CHAPTER 3

Adjusting the Accounts

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 3-1

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

(b) <= /span>Depreciation Expense—to account for t= he depreciation that has occurred on the asset during the period.

(d) Interest Payable—to recognize interest accrued but unpaid on no= tes payable.

BRIEF EXER= CISE 3-2

&nbs= p; Item	(a) Type of Adjustment	(b) Account Balances before Adjustment

1.	Prepaid Expenses	Assets Overstated Expenses Understated
&nbs= p;
2.	Accrued Revenues	Assets Understated Revenues Understated
&nbs= p;
3.	Accrued Expenses	Expenses Understated Liabilities Understated
&nbs= p;
4.	Unearned Revenues	Liabilities Overstated Revenues Understated

BRIEF EXERCISE 3-3

Dec. 31 Advertisi= ng Supplies Expense....................= ....... 4,000

&= nbsp; &nbs= p; Advertising Supplies ($6,700 – $2,700)....= . &= nbsp; 4,= 000

Advertisi= ng Supplies	Advertisi= ng Supplies Expense
&nbs= p; 6,700	12/31 4,000	12/31 = ; 4,000	<= /p>
12/31 Bal. 2,700	<= /p>	<= /p>	<= /p>

BRIEF EXERCISE 3-4

Dec. 31 Depreciat= ion Expense—Equipment.............= ..... 5,000

&= nbsp; &nbs= p; Accumulated Depreciation—

&= nbsp; &nbs= p; Equipment..........................................= ......... &= nbsp; 5,= 000

Depr. Expense—Equipment		Accum. De= preciation—Equipment
12/31 = ; 5,000	<= /p>		<= /p>	12/31 = ; 5,000

Balance Sheet:

Equipment..........................................= .................... $30,0= 00

Less: Accumulated Depreciation..................... = ; 5,000 &n= bsp; $25,000

BRIEF EXERCISE 3-5

July 1 Prepaid Insurance...........................= ................. 18,000

&= nbsp; &nbs= p; Cash..........................................= ................... &= nbsp; &nbs= p; 18,000

Dec. 31 &= nbsp; Insurance Expense [($18,000 ÷ 3) X 1/2]= ...... 3,000

&= nbsp; &nbs= p; Prepaid Insurance...........................= ......... &= nbsp; &nbs= p; 3,000

Prepaid I= nsurance	Insurance= Expense
7/1 18= ,000	12/31 = ; 3,000	12/31 = ; 3,000	<= /p>
12/31 Bal. = ; 15,000	<= /p>	<= /p>	<= /p>

BRIEF EXERCISE 3-6

July 1 Cash..........................................= ........................... 18,000

&= nbsp; &nbs= p; Unearned Insurance Revenue............... &= nbsp; &nbs= p; 18,000

Dec. 31 &= nbsp; Unearned Insurance Revenue...................= .... 3,000

&= nbsp; &nbs= p; Insurance Revenue.............................= ..... &= nbsp; &nbs= p; 3,000

Unearned = Insurance Revenue	Insurance= Revenue
12/31 = ; 3,000	7/1 = ; 18,000	<= /p>	12/31 3,000
<= /p>	12/31 Bal. 15,000	<= /p>	<= /p>

BRIEF EXERCISE 3-7

1. Dec. 31 Interest Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= .. = 400

&= nbsp; &nbs= p; = Interest Payable.............................= ........ &= nbsp; &nbs= p; 400

2. &= nbsp; 31 Accounts Receivab= le.................................... 1,500

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; 1,= 500

3. &= nbsp; 31 Salaries Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= . = 900

&= nbsp; &nbs= p; = Salaries Payable.............................= ....... &= nbsp; &nbs= p; 900

BRIEF EXERCISE 3-8

Account	(a) Type of Adjustment	(b) Related Account

Accounts Receivable<= o:p>	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 Rev= enue	Unearned Revenues	Service Revenue=

BRIEF EXERCISE 3-9

HARMONY COM= PANY

Income Stat= ement

For the Yea= r Ended December 31, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Revenues

Service revenue.............................= ......................... &= nbsp; &nbs= p; $35,400

Expenses

Salaries expense.............................= ....................... $16,000

Rent expense.............................= .............................. Q= 94;4,000

