Solutions Manual Financial and Managerial Accounting, 2nd Edition Weygandt Kimmel Kieso

67 Pages·2017·0.81 MB·English

Solutions Manual Financial and Managerial Accounting, 2nd Edition
Weygandt Kimmel Kieso
Completed Instant download SOLUTIONS MANUAL for Financial and
Managerial Accounting, 2nd Edition by Jerry J. Weygandt , Paul D. Kimmel ,
Donald E. Kieso
Solutions Manual, Answer key, Instructor's Resource Manual,Problems
Set,Exercises,... for all chapters are included
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CHAPTER 3 Adjusting the Accounts

ASSIGNMENT CLASSIFICATION TABLE

Brief A
Learning Objectives Questions Exercises Do It! Exercises Problems

*1. Explain the accrual basis of 1, 2, 3, 4, 5, 6, 1, 2, 8 1 1, 2, 3, 4, 6, 10,
accounting and the reasons 7, 8, 18 11
for adjusting entries.

*2. Prepare adjusting entries for 8, 9, 10, 11, 12, 2, 3, 4, 5, 6,8 2 4, 5, 6, 7, 8, 9, 1A, 2A, 3A,
deferrals. 13, 18, 19, 20, 10, 11, 12, 13, 4A, 5A, 6A
23 15

*3. Prepare adjusting entries for 8, 14, 15, 16, 2, 7, 8 3 4, 5, 6, 7, 8, 9, 1A, 2A, 3A,
accruals. 17, 18, 19, 20 10, 11, 12, 13, 4A, 5A, 6A
15

*4. Describe the nature and 21 9, 10 4 10, 11, 12, 13, 1A, 2A, 3A,
purpose of an adjusted trial 14 5A, 6A
balance.

*5. Prepare adjusting 22 11 16, 17 6A
entries for the alternative
treatment of deferrals.

*6. Discuss financial reporting 23, 24, 25, 26, 12, 13, 14, 15 18, 19, 20, 21,
concepts. 27, 28 22

*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix to the chapter.

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-1
ASSIGNMENT CHARACTERISTICS TABLE

Problem Difficulty Time
Number Description Level Allotted (min.)

1A Prepare adjusting entries, post to ledger accounts, Simple 40–50
and prepare an adjusted trial balance.

2A Prepare adjusting entries, post, and prepare adjusted Simple 50–60
trial balance, and financial statements.

3A Prepare adjusting entries and financial statements. Moderate 40–50

4A Prepare adjusting entries. Moderate 30–40

5A Journalize transactions and follow through accounting Moderate 60–70
cycle to preparation of financial statements.

*6A* Prepare adjusting entries, adjusted trial balance, Moderate 40–50
and financial statements using appendix.

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-2
WEYGANDT FINANCIAL AND MANAGERIAL ACCOUNTING 2E

CHAPTER 3
ADJUSTING THE ACCOUNTS
Number LO BT Difficulty Time (min.)
BE1 1 C Simple 4–6
BE2 1–3 AN Moderate 6–8
BE3 2 AN Simple 3–5
BE4 2 AN Simple 3–5
BE5 2 AN Simple 2–4
BE6 2 AN Simple 2–4
BE7 3 AN Simple 4–6
BE8 1–3 AN Simple 5–7
BE9 4 AP Simple 4–6
BE10 4 AP Simple 2–4
BE11* 5 AN Moderate 3–5
BE12* 6 C Simple 3–5
BE13* 6 C Simple 2–4
BE14* 6 C Simple 2–4
BE15* 6 C Simple 1–2
DI1 1 K Simple 2–4
DI2 2 AN Simple 6–8
DI3 3 AN Simple 4–6
DI4 4 AN Moderate 20–30
EX1 1 C Simple 3–5
EX2 1 E Moderate 10–15
EX3 1 AP Simple 6–8
EX4 1–3 AN Simple 5–6
EX5 2, 3 AN Moderate 10–15
EX6 1–3 AN Moderate 10–12
EX7 2, 3 AN Moderate 8–10
EX8 2, 3 AN Moderate 8–10
EX9 2, 3 AN Simple 8–10
EX10 1–4 AN Moderate 8–10
EX11 1–4 AN Moderate 12–15
EX12 2–4 AN Moderate 8–10
EX13 2–4 AN Simple 8–10
EX14 4 AP Simple 12–15

