Chapter 3, Problem 3AP

1.

To determine

Set up T-accounts for the general ledger accounts with the unadjusted balances.

Explanation of Solution

T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.

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2.

To determine

Journalize the adjusting entries.

Explanation of Solution

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

a.

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b.

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c.

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d.

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e.

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f.

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g.

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h.

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Post these adjusting entries into respective accounts prepared in requirement 1.

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3.

To determine

Prepare an adjusted trial balance of WT Institute as of December 31.

Explanation of Solution

Adjusted trial balance:

Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

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4.

To determine

Prepare income statement, owner’s equity and balance sheet of WT Institute for the year ended December 31.

Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

 Table (50)

Statement of owner’s equity for WT Institute for the year ended December 31.

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Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Note: Refer to income statement for value and computation of net income.

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