Solution ECO

Comprehensive Problem

(a)General Journal J1

Date Account Titles and Explanation Ref. Debit CreditJuly 1 Cash...................................................... 101 14,000

Share Capital—Ordinary........... 311 14,000

1 Equipment............................................ 157 10,000Cash............................................ 101 3,000Accounts Payable...................... 201 7,000

3 Cleaning Supplies................................ 128 800Accounts Payable...................... 201 800

5 Prepaid Insurance................................ 130 1,800Cash............................................ 101 1,800

12 Accounts Receivable........................... 112 3,800Service Revenue........................ 400 3,800

18 Accounts Payable................................ 201 1,400Cash............................................ 101 1,400

20 Salaries Expense................................. 726 1,600Cash............................................ 101 1,600

21 Cash.....................................................................................................................

101 1,400

Accounts Receivable................ 112 1,400

25 Accounts Receivable........................... 112 1,500Service Revenue........................ 400 1,500

31 Gas & Oil Expense............................... 633 400Cash............................................ 101 400

31 Dividends............................................. 332 600Cash............................................ 101 600

Copyright © 2011 John Wiley & Sons, Inc. Weygandt, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 4-1

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(b) & (c) JULIE’S MAIDS CLEANING SERVICE INC.Worksheet

For the Month Ended July 31, 2011

Account Titles Trial Balance AdjustmentsAdjusted

Trial BalanceIncome

StatementStatement of

Financial Position

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

CashAccounts ReceivableCleaning SuppliesPrepaid InsuranceEquipmentAccounts PayableShare Capital—OrdinaryDividendsService RevenueGas & Oil ExpenseSalaries Expense

TotalDepreciation ExpenseAccum. Depr.—EquipmentInsurance ExpenseCleaning Supplies ExpenseSalaries Payable

TotalsNet Income

Totals

6,600 3,900 800 1,80010,000

600

400 1,60025,700

6,40014,000

5,300

25,700

(a) 1,300

(e) 500

(b) 200

(c) 150(d) 700

2,850

(d) 700(c) 150

(a) 1,300

(b) 200

(e) 5002,850

6,600 5,200 100 1,65010,000

600

400 2,100

200

150 700

27,700

6,40014,000

6,600

200

500 27,700

4002,100

200

150 700

3,5503,0506,600

6,600

6,600

6,600

6,600 5,200 100

1,65010,000

600

24,150

24,150

6,40014,000

200

500 21,100 3,05024,150

Key: (a) Service Revenue; (b) Depreciation Expense; (c) Insurance Expired; (d) Cleaning Supplies Used; (e) Unpaid Salaries.

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COMPREHENSIVE PROBLEM (Continued)

(a), (e) & (f)

Cash No. 101

Date Explanation Ref. Debit Credit BalanceJuly 1 J1 14,000 14,000

1 J1 3,000 11,0005 J1 1,800 9,200

18 J1 1,400 7,80020 J1 1,600 6,20021 J1 1,400 7,60031 J1 400 7,20031 J1 600 6,600

Accounts Receivable No. 112


21 J1 1,400 2,40025 J1 1,500 3,90031 Adjusting J2 1,300 5,200

Cleaning Supplies No. 128

Date Explanation Ref. Debit Credit BalanceJuly3 J1 800 800

31 Adjusting J2 700 100

Prepaid Insurance No. 130


31 Adjusting J2 150 1,650

Equipment No. 157



Accumulated Depreciation—Equipment No. 158

Date Explanation Ref. Debit Credit BalanceJuly 31 Adjusting J2 200 200

Accounts Payable No. 201


3 J1 800 7,80018 J1 1,400 6,400

Salaries Payable No. 212


Share Capital—Ordinary No. 311


Retained Earnings No. 320

Date Explanation Ref. Debit Credit BalanceJuly 31 Closing J3 3,050 3,050

31 Closing J3 600 2,450

Dividends No. 332

Date Explanation Ref. Debit Credit BalanceJuly 31 J1 600 600

31 Closing J3 600 0

Income Summary No. 350

Date Explanation Ref. Debit Credit BalanceJuly 31 Closing J3 6,600 6,600

31 Closing J3 3,550 3,05031 Closing J3 3,050 0


Service Revenue No. 400


25 J1 1,500 5,30031 Adjusting J2 1,300 6,60031 Closing J3 6,600 0

Gas & Oil Expense No. 633

Date Explanation Ref. Debit Credit BalanceJuly 31 J1 400 400

31 Closing J3 400 0

Cleaning Supplies Expense No. 634


31 Closing J3 700 0

Depreciation Expense No. 711


31 Closing J3 200 0

Insurance Expense No. 722


31 Closing J3 150 0

Salaries Expense No. 726


31 Adjusting J2 500 2,10031 Closing J3 2,100 0


(d) JULIE’S MAIDS CLEANING SERVICE INC.Income Statement


RevenuesService revenue............................................... $6,600

ExpensesSalaries expense.............................................. $2,100Cleaning supplies expense............................. 700Gas & oil expense............................................ 400Depreciation expense...................................... 200Insurance expense........................................... 150

