Demonstration Problems Chapter 3 Problem #1: Solution A GENERAL JOURNAL J1 Date Account Title Debit Credit Oct. 31 Insurance Expense 3,600 Prepaid Expense 3,600 300 12 = $3,600 31 Supplies Expense 3,000 Supplies 3,000 $3,900 900 = $3,000 31 Depreciation Expense Cottages 7,500 Accumulated Depreciation Cottages 7,500 $150,000 20 = $7,500 31 Depreciation Expense Furniture 3,000 Accumulated Depreciation Furniture 3,000 $30,000 10 = $3,000 31 Unearned Rent Revenue 6,000 Rent Revenue 6,000 31 Salaries Expense 600 Salaries Payable 600 31 Utilities Expense 400 Accounts Payable 400 31 Accounts Receivable 1,200 Rent Revenue 1,200 31 Interest Expense 2,700 Interest Payable 2,700 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 1/8
($90,000 6%) 6/12 months = $2,700 B Cash Oct. 1 Balance 31,400 Accounts Receivable Oct. 1 1,200 1,200 Prepaid Insurance Oct. 31 Balance 4,800 31 J1 3,600 1,200 Supplies Oct. 31 Balance 3,900 31 J1 3,000 900 Land Oct. 31 Balance 45,500 Cottages Oct. 3 1 Balance 150,000 Accumulated Depreciation Cottages Oct. 31 Balance 3,750 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 2/8
31 J1 7,500 11,250 Furniture Oct. 31 Balance 30,000 Accumulated Depreciation Furniture Oct. 31 Balance 1,500 31 J1 3,000 4,500 Unearned Rent Revenue Oct. 31 Balance 7,500 31 J1 6,000 1,500 Salaries Payable Oct. 31 J1 600 600 Interest Payable Oct. 31 J1 2,700 2,700 Mortgage Payable Oct. 31 Balance 90,000 Larry Waterman, Capital Oct. 31 Balance 139,750 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 3/8
Larry Waterman, Drawings Oct. 31 Balance 6,000 Rent Revenue Oct. 31 Balance 120,000 31 J1 6,000 126,000 31 J1 1,200 127,200 Depreciation Expense Cottages Oct. 31 J1 7,500 7,500 Depreciation Expense Furniture Oct. 31 J1 3,000 3,000 Insurance Expense Oct. 31 J1 3,600 3,600 Interest Expense Oct. 31 J1 2,700 2,700 Salaries Expense Oct. 31 Balance 85,000 31 J1 600 85,600 Repair Expense https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 4/8
Oct. 31 Balance 1,900 Supplies Expense Oct. 31 J1 3,000 3,000 Utilities Expense Oct. 31 Balance 9,700 31 J1 400 10,100 C MENESET ON THE LAKE Adjusted Trial Balance October 31, 2014 Debit Credit Cash $31,400 Accounts receivable 1,200 Prepaid insurance ($4,800 $3,600) 1,200 Supplies ($3,900 $3,000) 900 Land 45,000 Cottages 150,000 Accumulated depreciation cottages ($3,750 + $7,500) $11,250 Furniture 30,000 Accumulated depreciation furniture ($1,500 + $3,000) 4,500 Accounts payable ($5,200 + $400) 5,600 Unearned rent revenue ($7,500 $6,000) 1,500 Salaries payable 600 Interest payable 2,700 Mortgage payable 90,000 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 5/8
LWaterman, capital 139,750 LWaterman, drawings 6,000 Rent revenue ($120,000 + $6,000 + $1,200) 127,200 Depreciation expense cottages 7,500 Depreciation expense furniture 3,000 Insurance expense 3,600 Interest expense 2,700 Repair expense 1,900 Salaries expense ($85,000 + $600) 85,600 Supplies expense 3,000 Utilities expense ($9,700 + $400) 10,100 $383,100 $383,100 D MENESET ON THE LAKE Income Statement Year Ended October 31, 2014 Revenues Rent revenue $127,200 Expenses Depreciation expense cottages $ 7,500 Depreciation expense furniture 3,000 Interest expense 2,700 Insurance expense 3,600 Repair expense 1,900 Salaries expense 85,600 Supplies expense 3,000 Utilities expense 10,100 Total expense 117,400 Profit $ 9,800 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 6/8
MENESET ON THE LAKE Statement of Owner s Equity Year Ended October 31, 2014 L Waterman, Capital, October 31, 2013 $ 119,750* Add: Investment $ 20,000 Profit 9,800 29,800 149,550 Less: Drawings 6,000 L Waterman, Capital, October 31, 2014 $143,550 * $139,750 $20,000 = $119,750 MENESET ON THE LAKE Balance Sheet October 31, 2014 Assets Cash $31,400 Accounts receivable 1,200 Prepaid insurance 1,200 Supplies 900 Land 45,000 Cottages $150,000 Less: Accumulated depreciation cottages 11,250 138,750 Furniture 30,000 Less: Accumulated depreciation furniture 4,500 25,500 Total assets $243,950 Liabilities and Owner s Equity Liabilities Accounts payable $ 5,600 Salaries payable 600 Interest payable 2,700 https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 7/8
Unearned rent revenue 1,500 Mortgage payable 90,000 Total liabilities 100,400 Owner s equity L Waterman, Capital 143,550 Total liabilities and owner s equity $243,950 Back https://edugen.wileyplus.com/edugen/courses/crs7780/simulations/multimedia_resources/demonstration_problems/ch03/ch3-1sol.html 8/8