Insurance expense.............................= ................... Q= 94;2,000

Supplies expense.............................= ...................... Q= 94;1,500

Depreciation expense.............................= .............. 1,300

&= nbsp; Total expenses............................= ................... &= nbsp; &nbs= p; 24,800

Net income..............................= ......................................... &= nbsp; &nbs= p; $10,600

BRIEF EXERCISE 3-10

HARMONY COM= PANY

Owner’= ;s Equity Statement

For the Yea= r Ended December 31, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Capital, January 1...........................= .................................................... $15,600

Add: Net income..........................................= ...................................... 10,600

= &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = 26,200

Less: Drawings..............................................................= .................... 6,000

Capital, December 31.........................= ................................................ $20,200<= /u>

*BRIEF EXERCISE 3-11

(a) Apr. 30 = Supplies..........................................= ......... 1,000

&= nbsp; &nbs= p; = Supplies Expense.............................= ..... &= nbsp; 1,= 000

(b) &= nbsp; 30 Service Revenue..........................................= .. 3,000

&= nbsp; &nbs= p; = Unearned Service Revenue................. &= nbsp; 3,= 000

SOLUTIONS TO EXERCISES

EXERCISE 3-1

1. True.

2. True.

3. False. Many business transactions affect more than one of these artificial time periods. For example, the purchase of a building aff= ects expenses for many years.

4. True.

5. False. A time period th= at lasts less than one year, such = as monthly or quarterly periods, is called an interim period.

6. False. All calendar years are fiscal years, but not all fiscal years are calendar years. An accounting time period that is one year in length is referred to as a fiscal year. A fiscal year that starts on January 1 and ends on December 31 is a calendar year.

EXERCISE 3-2

(a) Ac= crual-basis accounting records the transactions that change a company’s financial statements in the periods in which the events occur rather than in the periods in which the company receives or pays cas= h. Information presented on an accrual basis is useful because it reveals relationships that are likely to be important in predicting future results. Conversely, under cash-basis accounting, revenue is recorded only when cash= is received, and an expense is recognized only when cash is paid. As a result,= the cash basis of accounting often leads to misleading financial statements.

(b) <= /span>Politicians might desire a cash-basis accou= nting system over an accrual-basis sy= stem because if an accrual-accounting system is used, it could mean that billion= s in government liabilities presently unrecorded would have to be reporte= d in the federal budget immediately. The recognition of these additional liabili= ties would make the deficit even worse. This is not what politicians would like = to see and be held responsible for.

&= nbsp; It is my understanding, after having taken a beginning course in accounting principles, that the Federal government uses a cash-basis system rather than an accrual-basis accounting system.

&= nbsp; I am shocked at such a practice! There must be billions of dollars of liabili= ties hidden in many contracts that have not been recorded yet for the mere reason that they haven’t been paid yet. I realize that the deficit would dramatically increase if we were to implement an accrual system, but in all fairness, we citizens sho= uld be given a more accurate picture of what our government is up to.

= ; Sincerely,

= ; CONCERNED STUDENT

EXERCISE 3-3

(a) Cash received from revenue.............................= .............. &= nbsp; $100,000

&= nbsp; Cash paid for expenses...................= ................................ &= nbsp; (70,000)

&= nbsp; Cash-bas= is net income..........................= ................. &= nbsp; $ 30,000

(b) Revenues [($100,0= 00 – $25,000) + $40,000].........= ......... &= nbsp; $115,000

&= nbsp; Expenses [($70,000 – $30,000) + $42,000].................... &= nbsp; (82,000)

&= nbsp; Accrual-= basis net income..........................= ............. &= nbsp; $ 33,000

EXERCISE 3-4

= 1.&n= bsp; Unearned revenue.

= 2.&n= bsp; Accrued expense.

= 3.&n= bsp; Accrued expense.

= 4.&n= bsp; Accrued revenue.

= 5.&n= bsp; Prepaid expense.

= 6.&n= bsp; Unearned revenue.

= 7.&n= bsp; Accrued revenue.

= 8.&n= bsp; Prepaid expense.

= 9.&n= bsp; Prepaid expense.

= 10.&= nbsp; Prepaid expense.

= 11.&= nbsp; Accrued expense.

