Accounting 25th Edition Solution
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Complete Answer (Next Page)
CHAPTER 3
THE ADJUSTING PROCESS
3-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. a. Under cash-basis accounting, revenues are reported in the period in which cash is received and
expenses are reported in the period in which cash is paid.
b. Under accrual-basis accounting, revenues are reported in the period in which they are earned and
expenses are reported in the same period as the revenues to which they relate.
2. The matching concept is related to the accrual basis of accounting.
3. Adjusting entries are necessary at the end of an accounting period to bring the ledger up to date.
4. Adjusting entries bring the ledger up to date as a normal part of the accounting cycle. Correcting
entries correct errors in the ledger.
5. Four different categories of adjusting entries include prepaid expenses (deferred expenses), unearned
revenues (deferred revenues), accrued expenses (accrued liabilities), and accrued revenues (accrued
assets).
6. Statement (a): Increases the balance of a revenue account.
7. Statement (b): Increases the balance of an expense account.
8. Yes, because every adjusting entry affects expenses or revenues.
9. a. The rights acquired represent an asset.
b. The justification for debiting Rent Expense is that when the ledger is summarized in a trial
balance at the end of the month and statements are prepared, the rent will have become an
expense. Hence, no adjusting entry will be necessary.
10. a. The portion of the cost of a fixed asset deducted from revenue of the period is debited to
Depreciation Expense. It is the expired cost for the period. The reduction in the fixed asset
account is recorded by a credit to Accumulated Depreciation rather than to the fixed asset
account. The use of the contra asset account facilitates the presentation of original cost and
accumulated depreciation on the balance sheet.
b. Depreciation Expense—debit balance; Accumulated Depreciation—credit balance.
c. No, it is not customary for the balances of the two accounts to be equal in amount.
d. Depreciation Expense appears on the income statement; Accumulated Depreciation appears on
the balance sheet.
3-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 3 The Adjusting Process
PRACTICE EXERCISES
PE 3–1A
a. Yes c. No e. Yes
b. No d. Yes f. Yes
PE 3–1B
a. No c. Yes e. No
b. No d. No f. Yes
PE 3–2A
a. Unearned revenue c. Accrued revenue
b. Prepaid expense d. Accrued expense
PE 3–2B
a. Unearned revenue c. Accrued expense
b. Accrued revenue d. Prepaid expense
PE 3–3A
Supplies Expense 4,250
Supplies 4,250
Supplies used ($1,975 + $4,125 – $1,850).
PE 3–3B
Insurance Expense 15,140
Prepaid Insurance 15,140
Insurance expired ($9,600 + $12,900 – $7,360).
PE 3–4A
Unearned Fees 44,825
Fees Earned 44,825
Fees earned ($78,500 – $33,675).
PE 3–4B
Unearned Rent 11,025
Rent Revenue 11,025
Rent earned [($18,900 ÷ 12 months) × 7 months].
3-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 3 The Adjusting Process
PE 3–5A
Accounts Receivable 12,840
Fees Earned 12,840
Accrued fees.
PE 3–5B
Accounts Receivable 17,555
Fees Earned 17,555
Accrued fees.
PE 3–6A
Salaries Expense 9,750
Salaries Payable 9,750
Accrued salaries [($16,250 ÷ 5 days) × 3 days].
PE 3–6B
Salaries Expense 23,000
Salaries Payable 23,000
Accrued salaries [($27,600 ÷ 6 days) × 5 days].
PE 3–7A
Depreciation Expense 9,100
Accumulated Depreciation—Equipment 9,100
Depreciation on equipment.
PE 3–7B
Depreciation Expense 7,700
Accumulated Depreciation—Equipment 7,700
Depreciation on equipment.
3-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
(Download complete and 100% accurate work written as per requirements)
Topic: _________________
Student Name: __________
Course Title: ____________
Instructor: ______________
Date of submission: _______
For any problem feel free to message me on “Stuvia”
Complete Answer (Next Page)
CHAPTER 3
THE ADJUSTING PROCESS
3-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. a. Under cash-basis accounting, revenues are reported in the period in which cash is received and
expenses are reported in the period in which cash is paid.
b. Under accrual-basis accounting, revenues are reported in the period in which they are earned and
expenses are reported in the same period as the revenues to which they relate.
2. The matching concept is related to the accrual basis of accounting.
3. Adjusting entries are necessary at the end of an accounting period to bring the ledger up to date.
4. Adjusting entries bring the ledger up to date as a normal part of the accounting cycle. Correcting
entries correct errors in the ledger.
5. Four different categories of adjusting entries include prepaid expenses (deferred expenses), unearned
revenues (deferred revenues), accrued expenses (accrued liabilities), and accrued revenues (accrued
assets).
6. Statement (a): Increases the balance of a revenue account.
7. Statement (b): Increases the balance of an expense account.
8. Yes, because every adjusting entry affects expenses or revenues.
9. a. The rights acquired represent an asset.
b. The justification for debiting Rent Expense is that when the ledger is summarized in a trial
balance at the end of the month and statements are prepared, the rent will have become an
expense. Hence, no adjusting entry will be necessary.
10. a. The portion of the cost of a fixed asset deducted from revenue of the period is debited to
Depreciation Expense. It is the expired cost for the period. The reduction in the fixed asset
account is recorded by a credit to Accumulated Depreciation rather than to the fixed asset
account. The use of the contra asset account facilitates the presentation of original cost and
accumulated depreciation on the balance sheet.
b. Depreciation Expense—debit balance; Accumulated Depreciation—credit balance.
c. No, it is not customary for the balances of the two accounts to be equal in amount.
d. Depreciation Expense appears on the income statement; Accumulated Depreciation appears on
the balance sheet.
3-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 3 The Adjusting Process
PRACTICE EXERCISES
PE 3–1A
a. Yes c. No e. Yes
b. No d. Yes f. Yes
PE 3–1B
a. No c. Yes e. No
b. No d. No f. Yes
PE 3–2A
a. Unearned revenue c. Accrued revenue
b. Prepaid expense d. Accrued expense
PE 3–2B
a. Unearned revenue c. Accrued expense
b. Accrued revenue d. Prepaid expense
PE 3–3A
Supplies Expense 4,250
Supplies 4,250
Supplies used ($1,975 + $4,125 – $1,850).
PE 3–3B
Insurance Expense 15,140
Prepaid Insurance 15,140
Insurance expired ($9,600 + $12,900 – $7,360).
PE 3–4A
Unearned Fees 44,825
Fees Earned 44,825
Fees earned ($78,500 – $33,675).
PE 3–4B
Unearned Rent 11,025
Rent Revenue 11,025
Rent earned [($18,900 ÷ 12 months) × 7 months].
3-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 3 The Adjusting Process
PE 3–5A
Accounts Receivable 12,840
Fees Earned 12,840
Accrued fees.
PE 3–5B
Accounts Receivable 17,555
Fees Earned 17,555
Accrued fees.
PE 3–6A
Salaries Expense 9,750
Salaries Payable 9,750
Accrued salaries [($16,250 ÷ 5 days) × 3 days].
PE 3–6B
Salaries Expense 23,000
Salaries Payable 23,000
Accrued salaries [($27,600 ÷ 6 days) × 5 days].
PE 3–7A
Depreciation Expense 9,100
Accumulated Depreciation—Equipment 9,100
Depreciation on equipment.
PE 3–7B
Depreciation Expense 7,700
Accumulated Depreciation—Equipment 7,700
Depreciation on equipment.
3-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
