
Concept explainers
1
Concept Introduction:
Income Statement:
The income statement shows the revenues and expenses during the period and the resulting
Statement of
Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.
The balance Sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity.
To prepare:
The t-accounts from the given unadjusted
1

Explanation of Solution
Cash | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount $ |
31-Dec | balance c/d | 60,000 | |||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Teaching supplies | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 70,000 | |||
Prepaid Insurance | |||||
Dr | Cr | ||||
Date | Balance | Amount $ | Date | Balance | Amount$ |
31-Dec | balance c/d | 19,000 | |||
Prepaid Rent | |||||
Dr | Cr | ||||
Date | Balance | Amount $ | Date | Balance | Amount$ |
31-Dec | balance c/d | 3,800 | |||
Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 12,000 | |||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 2,500 | |||
Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 40,000 | |||
Accumulated Depreciation-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount $ | Date | Balance | Amount$ |
31-Dec | balance c/d | 20000 | |||
Accounts Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 11,200 | |||
Salaries Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Unearned training fees | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 28,600 | |||
Common stock | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 11,000 | |||
Retained Earnings | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 60,500 | |||
Dividends | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 20,000 | |||
Tuition fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 129,200 | |||
Training fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 68,000 | |||
Depreciation expenses-Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Depreciation expenses-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Salaries expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 44,200 | |||
Insurance expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Rent expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 29,600 | |||
Teaching supplies expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
Advertising expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 19,000 | |||
Utilities expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 13,400 | |||
2
Concept Introduction:
Income Statement:
The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues
Statement of retained earnings:
Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.
Balance Sheet:
The balance sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity
To prepare:
The
2

Explanation of Solution
Date | Accounts & explanation | Debit $ | Credit $ | |
a | 31-Dec | Insurance expenses | 9,500 | |
Prepaid Insurance | 9,500 | |||
To record insurance expenses | ||||
b | 31-Dec | Teaching supplies expenses | 50,000 | |
Teaching supplies | 50,000 | |||
To record teaching supplies expenses | ||||
c | 31-Dec | 5,000 | ||
Accumulated depreciation-Equipment | 5,000 | |||
To record depreciation expenses-equipment | ||||
d | 31-Dec | Depreciation expenses-professional library | 2,400 | |
Accumulated depreciation-professional library | 2,400 | |||
To record depreciation expenses-professional library | ||||
e | 31-Dec | Unearned Training fees | 28,600 | |
Training fees earned | 28,600 | |||
To record training fees earned | ||||
f | 31-Dec | Account Receivable | 5,750 | |
Tuition fees earned | 5,750 | |||
To record tuition fees earned | ||||
g | 31-Dec | Salaries expenses | 450 | |
Salaries payable | 450 | |||
To record salaries payable | ||||
h | 31-Dec | Rent expenses | 3,800 | |
Prepaid Rent | 3,800 | |||
To record rent expenses accrued |
The adjustment entries have been posted to T-accounts as follows
Cash | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 60,000 | |||
Accounts Receivable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Tuition fees earned | 5,750 | |||
Teaching supplies | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 70,000 | 31-Dec | Teaching supplies expenses | 50,000 |
Prepaid Insurance | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 19,000 | 31-Dec | Insurance expenses | 9,500 |
Prepaid Rent | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 3,800 | 31-Dec | Rent expenses | 3,800 |
Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 12,000 | |||
Accumulated Depreciation-Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 2,500 | |||
31-Dec | Depreciation expenses-Professional library | 2,400 | |||
Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 40,000 | |||
Accumulated Depreciation-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 20,000 | |||
31-Dec | Depreciation expenses-Equipment | 5,000 | |||
Accounts Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 11,200 | |||
Salaries Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Salaries expenses | 450 | |||
Unearned training fees | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | Training fees earned | 28,600 | 31-Dec | balance c/d | 28,600 |
Common stock | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 11,000 | |||
Retained Earnings | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 60,500 | |||
Dividends | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 20,000 | |||
Tuition fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 129,200 | |||
31-Dec | Accounts Receivable | 5,750 | |||
Training fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 68,000 | |||
31-Dec | Unearned training fees | 28,600 | |||
Depreciation expenses-Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Accumulated Depreciation-Professional library | 2,400 | |||
Depreciation expenses-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Accumulated Depreciation-Equipment | 5,000 | |||
Salaries expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 44,200 | |||
31-Dec | Salaries Payable | 450 | |||
Insurance expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Prepaid Insurance | 9,500 | |||
Rent expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount $ | Date | Balance | Amount$ |
31-Dec | balance c/d | 29,600 | |||
31-Dec | Prepaid rent | 3,800 | |||
Teaching supplies expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | Teaching supplies | 50,000 | |||
Advertising expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 19,000 | |||
Utilities expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 13,400 | |||
3
Concept Introduction:
Income Statement:
The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues
Statement of retained earnings:
Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.