EXERCISE 3-5

1. Interest Ex= pense..........................................= ............ &= nbsp; 400

&= nbsp; Interest Payable.............................= ................... &= nbsp; &nbs= p; 400

&= nbsp; ($= 10,000 X 12% X 4/12)

2. Supplies Ex= pense..........................................= .......... = 1,650

&= nbsp; Supplies..........................................= .................... &= nbsp; &nbs= p; 1,650

&= nbsp; ($= 2,450 – $800)

3. Depreciation Expense.............................= ................ = 1,000

&= nbsp; Accumulated Depreciation—Equipment...... <= /span> &= nbsp; &nbs= p; 1,000

4. Insurance E= xpense..........................................= ........ = 1,225

&= nbsp; Prepaid Insurance...........................= ................. &= nbsp; &nbs= p; 1,225

&= nbsp; ($= 2,100 X 7/12)

5. Unearned Consulting Revenue..................= ........... 10,00= 0

&= nbsp; Consulting Revenue.............................= ............ &= nbsp; &nbs= p; 10,000

&= nbsp; ($= 40,000 X 1/4)

6. Accounts Receivable..........................= ..................... = 4,200

&= nbsp; Consulting Revenue.............................= ............ &= nbsp; &nbs= p; 4,200

7. Salaries Ex= pense..........................................= ........... = 5,400

&= nbsp; Salaries Payable.............................= .................. &= nbsp; &nbs= p; 5,400

&= nbsp; ($= 9,000 X 3/5)

EXERCISE 3-6

&nbs= p; Item	(a) Type of Adjustment	(b) Accounts before Adjustment

1.	Accrued Revenues	Assets Understated Revenues Understated
&nbs= p;
2.	Prepaid Expenses	Assets Overstated Expenses Understated
&nbs= p;
3.	Accrued Expenses	Expenses Understated Liabilities Understated
&nbs= p;
4.	Unearned Revenues	Liabilities Overstated Revenues Understated
&nbs= p;
5.	Accrued Expenses	Expenses Understated Liabilities Understated
&nbs= p;
6.		Prepaid Expenses	Assets Overstated Expenses Understated

EXERCISE 3-7

1. Mar. 31 Depreciation Expe= nse ($400 X 3)............... 1,200

&= nbsp; &nbs= p; = Accumulated Depreciation—

&= nbsp; &nbs= p; = Equipment..........................................= . &= nbsp; 1,200

2. &= nbsp; 31 Unearned Rent..........................................= ...... 3,300

&= nbsp; &nbs= p; = Rent Revenue ($9,900 X 1/3)..............= .. &= nbsp; 3,= 300

3. &= nbsp; 31 Interest Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= .. 500

&= nbsp; &nbs= p; = Interest Payable.............................= ........ &= nbsp; &#= 8194; 500

4. &= nbsp; 31 Supplies Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= 2,100

&= nbsp; &nbs= p; = Supplies ($2,800 – $700)...............= ........ &= nbsp; 2,100

5. &= nbsp; 31 Insurance Expense= ($200 X 3).................... 600

&= nbsp; &nbs= p; = Prepaid Insurance...........................= ...... &= nbsp; &#= 8194; 600

EXERCISE 3-8

1. Jan. 31 &= nbsp; Accounts Receivable..........................= .......... 875

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; &#= 8194; 875

2. &= nbsp; 31 Utilities Expense= ..........................................= ... 520

&= nbsp; &nbs= p; = Utilities Payable.............................= ......... &= nbsp; &#= 8194; 520

3. &= nbsp; 31 Depreciation Expe= nse.................................. = 400

&= nbsp; &nbs= p; = Accumulated Depreciation—

&= nbsp; &nbs= p; = Dental Equipment...........................= ... &= nbsp; &#= 8194; 400

&= nbsp; 31 Interest Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= .. 500

&= nbsp; &nbs= p; = Interest Payable.............................= ........ &= nbsp; &#= 8194; 500

4. &= nbsp; 31 Insurance Expense ($12,000 ÷ 12)............. <= /span> 1,000

&= nbsp; &nbs= p; = Prepaid Insurance...........................= ...... &= nbsp; 1,= 000

5. &= nbsp; 31 Supplies Expense ($1,600 – $400)............. <= /span> 1,200

&= nbsp; &nbs= p; = Supplies..........................................= ......... &= nbsp; 1,= 200