Total expenses......................................... 3,550Net income............................................................... $3,050

JULIE’S MAIDS CLEANING SERVICE INC.Retained Earnings Statement


Retained earnings, July 1...................................................... $ 0Add: Net income.................................................................. 3,050

3,050Less: Dividends.................................................................... 600 Retained earnings, July 31................................................... $2,450


JULIE’S MAIDS CLEANING SERVICE INC.Statement of Financial Position

July 31, 2011

AssetsProperty, plant, and equipment

Equipment........................................................ $10,000Less: Accumulated depreciation................... 200 $ 9,800

Current assetsPrepaid insurance............................................ 1,650Cleaning supplies............................................ 100Accounts receivable........................................ 5,200Cash.................................................................. 6,600 13,550

Total assets.............................................................. $23,350

Equity and Liabilities Equity

Share capital—ordinary................................... $14,000Retained earnings............................................ 2,450 $16,450

Current liabilitiesAccounts payable............................................ 6,400Salaries payable............................................... 500 6,900

Total equity and liabilities....................................... $23,350


(e)General Journal J2

Date Account Titles and Explanation Ref. Debit CreditJuly 31 Accounts Receivable......................... 112 1,300

Service Revenue........................ 400 1,300

31 Depreciation Expense........................ 711 200Accumulated Depreciation— Equipment.............................. 158 200

31 Insurance Expense............................. 722 150Prepaid Insurance..................... 130 150

31 Cleaning Supplies Expense............... 634 700Cleaning Supplies..................... 128 700

31 Salaries Expense................................ 726 500Salaries Payable........................ 212 500

(f)General Journal J3

Date Account Titles and Explanation Ref. Debit CreditJuly 31 Service Revenue................................. 400 6,600

Income Summary....................... 350 6,600

31 Income Summary................................ 350 3,550Salaries Expense....................... 726 2,100Depreciation Expense............... 711 200Insurance Expense.................... 722 150Cleaning Supplies Expense...... 634 700Gas & Oil Expense..................... 633 400

31 Income Summary................................ 350 3,050Retained Earnings..................... 320 3,050

31 Retained Earnings.............................. 320 600Dividends................................... 332 600


(g) JULIE’S MAIDS CLEANING SERVICE INC.Post-Closing Trial Balance

July 31, 2011

Debit CreditCash...................................................................... $ 6,600Accounts Receivable.......................................... 5,200Cleaning Supplies............................................... 100Prepaid Insurance............................................... 1,650Equipment............................................................ 10,000Accumulated Depreciation—Equipment........... $ 200Accounts Payable................................................ 6,400Salaries Payable.................................................. 500Share Capital—Ordinary..................................... 14,000Retained Earnings............................................... 2,450

$23,550 $23,550

# Questions Ans Dept

1

Which of the following statements about users of accounting information is incorrect?A. Management is an internal user.B. Taxing authorities are external users.C. Present creditors are external users.D. Regulatory authorities are internal users.

D ECO

2

Debits:A. increase both assets and liabilities.B. decrease both assets and liabilities.C. increase assets and decrease liabilities.D. decrease assets and increase liabilities.

C ECO

3

One of the following statements about the accrual-basis of accounting is false. That statement is:A. Events that change a company's financial statements are recorded in the periods in which the events occur.B. To be recognized, revenue must be measurable.C. The accrual basis is in accord with IFRS.D. Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.

D ECO

4

In the unadjusted trial balance of its worksheet for the year ended December 31, 2011, Taitum Company reported Office Equipment of $120,000. The year-end adjusting entries require an adjustment of $15,000 for depreciation expense for the office equipment. After adjustment, the following adjusted amount should be reported:A. A debit of $105,000 for Office Equipment in the statement of financial position column.B. A credit of $15,000 for Depreciation Expense—Office Equipment in the income statement column.C. A debit of $120,000 for Office Equipment in the statement of financial position column.D. A debit of $15,000 for Accumulated Depreciation—Office Equipment in the statement of financial position column.