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-3
ADJUSTING THE ACCOUNTS (Continued)

Number LO BT Difficulty Time (min.)
EX15 2, 3 AN, S Moderate 8–10
EX16* 5 AN Moderate 6–8
EX17* 5 AN Moderate 10–12
EX18* 6 C Simple 3–5
EX19* 6 C Simple 3–5
EX20* 6 C Simple 6–8
EX21* 6 AN Simple 10–20
EX22* 6 AN Simple 10–20
P1A 2–4 AN Simple 40–50
P2A 2–4 AN Simple 50–60
P3A 2–4 AN Moderate 40–50
P4A 2, 3 AN Moderate 30–40
P5A 2–4 AN Moderate 60–70
P6A 2–5 AN Moderate 40–50
BYP1 2, 3, 4 AN Simple 10–15
BYP2 — AN Simple 10–15
BYP3 — AN Simple 10–15
BYP4 — AN Simple 10–15
BYP5 — AN Moderate 15–20
BYP6 1–4 S Moderate 15–20
BYP7 1–4 C Simple 10–15
BYP8 1–4 E Moderate 10–15
BYP9 — E Moderate 10–15
BYP10 — E Moderate 10–15
BYP11 — K Simple 10–15

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-4
C B
o Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
p L
y
rig O
h
t © Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation O
2 M
0
1 *1. Explain the accrual basis of accounting and the DI3-1 Q3-1 Q3-7 Q3-5 Q3-18 E3-4 E3-10
5 Jo reasons for adjusting entries. Q3-2 Q3-8 E3-3 BE3-2 E3-6 E3-11 ’S
hn W Q3-3 BE3-1 BE3-8 T
iley & QQ33--46 E3-1 AX
S *2. Prepare adjusting entries for deferrals. Q3-8 Q3-18 E3-7 P3-3A E3-15 O
o
ns, In QQ33--91 0 BBEE33--23 EE33--89 PP33--45AA NO
c
. W Q3-11 BE3-4 E3-10 P3-6A M
ey Q3-12 BE3-5 E3-11 Y
g Q3-13 BE3-6 E3-12
and Q3-19 BE3-8 E3-13 T
Ft, Q3-20 DI3-2 E3-15 A
in B
a E3-5 P3-1A
ncial an *3. Prepare adjusting entries for accruals. Q3-8 Q3-17 EQ33--61 6 EP33--82 A P3-3A E3-15 LE
d
M Q3-14 Q3-18 E3-9 P3-4A
a
n Q3-15 BE3-2 E3-10 P3-5A
a
ge Q3-19 BE3-7 E3-11 P3-6A
ria Q3-20 BE3-8 E3-12
l Ac DI3-3 E3-13
c
ou E3-4 E3-15
n
tin E3-5 P3-1A
, 2g E3-6 P3-2A
/e E3-7
, S
o
lu *4. Describe the nature and purpose of an Q3-21 BE3-9 DI3-4 P3-1A
tio adjusted trial balance. BE3-10 E3-10 P3-2A
n
s M E3-14 E3-11 P3-3A
an E3-12 P3-5A
u
a E3-13 P3-6A
l (F *5. Prepare adjusting entries for the alternative Q3-22 BE3-11 E3-17
o
r In treatment of deferrals. E3-16 P3-6A
stru *6. Discuss financial reporting concepts Q3-23 BE3-12 E3-20 E3-21
c
to BE3-13 Q3-24 E3-22
r U BE3-14 Q3-25
se O BE3-15 Q3-26
nly E3-18 Q3-27
) E3-19 Q3-28
Broadening Your Perspective FASB Activity Communication Financial Reporting Decision Making All About You
Comparative Analysis Across the Ethics Case
Real-World Focus Organization Considering
3 p, p & p
-5
ANSWERS TO QUESTIONS

1. (a) Under the time period assumption, an accountant is required to determine the relevance of each
business transaction to specific accounting periods.
(b) An accounting time period of one year in length is referred to as a fiscal year. A fiscal year that
extends from January 1 to December 31 is referred to as a calendar year. Accounting periods of less
than one year are called interim periods.