EXERCISE 3-9

1. Oct. 31 &= nbsp; Advertising Supplies Expense....................= 2,000

&= nbsp; &nbs= p; = Advertising Supplies............................= . &= nbsp; 2,= 000

&= nbsp; &nbs= p; = ($2,500 – $500)

2. &= nbsp; 31 Insurance Expense= ....................................... 100

&= nbsp; &nbs= p; = Prepaid Insurance...........................= ...... &= nbsp; &#= 8194; 100

3. &= nbsp; 31 Depreciation Expe= nse.................................. = 50=

&= nbsp; &nbs= p; = Accumulated Depreciation—

&= nbsp; &nbs= p; = Office Equipment...........................= .... &= nbsp; &#= 8194; 50

4. &= nbsp; 31 Unearned Revenue<= span style=3D'mso-tab-count:1 dotted'>........................................ <= /span> 600

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; &#= 8194; 600

5. &= nbsp; 31 Accounts Receivab= le.................................... 300

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; &#= 8194; 300

EXERCISE 3-9 (Continued)

6. Oct. 31 &= nbsp; Interest Expense.............................= ......... 70

&= nbsp; &nbs= p; = Interest Payable.............................= .. &= nbsp; &nbs= p; 70

7. &= nbsp; 31 Salaries Expense<= span style=3D'mso-tab-count:1 dotted'>..................................... 1,500

&= nbsp; &nbs= p; = Salaries Payable.............................= . &= nbsp; &nbs= p; 1,500

EXERCISE 3-10

BENNING CO.=

Income Stat= ement

For the Mon= th Ended July 31, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Revenues

Service revenue ($5,500 + $500).............= ............... &= nbsp; &nbs= p; $6,000

Expenses

Wages expense ($2,300 + $300).............= ................ $2,600

Supplies expense ($1,200 – $200).......= ................... 1,000

Utilities expense.............................= ............................ Q= 94; 600

Insurance expense.............................= ....................... Q= 94; 400

Depreciation expense.............................= .................. 150

&= nbsp; Total expenses............................= ....................... &= nbsp; &nbs= p; 4,750

Net income..............................= ............................................ &= nbsp; &nbs= p; $1,250

EXERCISE 3-11

Answer &= nbsp; &nbs= p; &= nbsp; Computation

(a) Supplies balance =3D $1,300 = Supplies expense = &nb= sp; $ 950

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Add: Supplies (1/31) &= nbsp; &#= 8194;850

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Less: Supplies purchased = ; (500 )

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Supplies (1/1) &n= bsp; = ; = $1,300

(b)= Total premium =3D $4,800 = Total premium =3D Monthly premium X 12; $400 X 12 =3D $4,800

&nb= sp; Purchase date =3D Aug. 1, 2007 Pu= rchase date: On Jan. 31, there are
6 months’ coverage remaining ($400 X 6). Thus, the purchase date was 6 months earlier on Aug. 1, 2007.

EXERCISE 3-11 (Continued)

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Salaries payable (1/31/08) &n= bsp; 800

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 4,300

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Less: Salaries expense = 1,800

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Salaries payable (12/31/07) &= nbsp; $2,500

(d) Unearned revenue =3D $1,150 Service rev= enue &= nbsp; &nbs= p; $2,000

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Unearned service revenue

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; (1/31/08) &= nbsp; &nbs= p; &= nbsp; 750

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 2,750

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Cash received in January = 1,600

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Unearned service revenue

&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; (12/31/07) &= nbsp; &nbs= p; &= nbsp; $1,150

EXERCISE 3-12

(a) July 10 Supplies..........................................= ................. 400

&= nbsp; &nbs= p; = Cash..........................................= ................ &= nbsp; &#= 8194; 400

&= nbsp; 14 Cash..........................................= ........................ 2,000

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; 2,= 000

&= nbsp; 15 Salaries Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= . 1,200

&= nbsp; &nbs= p; = Cash..........................................= ................ &= nbsp; 1,= 200

&= nbsp; 20 Cash..........................................= ........................ 1,000

&= nbsp; &nbs= p; = Unearned Revenue.............................= ... &= nbsp; 1,000