B ECO

5

The three types of business entities are:A. proprietorships, small businesses, and partnerships.B. proprietorships, partnerships, and corporations.C. proprietorships, partnerships, and large businesses.D. financial, manufacturing, and service companies.

B ECO

6

The expanded accounting equation is:A. Assets + Liabilities = Share Capital + Retained Earnings + Dividends + Revenues + ExpensesB. Assets = Liabilities + Share Capital + Retained Earnings + Dividends + Revenues - ExpensesC. Assets = Liabilities - Share Capital – Retained Earnings - Dividends - Revenues - ExpensesD. Assets = Liabilities + Share Capital + Retained Earnings - Dividends + Revenues – Expenses

D ECO

7 Each of the following is a major type (or category) of adjusting entries except:A. prepaid expenses.B. accrued revenues.

D ECO

C. accrued expenses.D. earned revenues.

8

The closing process involves separate entries to close (1) expenses, (2) dividends, (3) revenues, and (4) income summary. The correct sequencing of the entries is:A. (4), (3), (2), (1)B. (1), (2), (3), (4)C. (3), (1), (4), (2)D. (3), (2), (1), (4)

C ECO

9

As of December 31, 2011, Stoneland Company has assets of €3,500 and equity of €2,000. What are the liabilities for Stoneland Company as of December 31, 2011?A. €1,500.B. €1,000.C. €2,500.D. €2,000.

A ECO

10

The purchase of supplies on account should result in:A. a debit to Supplies Expense and a credit to Cash.B. a debit to Supplies Expense and a credit to Accounts Payable.C. a debit to Supplies and a credit to Accounts Payable.D. a debit to Supplies and a credit to Accounts Receivable.

C ECO

11

Accumulated Depreciation is:A. a contra-asset account.B. an expense account.C. an equity account.D. a liability account.

A ECO

12

The proper order of the following steps in the accounting cycle is:A. prepare unadjusted trial balance, journalize transactions, post to ledger accounts, journalize and post adjusting entries.B. journalize transactions, prepare unadjusted trial balance, post to ledger accounts, journalize and post adjusting entries.C. journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.D. prepare unadjusted trial balance, journalize and post adjusting entries, journalize transactions, post to ledger accounts.

C ECO

13

Payment of accounts payable affects the components of the accounting equation in the following way.A. Decreases equity and decreases liabilities.B. Increases assets and decreases liabilities.C. Decreases assets and increases equity.D. Decreases assets and decreases liabilities.

D ECO

14

Before posting a payment of €5,000 to a creditor, the Accounts Payable account of Senator Company has a normal balance of €16,000. The balance after posting the payment is:A. €21,000.B. €5,000.C. €11,000.D. Cannot be determined.

C ECO

15Adjustments for accrued revenues:A. have a liabilities and revenues account relationship.B. have an assets and revenues account relationship.C. decrease assets and revenues.

B ECO

D. decrease liabilities and increase revenues.

16

The correct order of presentation in a classified statement of financial position for the following current assets is:A. accounts receivable, cash, prepaid insurance, inventories.B. cash, inventories, accounts receivable, prepaid insurance.C. prepaid insurance, inventories, accounts receivable, cash,D. inventories, cash, accounts receivable, prepaid insurance.

C ECO

17

The financial statement that reports assets, liabilities, and equity is the:A. income statement.B. retained earnings statement.C. statement of financial position.D. statement of cash flow.

C ECO

18

The trial balance of Clooney Corporation had accounts with the following normal balances: Cash $5,000, Revenue $85,000, Salaries Payable $4,000, Salaries Expense $40,000, Rent Expense $10,000, Share Capital – Ordinary $42,000; Dividends $15,000; Equipment $61,000. In preparing a trial balance, the total in the debit column is:A. $131,000B. $216,000C. $91,000D. $116,000

A ECO

19

The trial balance shows Supplies $0 and Supplies Expense $1,500. If $800 of supplies are on hand at the end of the period, the adjusting entry is:A. Debit Supplies $800 and credit Supplies Expense $800.B. Debit Supplies Expense $800 and credit Supplies $800.C. Debit Supplies $700 and credit Supplies Expense $700.D. Debit Supplies Expense $700 and credit Supplies $700.

A ECO

20

Current assets are listed:A. by the reverse order of their expected conversion to cash.B. by importance.C. by longevity.D. alphabetically.

A ECO

Solution ECO

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