Balance Sheet:
The Balance Sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity
The closing balances of t-accounts and prepare the adjusted trial balance
3

Explanation of Solution
The T-accounts with updated balances have been presented below
Cash | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 60,000 | 31-Dec | balance c/d | 60,000 |
60,000 | 60,000 | ||||
Accounts Receivable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 0 | 31-Dec | balance c/d | 5,750 |
31-Dec | Tuition fees earned | 5,750 | |||
5,750 | 5,750 | ||||
Teaching supplies | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 70,000 | 31-Dec | Teaching supplies expenses | 50,000 |
31-Dec | balance c/d | 20,000 | |||
70,000 | 70,000 | ||||
Prepaid Insurance | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 19000 | 31-Dec | Insurance expenses | 9500 |
31-Dec | balance c/d | 9500 | |||
19,000 | 19,000 | ||||
Prepaid Rent | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 3800 | 31-Dec | Rent expenses | 3800 |
31-Dec | balance c/d | 0 | |||
3800 | 3800 | ||||
Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 12,000 | |||
31-Dec | balance c/d | 12,000 | |||
12,000 | 12,000 | ||||
Accumulated Depreciation-Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 2500 | |||
31-Dec | balance c/d | 4,900 | 31-Dec | Depreciation expenses-Professional library | 2400 |
4,900 | 4,900 | ||||
Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 40000 | |||
31-Dec | balance c/d | 40000 | |||
40,000 | 40,000 | ||||
Accumulated Depreciation-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 20,000 | |||
31-Dec | balance c/d | 25,000 | 31-Dec | Depreciation expenses-Equipment | 5,000 |
25,000 | 25,000 | ||||
Accounts Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 11,200 | |||
31-Dec | balance c/d | 11,200 | |||
11,200 | 11,200 | ||||
Salaries Payable | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance c/d | 0 | |||
31-Dec | balance c/d | 450 | 31-Dec | Salaries expenses | 450 |
450 | 450 | ||||
Unearned training fees | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | Training fees earned | 28,600 | 31-Dec | balance b/d | 28,600 |
31-Dec | balance c/d | 0 | |||
28,600 | 28,600 | ||||
Common stock | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 11,000 | |||
31-Dec | balance c/d | 11,000 | |||
11,000 | 11,000 | ||||
Retained Earnings | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 60,500 | |||
31-Dec | balance c/d | 60,500 | |||
60,500 | 60,500 | ||||
Dividends | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 20,000 | |||
31-Dec | balance c/d | 20,000 | |||
20,000 | 20,000 | ||||
Tuition fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 129200 | |||
31-Dec | balance c/d | 134,950 | 31-Dec | Accounts Receivable | 5750 |
134,950 | 134,950 | ||||
Training fees earned | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 68,000 | |||
31-Dec | balance c/d | 96,600 | 31-Dec | Unearned training fees | 28,600 |
96,600 | 96,600 | ||||
Depreciation expenses-Professional library | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 0 | |||
31-Dec | Accumulated Depreciation-Professional library | 2,400 | 31-Dec | balance c/d | 2,400 |
2,400 | 2,400 | ||||
Depreciation expenses-Equipment | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 0 | |||
31-Dec | Accumulated Depreciation-Equipment | 5000 | 31-Dec | balance c/d | 5000 |
5000 | 5000 | ||||
Salaries expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | 44,200 | ||||
31-Dec | Salaries Payable | 450 | 31-Dec | balance c/d | 44,650 |
44,650 | 44,650 | ||||
Insurance expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 0 | |||
31-Dec | Prepaid Insurance | 9,500 | 31-Dec | balance c/d | 9,500 |
9,500 | 9,500 | ||||
Rent expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 29,600 | |||
31-Dec | Prepaid rent | 3,800 | 31-Dec | balance c/d | 33,400 |
33,400 | 33,400 | ||||
Teaching supplies expenses | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 0 | |||