2. The two generally accepted accounting principles that relate to adjusting the accounts are:
The revenue recognition principle, which states that revenue should be recognized in the accounting period in
which services are performed.
The expense recognition principle, which states that efforts (expenses) be matched with accomplishments
(revenues).

3. The law firm should recognize the revenue in April. The revenue recognition principle states that revenue
should be recognized in the accounting period in which services are performed.

4. Information presented on an accrual basis is more useful than on a cash basis because it reveals
relationships that are likely to be important in predicting future results. To illustrate, under accrual
accounting, revenues are recognized when the performance obligation is satisfied so they can be related to
the economic environment in which they occur. Trends in revenues are thus more meaningful.

5. Expenses of $4,500 should be deducted from the revenues in April. Under the expense recognition
principle efforts (expenses) should be matched with accomplishments (revenues).

6. No, adjusting entries are required by the revenue recognition and expense recognition principles.

7. A trial balance may not contain up-to-date information for financial statements because:
(1) Some events are not journalized daily because it is not efficient to do so.
(2) The expiration of some costs occurs with the passage of time rather than as a result of daily
transactions.
(3) Some items may be unrecorded because the transaction data are not yet known.

8. The two categories of adjusting entries are deferrals and accruals. Deferrals consist of prepaid expenses
and unearned revenues. Accruals consist of accrued revenues and accrued expenses.

9. In the adjusting entry for a prepaid expense, an expense is debited and an asset is credited.

10. No. Depreciation is the process of allocating the cost of an asset to expense over its useful life in a rational
and systematic manner. Depreciation results in the presentation of the book value of the asset, not its fair
value.

11. Depreciation expense is an expense account whose normal balance is a debit. This account shows the cost
that has expired during the current accounting period. Accumulated depreciation is a contra asset account
whose normal balance is a credit. The balance in this account is the depreciation that has been recognized
from the date of acquisition to the balance sheet date.

12. Equipment .............................................................................................................. $18,000
Less: Accumulated Depreciation—Equipment .................................................... 6,000 $12,000

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-6
Questions Chapter 3 (Continued)

*13. In the adjusting entry for an unearned revenue, a liability is debited and a revenue is credited.

*14. Asset and revenue. An asset would be debited and a revenue would be credited.

*15. An expense is debited and a liability is credited in the adjusting entry.

*16. Net income was understated $200 because prior to adjustment, revenues are understated by $900 and
expenses are understated by $700. The difference in this case is $200 ($900 – $700).
*17. The entry is:
Jan. 9 Salaries and Wages Payable ..................................................................... 2,000
Salaries and Wages Expense ..................................................................... 3,000
Cash .................................................................................................. 5,000
*18. (a) Accrued revenues. (d) Accrued expenses or prepaid expenses.
(b) Unearned revenues. (e) Prepaid expenses.
(c) Accrued expenses. (f) Accrued revenues or unearned revenues.

*19. (a) Salaries and Wages Payable. (d) Supplies Expense.
(b) Accumulated Depreciation. (e) Service Revenue.
(c) Interest Expense. (f) Service Revenue.

*20. Disagree. An adjusting entry affects only one balance sheet account and one income statement
account.

*21. Financial statements can be prepared from an adjusted trial balance because the balances of all accounts
have been adjusted to show the effects of all financial events that have occurred during the accounting
period.

