Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-1 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 Download link: https://testbankreal.com/download/financial-managerial-accounting-2nd-edition- 2nd-edition-kindle-edition-solutions-manual-weygandt-kimmel-kieso/ CHAPTER 3 Adjusting the Accounts ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems *1. Explain the accrual basis of accounting and the reasons for adjusting entries. 1, 2, 3, 4, 5, 6, 7, 8, 18 1, 2, 8 1 1, 2, 3, 4, 6, 10, 11 *2. Prepare adjusting entries for deferrals. 8, 9, 10, 11, 12, 13, 18, 19, 20, 23 2, 3, 4, 5, 6,8 2 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15 1A, 2A, 3A, 4A, 5A, 6A *3. Prepare adjusting entries for accruals. 8, 14, 15, 16, 17, 18, 19, 20 2, 7, 8 3 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15 1A, 2A, 3A, 4A, 5A, 6A *4. Describe the nature and purpose of an adjusted trial balance. 21 9, 10 4 10, 11, 12, 13, 14 1A, 2A, 3A, 5A, 6A *5. Prepare adjusting entries for the alternative treatment of deferrals. 22 11 16, 17 6A *6. Discuss financial reporting concepts. 23, 24, 25, 26, 27, 28 12, 13, 14, 15 18, 19, 20, 21, 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) 3-2 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Prepare adjusting entries, post to ledger accounts, and prepare an adjusted trial balance. Simple 40–50 2A Prepare adjusting entries, post, and prepare adjusted trial balance, and financial statements. Simple 50–60 3A Prepare adjusting entries and financial statements. Moderate 40–50 4A Prepare adjusting entries. Moderate 30–40 5A Journalize transactions and follow through accounting cycle to preparation of financial statements. Moderate 60–70 *6A* Prepare adjusting entries, adjusted trial balance, and financial statements using appendix. Moderate 40–50 Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-3 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) 3-4 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 BLOOM’S TAXONOMY TABLE Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-5 Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation *1. Explain the accrual basis of accounting and the reasons for adjusting entries. DI3-1 Q3-1 Q3-2 Q3-3 Q3-4 Q3-6 Q3-7 Q3-8 BE3-1 E3-1 Q3-5 E3-3 Q3-18 BE3-2 BE3-8 E3-4 E3-6 E3-10 E3-11 *2. Prepare adjusting entries for deferrals. Q3-8 Q3-9 Q3-10 Q3-11 Q3-12 Q3-13 Q3-19 Q3-20 Q3-18 BE3-2 BE3-3 BE3-4 BE3-5 BE3-6 BE3-8 DI3-2 E3-5 E3-6 E3-7 E3-8 E3-9 E3-10 E3-11 E3-12 E3-13 E3-15 P3-1A P3-2A P3-3A P3-4A P3-5A P3-6A E3-15 *3. Prepare adjusting entries for accruals. Q3-8 Q3-14 Q3-15 Q3-19 Q3-20 Q3-17 Q3-16 Q3-18 BE3-2 BE3-7 BE3-8 DI3-3 E3-4 E3-5 E3-6 E3-7 E3-8 E3-9 E3-10 E3-11 E3-12 E3-13 E3-15 P3-1A P3-2A P3-3A P3-4A P3-5A P3-6A E3-15 *4. Describe the nature and purpose of an adjusted trial balance. Q3-21 BE3-9 BE3-10 E3-14 DI3-4 E3-10 E3-11 E3-12 E3-13 P3-1A P3-2A P3-3A P3-5A P3-6A *5. Prepare adjusting entries for the alternative treatment of deferrals. Q3-22 BE3-11 E3-16 E3-17 P3-6A *6. Discuss financial reporting concepts Q3-23 BE3-12 E3-20 BE3-13 Q3-24 BE3-14 Q3-25 BE3-15 Q3-26 E3-18 Q3-27 E3-19 Q3-28 E3-21 E3-22 Broadening Your Perspective FASB Activity Communication Financial Reporting Comparative Analysis Real-World Focus Decision Making Across the Organization All About You Ethics Case Considering p, p & p Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-6 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) 3-7 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) 3-8 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) 3-9 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 Item (a) Type of Adjustment (b) 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) 3-10 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) 3-11 BRIEF EXERCISE 3-7 1. Dec. 31Interest Expense............................................................ 400 Interest Payable............................................. 400 2. 31 Accounts Receivable.............................................. 1,900 Service Revenue ............................................ 1,900 3. 31 Salaries and Wages Expense ................................ 900 Salaries and Wages Payable ........................ 900 BRIEF EXERCISE 3-8 Account (a) Type of Adjustment (b) Related Account Accounts Receivable Accrued Revenues Service Revenue Prepaid Insurance Prepaid Expenses Insurance Expense Accum. Depr.—Equipment Prepaid Expenses Depreciation Expense Interest Payable Accrued Expenses Interest Expense Unearned Service Revenue Unearned Revenues Service Revenue BRIEF EXERCISE 3-9 PARSONS COMPANY Income Statement For the Year Ended December 31, 2017 Revenues Service revenue............................................................... $37,000 Expenses Salaries and wages expense ........................................... $16,000 Rent expense ................................................................... 4,000 Insurance expense .......................................................... 2,000 Supplies expense............................................................. 1,500 Depreciation expense ..................................................... 1,300 Total expenses ........................................................ 