(b) July 31 Supplies Expense.............................= ............. 800

&= nbsp; &nbs= p; = Supplies..........................................= ......... &= nbsp; &#= 8194; 800

&= nbsp; 31 Accounts Receivab= le.................................... 500

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; &#= 8194; 500

&= nbsp; 31 Salaries Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= . 1,200

&= nbsp; &nbs= p; = Salaries Payable.............................= ....... &= nbsp; 1,= 200

&= nbsp; 31 Unearned Revenue<= span style=3D'mso-tab-count:1 dotted'>........................................ <= /span> 900

&= nbsp; &nbs= p; = Service Revenue.............................= ....... &= nbsp; &#= 8194; 900

EXERCISE 3-13

Aug. 31 Accounts Receivable..........................= ............ 1,0= 00

&= nbsp; &nbs= p; Service Revenue.............................= ........ &= nbsp; &nbs= p; 1,000

= 31 Office Supplies E= xpense............................... = 1,600

&= nbsp; &nbs= p; Office Supplies............................= ............ &= nbsp; &nbs= p; 1,600

= 31 Insurance Expense= ......................................... = = 1,500

&= nbsp; &nbs= p; Prepaid Insurance...........................= ....... &= nbsp; &nbs= p; 1,500

= 31 Depreciation Expe= nse.................................... &= nbsp; 900

&= nbsp; &nbs= p; Accumulated Depreciation—Office

&= nbsp; &nbs= p; Equipment..........................................= .. &= nbsp; &nbs= p; 900

= 31 Salaries Expense<= span style=3D'mso-tab-count:1 dotted'>..........................................= .. = 1,100

&= nbsp; &nbs= p; Salaries Payable.............................= ......... &= nbsp; &nbs= p; 1,100

= 31 Unearned Rent..........................................= ....... = 900

&= nbsp; &nbs= p; Rent Revenue.............................= .............. &= nbsp; &nbs= p; 900

EXERCISE 3-14

GARCIA COMP= ANY

Income Stat= ement

For the Yea= r Ended August 31, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Revenues

Service revenue.............................= ............................ &= nbsp; &nbs= p; $35,000

Rent revenue.............................= ................................. &= nbsp; &nbs= p; 11,900

&= nbsp; Total revenues............................= ....................... &= nbsp; &nbs= p; 46,900

Expenses

Salaries expense.............................= .......................... $18,100

Rent expense.............................= ................................. 15,000

Office supplies expense....................= ....................... 1,6= 00

Insurance expense.............................= ....................... 1,5= 00

Depreciation expense.............................= .................. 900<= /u>

&= nbsp; Total expenses............................= ....................... &= nbsp; &nbs= p; 37,100

Net income..............................= ............................................ &= nbsp; &nbs= p; $ 9,800

EXERCISE 3-14 (Continued)

GARCIA COMPANY

Owner’s Equity Statement

For the Year Ended August 31, 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Capital, September 1, 2007...................= ............................................ $15,600

Add: Net income.................................................................= .............. 9,800

Capital, August 31, 2008.....................= ............................................... $25,400<= /u>

GARCIA COMP= ANY

Balance She= et

August 31, = 2008

&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Assets

Cash..........................................= ........................................... &= nbsp; &nbs= p; $10,400

Accounts receivable..........................= ............................... &= nbsp; &nbs= p; 9,800

Office supplies............................= ....................................... &= nbsp; &nbs= p; 700

Prepaid insurance...........................= .................................. &= nbsp; &nbs= p; 2,500

Office equipment...........................= ..................................... $14,000 &= nbsp;

Less: Accum. depreciation—office equipment.......... 4,500 9,500

&= nbsp; Total assets..............................= .......................... &= nbsp; &nbs= p; $32,900

Liabilities and Owner’s Equity

Liabilities

Accounts payable.............................= .......................................... $ 5,8= 00

Salaries payable.............................= ............................................ Q= 94;1,100

Unearned rent................................= ............................................. 600<= /u>

&= nbsp; Total liabilities.........................= ............................................ Q= 94;7,500

Owner’s equity

T. Garcia, Capital.....................= ................................................... 25,400

&= nbsp; Total liabilities and owner’s equity= ................................. $32,900<= /u>

EXERCISE 3-15

(a) 1. Cash..........................................= ............................ ̳= 4;9,000