*22. For Supplies Expense (prepaid expense): expenses are overstated and assets are understated. The adjusting
entry is:
Assets (Supplies) .................................................................................................... XX
Expenses (Supplies Expense) .......................................................................... XX
For Rent Revenue (unearned revenues): revenues are overstated and liabilities are understated. The
adjusting entry is:
Revenues (Rent Revenue) ...................................................................................... XX
Liabilities (Unearned Rent Revenue) .............................................................. XX

**23. (a) The primary objective of financial reporting is to provide financial information that is useful to
investors and creditors for making decisions about providing capital.
(b) The fundamental qualitative characteristics are relevance and faithful representation. The enhancing
qualities are comparabiIity, consistency, verifiability, timeliness, and understandability.
*24. Gross is correct. Consistency means using the same accounting principles and accounting methods from
period to period within a company. Without consistency in the application of accounting principles, it is
difficult to determine whether a company is better off, worse off, or the same from period to period.

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-7
Questions Chapter 3 (Continued)

*25. Comparability results when different companies use the same accounting principles. Consistency means
using the same accounting principles and methods from year to year within the same company.

*26. The constraint is the cost constraint. The cost constraint allows accounting standard setters to weigh the
cost that companies will incur to provide information against the benefit that financial statement users will
gain from having the information available.

*27. Accounting relies primarily on two measurement principles. Fair value is sometimes used when market
price information is readily available. However, in many situations reliable market price information is
not available. In these instances, accounting relies on cost as its basis.

*28. The economic entity assumption states that every economic entity can be separately identified and
accounted for. This assumption requires that the activities of the entity be kept separate and distinct from
(1) the activities of its owners (the shareholders) and (2) all other economic entities. A shareholder of a
company charging personal living costs as expenses of the company is an example of a violation of the
economic entity assumption.

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-8
SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

(a) Prepaid Insurance—to recognize insurance expired during the period.

(b) Depreciation Expense—to account for the depreciation that has occurred on the
asset during the period.

(c) Unearned Service Revenue—to record revenue recognized during the period
for services performed.

(d) Interest Payable—to recognize interest accrued but unpaid on notes
payable.

BRIEF EXERCISE 3-2

(a) (b)
Item Type of Adjustment Account Balances before Adjustment

1. Prepaid Expenses Assets Overstated
Expenses Understated

2. Accrued Revenues Assets Understated
Revenues Understated

3. Accrued Expenses Expenses Understated
Liabilities Understated

4. Unearned Revenues Liabilities Overstated
Revenues Understated

BRIEF EXERCISE 3-3

Dec. 31 Supplies Expense ............................................................ 4,200
Supplies ($6,700 – $2,500) ..................................... 4,200

Supplies Supplies Expense
6,700 12/31 4,200 12/31 4,200
12/31 Bal. 2,500

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-9
BRIEF EXERCISE 3-4

Dec. 31 Depreciation Expense .................................................... 4,000
Accumulated Depreciation—
Equipment .......................................................... 4,000

Depreciation Expense Accum. Depreciation—Equipment
12/31 4,000 12/31 4,000

Balance Sheet:
Equipment ..................................................................... $30,000
Less: Accumulated Depreciation—
Equipment ......................................................... 4,000 $26,000

BRIEF EXERCISE 3-5

July 1 Prepaid Insurance ..................................................... 14,400
Cash ................................................................... 14,400

Dec. 31 Insurance Expense [($14,400 ÷ 3) X 1/2] ................ 2,400
Prepaid Insurance ............................................ 2,400

Prepaid Insurance Insurance Expense
7/1 14,400 12/31 2,400 12/31 2,400
12/31 Bal. 12,000

BRIEF EXERCISE 3-6

July 1 Cash ............................................................................ 14,400
Unearned Service Revenue .............................. 14,400

Dec. 31 Unearned Service Revenue ...................................... 2,400
Service Revenue ................................................ 2,400

Unearned Service Revenue Service Revenue
12/31 2,400 7/1 14,400 12/31 2,400
12/31 Bal. 12,000

Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-10