Summary ACCT 211 Connect Homework Chapter 3 Exercises Liberty University answers complete solutions (latest 2022/2023) 1. a. Depreciation on the company’s equipment for 2016 is computed to be $18,000. b. The Prepaid Insurance account had a $6,000 debit balance at

ACCT 211 Connect Homework Chapter 3 Exercises Liberty University answers complete solutions (latest 2022/2023) 1. a. Depreciation on the company’s equipment for 2016 is computed to be $18,000. b. The Prepaid Insurance account had a $6,000 debit balance at December 31, 2016, before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,100 of unexpired insurance coverage remains. c. The Office Supplies account had a $700 debit balance on December 31, 2015; and $3,480 of office supplies were purchased during the year. The December 31, 2016, physical count showed $300 of supplies available. d. Two-thirds of the work related to $15,000 of cash received in advance was performed this period. e. The Prepaid Insurance account had a $6,800 debit balance at December 31, 2016, before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $5,800 of coverage had expired. f. Wage expenses of $3,200 have been incurred but are not paid as of December 31, 2016. Prepare adjusting journal entries for the year ended (date of) December 31, 2016, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities. Explanation: b. Prepaid insurance* = ($6,000 – $1,100) = $4,900 c. Office supplies** = ($700 $3,480 – $300) = $3,880 d. Fee revenue = ($15,000 × 2/3) = $10,000 Notes: Prepaid Insurance* Beg. Bal. 6,000 ? Used End. Bal. 1,100 Office Supplies** Beg. Bal. 700 Purch. 3,480 ? Used End. Bal. 300 2. a. One-third of the work related to $15,000 cash received in advance is performed this period. b. Wages of $8,000 are earned by workers but not paid as of December 31, 2016. c. Depreciation on the company’s equipment for 2016 is $18,000. d. The Office Supplies account had a $240 debit balance on December 31, 2015. During 2016, $5,200 of office supplies are purchased. A physical count of supplies at December 31, 2016, shows $440 of supplies available. e. The Prepaid Insurance account had a $4,000 balance on December 31, 2015. An analysis of insurance policies shows that $1,200 of unexpired insurance benefits remain at December 31, 2016. f. The company has earned (but not recorded) $1,050 of interest from investments in CDs for the year ended December 31, 2016. The interest revenue will be received on January 10, 2017. g. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31, 2016. The company must pay the interest on January 2, 2017. For each of the above separate cases, prepare adjusting entries required for financial statements for the year ended (date of) December 31, 2016. (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.) Explanation: a. Fee revenue = ($15,000 × 1/3) = $5,000 d. Office supplies* = ($240 $5,200 − $440) = $5,000 e. Prepaid insurance† = ($4,000 − $1,200) = $2,800 Notes: Prepaid Insurance† Beg. Bal. 4,000 ? Used End. Bal. 1,200 Office Supplies* Beg. Bal. 240 Purch. 5,200 ? Used End. Bal. 440 3. Following are two income statements for Alexis Co. for the year ended December 31. The left column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. ALEXIS CO. Income Statements For Year Ended December 31 Unadjusted Adjusted Revenues Fees earned $ 18,000 $ 25,000 Commissions earned 36,500 36,500 Total revenues $ 54,500 61,500 Expenses Depreciation expense—Computers 0 1,600 Depreciation expense—Office furniture 0 1,850 Salaries expense 13,500 15,750 Insurance expense 0 1,400 Rent expense 3,800 3,800 Office supplies expense 0 580 Advertising expense 2,500 2,500 Utilities expense 1,245 1,335 Total expenses 21,045 28,815 Net income $ 33,455 $ 32,685 ________________________________________ Analyze the statements and prepare the eight adjusting entries that likely were recorded. (Note: 30% of the $7,000 adjustment for Fees Earned has been earned but not billed, and the other 70% has been earned by performing services that were paid for in advance.) Explanation: Dec. 31 To record earned but unbilled fees. Fees earned = (30% × $7,000) = $2,100 Dec. 31 To record earned fees collected in advance. Fees earned = (70% × $7,000) = $4,900 4. The following is the adjusted trial balance of Wilson Trucking Company. Account Title Debit Credit Cash $ 8,000 Accounts receivable 17,500 Office supplies 3,000 Trucks 172,000 Accumulated depreciation—Trucks $ 36,000 Land 85,000 Accounts payable 12,000 Interest payable 4,000 Long-term notes payable 53,000 Common stock 20,000 Retained earnings 155,000 Dividends 20,000 Trucking fees earned 130,000 Depreciation expense—Trucks 23,500 Salaries expense 61,000 Office supplies expense 8,000 Repairs expense—Trucks 12,000 Totals $ 410,000 $ 410,000 ________________________________________ The Retained Earnings account balance is $155,000 at December 31, 2015. (1). Prepare the income statement for the year ended December 31, 2016. WILSON TRUCKING COMPANY Income Statement For Year Ended December 31, 2016 Revenues Trucking fees earned $130,000 Expenses Depreciation expense—Trucks $23,500 Salaries expense 61,000 Office supplies expense 8,000 Repairs expense—Trucks 12,000 Total expenses 104,500 Net income $25,500 (2). Prepare the statement of retained earnings for the year ended December 31, 2016. WILSON TRUCKING COMPANY Statement of Retained Earnings For Year Ended December 31, 2016 Retained earnings, December 31, 2015 $155,000 Add: Net income 25,500 180,500 Less: Dividends (20,000) Retained earnings, December 31, 2016 $160,500 5. Following are Nintendo’s revenue and expense accounts for a recent calendar year. Net sales ¥ 571,726 Cost of sales 408,506 Advertising expense 70,264 Other expense, net 156,786 ________________________________________ Prepare the company’s closing entries for its revenues and its expenses. 6. Following is the adjusted trial balance of Wilson Trucking Company Account Title Debit Credit Cash $ 8,000 Accounts receivable 17,500 Office supplies 3,000 Trucks 172,000 Accumulated depreciation—Trucks $ 36,000 Land 85,000 Accounts payable 12,000 Interest payable 4,000 Long-term notes payable 53,000 Common stock 20,000 Retained earnings 155,000 Dividends 20,000 Trucking fees earned 130,000 Depreciation expense—Trucks 23,500 Salaries expense 61,000 Office supplies expense 8,000 Repairs expense—Trucks 12,000 Totals $ 410,000 $ 410,000 ________________________________________ Use the above adjusted trial balance to prepare Wilson Trucking Company’s classified balance sheet as of December 31, 2016. WILSON TRUCKING COMPANY Balance Sheet December 31, 2016 Assets Current assets Cash $8,000 Accounts receivable 17,500 Office supplies 3,000 Total current assets $28,500 Plant assets Trucks $172,000 Accumulated depreciation—Trucks (36,000) 136,000 Land 85,000 Total plant assets 221,000 Total assets $249,500 Liabilities Current liabilities Accounts payable $12,000 Interest payable 4,000 Total current liabilities 16,000 Long-term liabilities Long-term notes payable 53,000 Total liabilities 69,000 Equity Common stock 20,000 Retained earnings 160,500 Total liabilities and equity $249,500 Explanation: Retained earnings is computed as: Beginning balance $ 155,000 Plus: Net income ($130,000 – $23,500 – $61,000– $8,000 – $12,000) 25,500 Less: Dividends (20,000 ) Ending balance $ 160,500 ________________________________________