Concept explainers
1.
Set up T-accounts for the general ledger accounts with the unadjusted balances.
1.
Explanation of Solution
T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.
Cash | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $60,000 | ||||
Table (1)
Accounts Receivable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (2)
Teaching Supplies | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $70,000 | ||||
Table (3)
Prepaid Insurance | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $19,000 | ||||
Table (4)
Prepaid Rent | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $3,800 | ||||
Table (5)
Professional Library | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $12,000 | ||||
Table (6)
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $2,500 | ||||
Table (7)
Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $40,000 | ||||
Table (8)
Accumulated Depreciation-Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $20,000 | ||||
Table (9)
Accounts Payable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $11,200 | ||||
Table (10)
Salaries Payable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (11)
Unearned Training Fees | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $28,600 | ||||
Table (12)
Person A, Capital | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $71,500 | ||||
Table (13)
Person A, Withdrawals | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $20,000 | ||||
Table (14)
Tuition Fees Earned | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $129,200 | ||||
Table (15)
Training Fees Earned | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $68,000 | ||||
Table (16)
Depreciation Expense-Professional Library | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (17)
Depreciation Expense-Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (18)
Salaries Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $44,200 | ||||
Table (19)
Insurance Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (20)
Rent Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $29,600 | ||||
Table (21)
Teaching Supplies Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
Table (22)
Advertising Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $19,000 | ||||
Table (23)
Utilities Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $13,400 | ||||
Table (24)
2.
Journalize the
2.
Explanation of Solution
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and
a.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Insurance Expense | 9,500 | ||
Prepaid Insurance | 9,500 | ||||
(To record expired insurance coverage) |
Table (25)
b.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Teaching Supplies Expense | 50,000 | ||
Teaching Supplies | 50,000 | ||||
(To record used teaching supplies) |
Table (26)
c.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | 5,000 | |||
Accumulated Depreciation–Equipment | 5,000 | ||||
(To record depreciation expense on equipment) |
Table (27)
d.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Depreciation Expense–Professional Library | 2,400 | ||
Accumulated Depreciation– Professional Library | 2,400 | ||||
(To record depreciation expense on professional library) |
Table (28)
e.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Unearned Training Fees | 28,600 | ||
Training Fees Earned | 28,600 | ||||
(To record portion of advance training fees received $2,500 per month for 2 months) |
Table (29)
f.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Accounts Receivable | 5,750 | ||
Tuition Fees Earned | 5,750 | ||||
(To record accrued tuition fee earned) |
Table (30)
g.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Salaries Expense | 450 | ||
Salaries Payable | 450 | ||||
(To record accrued salaries) |
Table (31)
h.
Date | Account Titles and Explanations | Post Ref. | Debit ($) | Credit ($) | |
December | 31 | Rent Expense | 3,800 | ||
Prepaid Rent | 3,800 | ||||
(To record rent paid) |
Table (32)
Insurance Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | 0 | ||||
December 31 | Prepaid insurance | 9,500 | ||||
December 31 | Balance | $9,500 |
Table (33)
Prepaid Insurance | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | 19,000 | December 31 | Insurance expense | 9,500 | |
December 31 | Balance | $9,500 |
Table (34)
Teaching Supplies Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
December 31 | Teaching supplies | 5,200 | ||||
December 31 | Balance | $5,200 |
Table (35)
Teaching Supplies | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $70,000 | December 31 | Teaching supplies expense | 50,000 | |
December 31 | Balance | $20,000 |
Table (36)
Depreciation Expense-Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
December 31 | Accumulated depreciation-equipment | 5,000 | ||||
December 31 | Balance | $13,200 |
Table (37)
Accumulated Depreciation-Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $20,000 | ||||
December 31 | Depreciation expense-equipment | 5,000 | ||||
December 31 | Balance | $25,000 |
Table (38)
Depreciation Expense-Professional Library | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
December 31 | Accumulated depreciation-Professional library | 2,400 | ||||
December 31 | Balance | $2,400 |
Table (39)
Accumulated Depreciation-Professional Library | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $2,500 | ||||
December 31 | Depreciation expense-professional library | 2,400 | ||||
December 31 | Balance | $4,900 |
Table (40)
Unearned Training Fees | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Training fees earned | 5,000 | December 31 | Balance | $12,500 | |
December 31 | Balance | $7,500 |
Table (41)
Training Fees Earned | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $68,000 | ||||
December 31 | Unearned training fees earned | 28,600 | ||||
December 31 | Balance | $96,600 |
Table (42)
Accounts Receivable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
December 31 | Tuition fees earned | 5,750 | ||||
December 31 | Balance | $5,750 |
Table (43)
Tuition Fees Earned | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $129,200 | ||||
December 31 | Accounts receivable | 5,750 | ||||
December 31 | Balance | $134,950 |
Table (44)
Salaries Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $44,200 | ||||
December 31 | Salaries payable | 450 | ||||
December 31 | Balance | $44,650 |
Table (45)
Salaries Payable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $0 | ||||
December 31 | Salaries expense | 450 | ||||
December 31 | Balance | $450 |
Table (46)
Rent Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $29,600 | ||||
December 31 | Prepaid rent | 3,800 | ||||
December 31 | Balance | $33,400 |
Table (47)
Prepaid Rent | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Balance | $3,800 | December 31 | Rent expense | 3,800 | |
December 31 | Balance | $0 |
Table (48)
3.
Prepare an adjusted
3.
Explanation of Solution
Adjusted trial balance:
Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.
A Institute | ||
Adjusted Trial Balance | ||
December 31 | ||
Account Titles | Debit ($) | Credit ($) |
Cash | 60,000 | |
Accounts receivable | 5,750 | |
Teaching supplies | 20,000 | |
Prepaid insurance | 9,500 | |
Prepaid rent | 0 | |
Professional library | 12,000 | |
Accumulated depreciation-Professional library | 4,900 | |
Equipment | 40,000 | |
Accumulated depreciation-Equipment | 25,000 | |
Accounts payable | 11,200 | |
Salaries payable | 450 | |
Unearned training fees | 0 | |
Person A, Capital | 71,500 | |
Person A, Withdrawals | 20,000 | |
Tuition fees earned | 134,950 | |
Training fees earned | 96,600 | |
Depreciation expense–Professional library | 2,400 | |
Depreciation expense–Equipment | 5,000 | |
Salaries expense | 44,650 | |
Insurance expense | 9,500 | |
Rent expense | 33,400 | |
Teaching supplies expense | 50,000 | |
Advertising expense | 19,000 | |
Utilities expense | 13,400 | |
Total | $344,600 | $344,600 |
Table (49)
4.
Prepare income statement, statement of owner’s equity and balance sheet of A Institute for the year ended December 31.
4.
Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
A Institute | ||
Income Statement | ||
For the Year Ended December 31 | ||
Revenues | ||
Tuition fees earned | $134,950 | |
Training fees earned | 96,600 | |
Total revenues | $231,550 | |
Expenses | ||
Depreciation expense–Professional library | 2,400 | |
Depreciation expense–Equipment | 5,000 | |
Salaries expense | 44,650 | |
Insurance expense | 9,500 | |
Rent expense | 33,400 | |
Teaching supplies expense | 50,000 | |
Advertising expense | 19,000 | |
Utilities expense | 13,400 | |
Total expenses | 177,350 | |
Net income | $54,200 |
Table (50)
Statement of owner’s equity for A Institute for the year ended December 31:
A Institute | |
Statement of Owner’s equity | |
Year Ended December 31 | |
Person A, Capital, Dec. 31 prior year end | $71,500 |
Add: Net income for the year | 54,200 |
125,700 | |
Less: Withdrawals | (20,000) |
Person A, Capital, Dec. 31 current year end | $105,700 |
Table (51)
Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.
Note: Refer to income statement for value and computation of net income.
The balance sheet of A Institute as of December 31:
A Institute | ||
Balance Sheet | ||
December 31 | ||
Assets | ||
Cash | $60,000 | |
Accounts receivable | 5,750 | |
Teaching supplies | 20,000 | |
Prepaid insurance | 9,500 | |
Professional library | $12,000 | |
Accumulated depreciation-Professional library | (4,900) | 7,100 |
Equipment | 40,000 | |
Accumulated depreciation-Equipment | (25,000) | 15,000 |
Total assets | $117,350 | |
Liabilities | ||
Accounts payable | $11,200 | |
Salaries payable | 450 | |
Unearned training fees | 11,650 | |
Total liabilities | 11,650 | |
Equity | ||
Person A, Capital | 105,700 | |
Total liabilities and equity | $117,350 |
Table (52)
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Chapter 3 Solutions
Principles of Financial Accounting.
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