24,800 Net income ............................................................................... $12,200 Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-12 BRIEF EXERCISE 3-10 PARSONS COMPANY Retained Earnings Statement For the Year Ended December 31, 2017 Retained earnings, January 1...................................................................... $ 7,240 Add: Net income.......................................................................................... 12,200 19,440 Less: Dividends ............................................................................................ 7,000 Retained earnings, December 31................................................................. $12,440 *BRIEF EXERCISE 3-11 (a) Apr. 30 Supplies................................................................... 700 Supplies Expense........................................... 700 (b) 30 Service Revenue..................................................... 3,000 Unearned Service Revenue .......................... 3,000 BRIEF EXERCISE 3-12 (a) Predictive value. (b) Confirmatory value. (c) Materiality. (d) Complete. (e) Free from error. (f) Comparability. (g) Verifiability. (h) Timeliness. BRIEF EXERCISE 3-13 (a) Relevant. (b) Faithful representation. (c) Consistency. Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-13 BRIEF EXERCISE 3-14 (a) 1. Predictive value. (b) 2. Neutral. (c) 3. Verifiable. (d) 4. Timely. BRIEF EXERCISE 3-15 (c) Financial statements should disclose all events and circumstances that would matter to users of financial statements. Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-14 SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 3-1 1. (d) 2. (e) 3. (h) 4. (c) DO IT! 3-2 1. Insurance Expense .................................................................. 300 Prepaid Insurance ........................................................... 300 (To record insurance expired) 2. Supplies Expense ($2,500 – $1,100) ....................................... 1,400 Supplies............................................................................. 1,400 (To record supplies used) 3. Depreciation Expense.............................................................. 500 Accumulated Depreciation—Equipment...................... 500 (To record monthly depreciation) 4. Unearned Service Revenue ($9,000 x 2/5)............................. 3,600 Service Revenue............................................................... 3,600 (To record revenue for services provided) DO IT! 3-3 1. Salaries and Wages Expense .................................................. 1,300 Salaries and Wages Payable........................................... 1,300 (To record accrued salaries) 2. Interest Expense ($20,000 x .12 x 1/12) ................................. 200 Interest Payable ............................................................... 200 (To record accrued interest) 3. Accounts Receivable................................................................ 2,400 Service Revenue............................................................... 2,400 (To record revenue for service provided) Weygandt, Financial and Managerial Accounting, 2/e, Solutions Manual (For Instructor Use Only) 3-15 DO IT! 3-4 (a) The net income is determined by adding revenues and subtracting expenses. The net income is computed as follows: Revenues Service revenue .......................................................... $11,360 Rent revenue............................................................... 1,100 Total revenues ................................................... $12,460 Expenses Salaries and wages expense....................................... 7,400 Rent expense............................................................... 1,200 Depreciation expense................................................. 700 Utilities expense.......................................................... 410 Supplies expense ........................................................ 160 Interest expense.......................................................... 40 Total expenses.................................................... 9,910 Net income........................................................................... $ 2,550 (b) Total assets and liabilities are computed as follows: Assets Cash............................................................................. $ 5,360 Accounts receivable................................................... 480 Prepaid rent................................................................ 720 Supplies....................................................................... 920 Equipment .................................................................. $12,000 Less: Accumulated depreciation— Equipment....................................................... 700 11,300 Total assets......................................................... $18,780 Liabilities Notes payable ............................................................. $ 4,000 Accounts payable ....................................................... 790 Unearned rent revenue.............................................. 400 Salaries and wages payable....................................... 300 Interest payable.......................................................... 40 Total liabilities................................................... $ 5,530 (c) Retained Earnings, April 1................................................ $ –0– Add: Net income................................................................. 2,550 2,550 Less: Dividends................................................................... 500 Retained Earnings, June 30............................................... $2,050