501,600$1,150(a) July 10141520(b) July 31313131Supplies .Cash.Cash.Service Revenue.Salaries Expense.Cash.Cash.Unearned Revenue.Suppli

50、es Expense .Supplies .Accounts Receivable .Service Revenue.Salaries Expense.Salaries Payable .Unearned Revenue.Service Revenue.3-142002,0001,2007508005001,2009002002,0001,2007508005001,200900EXERCISE 3-9Aug. 313131313131Accounts Receivable .Service Revenue .Office Supplies Expense.Office Supplies.In

51、surance Expense.Prepaid Insurance.Depreciation Expense .Accumulated DepreciationOfficeEquipment .Salaries Expense .Salaries Payable .Unearned Rent .Rent Revenue.6001,6001,5001,3001,1009006001,6001,5001,3001,100900EXERCISE 3-10VILLA COMPANYIncome StatementFor the Year Ended August 31, 2006RevenuesSer

52、vice revenue .Rent revenue .Total revenues.ExpensesSalaries expense.Rent expense.Office supplies expense.Insurance expense.Depreciation expense.Total expenses .Net income.3-15$18,10015,0001,6001,5001,300$34,60011,90046,50037,500$ 9,000EXERCISE 3-10 (Continued)VILLA COMPANYRetained Earnings Statement

53、For the Year Ended August 31, 2006Retained earnings, September 1, 2005.Add: Net income .Retained earnings, August 31, 2006.VILLA COMPANYBalance SheetAugust 31, 2006Assets$ 5,6009,000$14,600Cash .Accounts receivable.Office supplies .Prepaid insurance .Office equipment .$14,000$10,4009,4007002,500Less

54、: Accum. depreciationoffice equipment .Total assets .Liabilities and Stockholders EquityLiabilities4,9009,100$32,100Accounts payable .Salaries payable.Unearned rent.Total liabilities .Stockholders equityCommon stock . $10,000Retained earnings. 14,600Total liabilities and stockholders equity .EXERCIS

55、E 3-11$ 5,8001,1006007,50024,600$32,100(a) 1.2.Cash .Fees Receivable .Unearned Fees .Fees Revenues.3-169,00020,0009,00020,000EXERCISE 3-11 (Continued)3.(i)Cash.35,000Unearned Fees.(ii) Unearned Fees .($35,000 $17,000)Fees Revenue .18,00035,00018,0004.5.Fees Receivable .Fees Revenue .($153,000 $20,00

56、0 $18,000)Cash .Fees Receivable .115,000103,000115,000103,000($115,000 $12,000)(b) Cash received with respect to fees = $9,000 + $103,000 + $35,000= $147,000*EXERCISE 3-12(a) Jan. 21015Insurance Expense.Cash .Supplies Expense.Cash .Cash.Service Revenue.2,4001,7006,1002,4001,7006,100Insurance Expense

57、Supplies Expense1/22,400Cash1/101,700Service Revenue1/156,100 1/22,4001/156,1001/101,7003-17*EXERCISE 3-12 (Continued)(b) Jan. 313131Prepaid Insurance ($200 X 11 months) .Insurance Expense.Supplies .Supplies Expense.Service Revenue .Unearned Revenue.2,2008004,6002,2008004,600Insurance Expense1/2 2,4

58、00 1/31 2,200Bal. 200Prepaid InsuranceSupplies Expense1/10 1,700 1/31 800Bal. 900SuppliesService Revenue1/31 4,600 1/15 6,100Bal. 1,500Unearned Revenue1/31 2,2001/318001/31 4,600(c) Insurance expense .Supplies expense .Service revenue .Prepaid insurance.Supplies .Unearned revenue .3-18$ 2009001,5002

59、,2008004,600SOLUTIONS TO PROBLEMSPROBLEM 3-1A(a)J4DateAccount Titles and ExplanationRef.DebitCredit2006May 313131Supplies ExpenseSuppliesTravel ExpenseTravel PayableInsurance ExpensePrepaid Insurance560130550210540120500200100500200100($2,400 24 months)31Unearned Service RevenueService Revenue230400

60、2,0002,000($3,000 $1,000)31Salaries ExpenseSalaries Payable510220600600(3/5 X $500) X 2 employees31Depreciation Expense530200Accumulated DepreciationOffice Furniture20031Accounts ReceivableService Revenue1104001,0001,000(b)CashNo. 101DateExplanationRef.DebitCreditBalance2006May 31Balance3-197,700PRO