31-Dec | Teaching supplies | 50,000 | 31-Dec | balance c/d | 50,000 |
50,000 | 50,000 | ||||
Advertising expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 19,000 | |||
31-Dec | balance c/d | 19000 | |||
19,000 | 19,000 | ||||
Utilities expense | |||||
Dr | Cr | ||||
Date | Balance | Amount$ | Date | Balance | Amount$ |
31-Dec | balance b/d | 13,400 | |||
31-Dec | balance c/d | 13400 | |||
13,400 | 13,400 |
The Adjusted Trial Balance has been prepared below
A I | ||
Adjusted Trial Balance | ||
December 31 | ||
Debit ($) | Credit ($) | |
Cash | 60,000 | |
Accounts Receivable | 5,750 | |
Teaching supplies | 20,000 | |
Prepaid Insurance | 9,500 | |
Prepaid Rent | 0 | |
Professional library | 12,000 | |
Accumulated Depreciation-Professional library | 4,900 | |
Equipment | 40,000 | |
Accumulated Depreciation-Equipment | 25,000 | |
Accounts Payable | 11,200 | |
Salaries Payable | 450 | |
Unearned training fees | 0 | |
Common stock | 11,000 | |
Retained Earnings | 60,500 | |
Dividends | 20,000 | |
Tuition fees earned | 134,950 | |
Training fees earned | 96,600 | |
Depreciation expenses-Professional library | 2,400 | |
Depreciation expenses-Equipment | 5,000 | |
Salaries expenses | 44,650 | |
Insurance expenses | 9,500 | |
Rent expenses | 33,400 | |
Teaching supplies expenses | 50,000 | |
Advertising expense | 19,000 | |
Utilities expense | 13,400 | |
Totals | 344,600 | 344,600 |
4
Concept Introduction:
Income Statement:
The income statement shows the revenues and expenses during the period and the resulting profits or losses arising after all the expenses are deducted from the revenues
Statement of retained earnings:
Statement of retained earnings shows the opening balance to which resulting profits or losses are added/subtracted and dividends if any are deducted resulting in closing retained earnings balance.
Balance Sheet:
The balance sheet shows the assets and liabilities and owner’s equity of the business as of the date of preparation. The sum of assets is equal to the sum of liabilities and owners equity
To prepare:
The income statement, statement of retained earnings and balance sheet
4

Explanation of Solution
The income statement has been presented below
A I | ||
Income statement | ||
for the year ended December 31 | ||
Amount $ | Amount $ | |
Tuition fees earned | 134,950 | |
Training fees earned | 96,600 | |
Total revenues | 231,550 | |
less. Expenses | ||
Depreciation expenses-Professional library | 2,400 | |
Depreciation expenses-Equipment | 5,000 | |
Salaries expenses | 44,650 | |
Insurance expenses | 9,500 | |
Rent expenses | 33,400 | |
Teaching supplies expenses | 50,000 | |
Advertising expense | 19,000 | |
Utilities expense | 13,400 | |
Total expenses | 177,350 | |
Net profit | 54,200 |
The statement of retained earnings has been presented below
A I | ||
Statement of retained earnings | ||
for the year ended December 31 | ||
Amount $ | ||
Opening balance | 60,500 | |
Add profits earned during the year | 54,200 | |
less dividends paid | -20,000 | |
Ending balance | 94,700 |
The Balance Sheet has been prepared as follows
A I | ||
Balance Sheet | ||
as ofDecember 31 | ||
Amount $ | Amount $ | |
Assets | ||
Current Assets | ||
Cash | 60,000 | |
Accounts Receivable | 5,750 | |
Current Assets | 20,000 | |
Prepaid Insurance | 9,500 | |
Total Current Assets | 95,250 | |
Non-Current Assets | ||
Professional library | 12,000 | |
less:Accumulated Depreciation-Professional library | -4,900 | 7,100 |
Equipment | 40,000 | |
less:Accumulated Depreciation-Equipment | -25,000 | 15,000 |
Total non-current Assets | 22,100 | |
Total Assets | 117,350 | |
Liability & owner's Equity | ||
Liabilities | ||
Accounts Payable | 11,200 | |
Salaries Payable | 450 | |
Total liabilities | 11,650 | |
Owner's equity | ||
Common stock | 11,000 | |
Retained Earnings | 94,700 | |
Total Equity | 105,700 | |
Total Liability & owner's Equity | 117,350 |
Want to see more full solutions like this?
Chapter 3 Solutions
Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning

