Explanation Journal: Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect. Accounting Equation : The accounting equation implies the relationship between the assets, liabilities, and the stockholders equity. The balance of both the assets and the liabilities, stockholders equity must be equally balanced. The accounting equation is as follows; Assets = Liabilities + Stockholders Equity Accrual basis of accounting: In accrual Basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly the expenses are recognized for the accounting period, in which the business incurred expenses even if cash is not exchanged. The journal entries of each transaction under accrual basis revenue are prepared as follows: a. Journalize the rent earned. Date Account Title and Explanation Debit ($) Credit ($) February Cash (A+) 15,000 Service revenue (R+, SE+) 15,000 ( To record the rent earned ) Table (4) Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $15,000. Service revenue is a component of stockholder’s equity account. Thus, an increase in service revenue increases the stockholder’s equity account. Hence, service revenue account is being credited to increase its balance by $15,000. b. Journalize the cash received from customer for the service yet to provide. Date Account Title and Explanation Debit ($) Credit ($) February Cash (A+) 150 Unearned revenue (L+) 150 ( To record the unearned revenue ) Table (5) Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $150. Unearned revenue is a liability account. Thus, an increase in unearned revenue increases the liability account

Connect 1 Semester Access Card for Fundamentals of Financial Accounting

5th Edition

ISBN: 9781259128547

Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby

Publisher: McGraw-Hill Education

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Chapter 3, Problem 3.11ME

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To prepare: The journal entries of each transaction under accrual basis expenses.

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Chapter 3, Problem 3.10ME

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Harper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $210,000 in cash. The book value of Kinman's net assets on that date was $400,000, although one of the company's buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000. Kinman sold Inventory with an original cost of $60,000 to Harper during 2023 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in Inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024. Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2023. The company still manages to declare and pay a $10,000 cash dividend during the year. During 2024, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales…

Chapter 3 Solutions

Connect 1 Semester Access Card for Fundamentals of Financial Accounting

Ch. 3 - Prob. 1Q Ch. 3 - When accounting was developed in the 14th and 15th...Ch. 3 - Define accrual basis accounting and contrast it...Ch. 3 - Prob. 4Q Ch. 3 - Prob. 5Q Ch. 3 - Prob. 6Q Ch. 3 - Explain the expense recognition principle...Ch. 3 - Explain why stockholders equity is increased by...Ch. 3 - Explain why revenues are recorded as credits and...Ch. 3 - Complete the following table by entering either...

Ch. 3 - Complete the following table by entering either...Ch. 3 - Prob. 12Q Ch. 3 - Prob. 13Q Ch. 3 - What is the difference between Accounts Receivable...Ch. 3 - What is the difference between Accounts Payable...Ch. 3 - For each of the following situations, indicate...Ch. 3 - Prob. 17Q Ch. 3 - Which of the following items is not a specific...Ch. 3 - Prob. 2MC Ch. 3 - Prob. 3MC Ch. 3 - Prob. 4MC Ch. 3 - If a company incorrectly records a payment as an...Ch. 3 - Prob. 6MC Ch. 3 - Prob. 7MC Ch. 3 - Prob. 8MC Ch. 3 - Webby Corporation reported the following amounts...Ch. 3 - Prob. 10MC Ch. 3 - Prob. 3.1ME Ch. 3 - Identifying Accrual Basis Revenues The following...Ch. 3 - Identifying Accrual Basis Expenses The following...Ch. 3 - Recording Accrual Basis Revenues For each of the...Ch. 3 - Recording Accrual Basis Expenses For each of the...Ch. 3 - Prob. 3.6ME Ch. 3 - Prob. 3.7ME Ch. 3 - Prob. 3.8ME Ch. 3 - Prob. 3.9ME Ch. 3 - Identifying Accrual Basis Expenses The following...Ch. 3 - Prob. 3.11ME Ch. 3 - Recording Accrual Basis Expenses For each of the...Ch. 3 - Prob. 3.13ME Ch. 3 - Preparing Accrual Basis Journal Entries for...Ch. 3 - Preparing Accrual Basis Journal Entries for...Ch. 3 - Prob. 3.16ME Ch. 3 - Determining the Accounting Equation Effects of...Ch. 3 - Prob. 3.18ME Ch. 3 - Preparing an Income Statement and Calculating Net...Ch. 3 - Preparing Financial Statements from a Trial...Ch. 3 - Preparing an Income Statement and Calculating Net...Ch. 3 - Prob. 3.22ME Ch. 3 - Calculating and Interpreting Net Profit Margin...Ch. 3 - Prob. 3.1E Ch. 3 - Matching Definitions with Terms Match each...Ch. 3 - Identifying Accrual Basis Revenues According to...Ch. 3 - Identifying Accrual Basis Revenues According to...Ch. 3 - Identifying Accrual Basis Expenses Under accrual...Ch. 3 - Identifying Accrual Basis Expenses Under accrual...Ch. 3 - Determining Accounting Equation Effects and Net...Ch. 3 - Determining Accounting Equation Effects and Net...Ch. 3 - Recording Journal Entries and Determining Net...Ch. 3 - Prob. 3.10E Ch. 3 - Recording Journal Entries and Determining Net...Ch. 3 - Recording and Posting Accrual Basis Journal...Ch. 3 - Prob. 3.13E Ch. 3 - Analyzing Transactions from the Perspectives of...Ch. 3 - Prob. 3.15E Ch. 3 - Determining Accounting Equation Effects of Several...Ch. 3 - Preparing Journal Entries For each of the...Ch. 3 - Prob. 3.18E Ch. 3 - Creating an Unadjusted Trial Balance Based on the...Ch. 3 - Inferring Transactions, Creating Financial...Ch. 3 - Determining the Effects of Various Transactions EZ...Ch. 3 - COACHED PROBLEMS Recording Nonquantitative Journal...Ch. 3 - Prob. 3.2CP Ch. 3 - Prob. 3.3CP Ch. 3 - Prob. 3.4CP Ch. 3 - Prob. 3.1PA Ch. 3 - Recording Journal Entries Diana Mark is the...Ch. 3 - Analyzing the Effects of Transactions Using...Ch. 3 - Prob. 3.4PA Ch. 3 - Prob. 3.1PB Ch. 3 - Prob. 3.2PB Ch. 3 - Analyzing the Effects of Transactions Using...Ch. 3 - Analyzing, Journalizing, and Interpreting Business...Ch. 3 - Prob. 3.1COP Ch. 3 - SKIL_S DEVELOPMENT CASES Finding Financial...Ch. 3 - Prob. 3.2SDC Ch. 3 - Prob. 3.4SDC Ch. 3 - Ethical Decision Making: A Mini-Case Mike Lynch is...Ch. 3 - Accounting for Business Operations Starting in...

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The journal entries of each transaction under accrual basis expenses.

Solution Summary: The author explains the accounting equation, which implies the relationship between the assets, liabilities, and the stockholders equity.

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To prepare: The journal entries of each transaction under accrual basis expenses.

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Chapter 3 Solutions