&= nbsp; &nbs= p; Fees Receivable..........................= ................ &= nbsp; &nbs= p; 9,000

2. Unearned Fees..........................................= .......... 25,00= 0

&= nbsp; &nbs= p; Fees Revenue.............................= ................. &= nbsp; &nbs= p; 25,000

3. (a) Cash.........= ..................................................... 35,000

&= nbsp; &nbs= p; Unearned Fees................................= .... &= nbsp; &nbs= p; 35,000

&= nbsp; (b) Unearned Fees..........................................= .. 18,000

&= nbsp; &nbs= p; ($35,000 – $17,000)

&= nbsp; &nbs= p; Fees Revenue.............................= ......... &= nbsp; &nbs= p; 18,000

4. Fees Receivable..........................................= ........ 110,000

&= nbsp; &nbs= p; Fees Revenue.............................= ................. &= nbsp; &nbs= p; 110,000

&= nbsp; &nbs= p; ($153,000 – $25,000 – $18,000)

5. Cash.................................................................= ..... 96,00= 0

&= nbsp; &nbs= p; Fees Receivable..........................= ................ &= nbsp; &nbs= p; 96,000

&= nbsp; &nbs= p; ($110,000 – $14,000)

(b= ) Cash received with respect to= fees =3D $9,000 + $96,000 + $35,000

= &nb= sp; = &nb= sp; = =3D $140,000

*EXERCISE 3-16

1. Prepaid Insurance= ..........................................= ......... &= nbsp; 875

&= nbsp; Insurance Expense.............................= ............. &= nbsp; &nbs= p; 875

&= nbsp; ($2,100 X 5/12)

2. Consulting Revenu= e..........................................= ...... 30,00= 0

&= nbsp; Unearned Consulting Revenue..................= .... &= nbsp; &nbs= p; 30,000

&= nbsp; ($40,000 X 3/4)

3. Supplies..........................................= ........................... &= nbsp; 800

&= nbsp; Supplies Expense.............................= ................ &= nbsp; &nbs= p; 800

*EXERCISE 3-17

(a) Jan. 2 &= nbsp; Insurance Expense.............................= ......... 1,800=

&= nbsp; &nbs= p; = Cash..........................................= .............. &= nbsp; &nbs= p; 1,800

&= nbsp; 10 Supplies Expense<= span style=3D'mso-tab-count:1 dotted'>........................................ <= /span> 1,700=

&= nbsp; &nbs= p; = Cash..........................................= .............. &= nbsp; &nbs= p; 1,700

&= nbsp; 15 Cash..........................................= ...................... 6,100=

&= nbsp; &nbs= p; = Service Revenue.............................= ..... &= nbsp; &nbs= p; 6,100

Insurance= Expense	Supplies = Expense
1/2 &nbs= p; 1,800	<= /p>	1/10 = ; 1,700	<= /p>

Cash

Service R= evenue

1/15 = ; 6,100

1/2 = ; 1,800

1/10 = ; 1,700

<= /p>

1/15 = ; 6,100

(b) Jan. 31 Prepaid Insurance ($150 X 11 months)... 1,650=

&= nbsp; &nbs= p; = Insurance Expense.............................= . &= nbsp; &nbs= p; 1,650

&= nbsp; 31 Supplies..........................................= ............... ̳= 4; 800

&= nbsp; &nbs= p; = Supplies Expense.............................= ... &= nbsp; &nbs= p; 800

&= nbsp; 31 Service Revenue..........................................= 3,600=

&= nbsp; &nbs= p; = Unearned Revenue.............................= . &= nbsp; &nbs= p; 3,600

Insurance Expense	Supplies Expense	Service Revenue
1/2 1,800	1/31 1,650	1/10 1,700	1/31 800	1/31 3,600	1/15 6,100
Bal. 150		Bal. 900		<= /p>		Bal. 2,500

Prepaid Insurance	Supplies		Unearned Revenue
1/31 1,650		1/31 800		1/31 3,600

Supplies expense.............................= ............................................ 90= 0

Service revenue.............................= ............................................... 2,500

Prepaid insurance...........................= ............................................. 1,650

Supplies..........................................= ................................................ 80= 0

Unearned revenue.............................= ........................................... 3,600