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MGAB01 FINANCIAL ACCOUNTING I – 2013 Fall
Problems
Problem #1
Cash Wages Payable Wages Expense
Oct 5 400 Oct 31 240 Oct 5 400
Oct 12 400 Oct 12 400
Oct 19 400 Oct 19 400
Oct 26 400 Oct 26 400
Oct 31 240
(1,600) 240 1,840
Blade Company's October Income Statement should show $1,840 of wages expense and its October 31 Balance Sheet should show a
$240 liability for wages payable. The wages earned by its employee but unpaid on October 31 are an example of an accrued expense.
Long Company
General Journal
Date Account and Explanation DR CR
Nov 2 Wages Payable 240
Salary Expense 160
Cash 400
Salary payment November 2 (3 days accrued in October)
Problem #2
After the foregoing adjustments are entered in the accounts, the company’s Rent Revenue account has a $337,175 balance.
Its Unearned Revenue account has a $2,400 balance and this should
Page 2 ofbe
6 included in the company’s Balance Sheet as a
liability. Likewise, the company’s Rent Receivable account has a $475 balance, and this should appear on its Balance
Sheet as part of Accounts Receivable.
MGAB01 FINANCIAL ACCOUNTING I – 2013 Fall
Problem #3
Patel Limited
General Journal
Error Account and Explanation DR CR
a Accounts Payable 5,000
Accounts Receivable 5,000
To correct the supplier payment of $5,000 incorrectly debited to A/P
b Interest Expense 1,650
Interest Income/Revenue 1,650
To correct the interest income incorrectly credited to interest expense
c Office Supplies 8,200
Office Equipment 8,200
To correct the purchase of office supplies incorrectly debited to office equipment
c Office Supplies Expense 8,200
(as Office Equipment 8,200
expense) To correct the purchase and use of office supplies incorrectly debited to office equipment
b
No No No No No Understated by Understated by
Effect Effect Effect Effect Effect $1,650 $1,650
1. June 7, 2011 - Inventory which cost $12,000 is sold for $17,000 (cash of $5,000 and the balance due in 30 days).
2. July 1, 2011 – Annual rent of $36,000 is paid in cash. This covers the period July 1, 2011 – June 30, 2012.
3. January 15, 2011 – Wages of $21,000 are paid. These wages are for work done in the month of December, 2010.
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MGAB01 FINANCIAL ACCOUNTING I – 2013 Fall
Assets Liabilities Net Income
Dr Wages payable 21,000 Decrease Decrease NC
Cr Cash 21,000
4. January 15, 2012 - Wages of $23,000 are paid. These wages are for work done in the month of December, 2011.
5. October 1, 2011 – Equipment costing $450,000 is purchased for $80,000 cash and the rest on credit. The equipment is expected to last for 5
years and have no residual value.
6. November 1, 2011 – Payment of $510,000 is received for services that are to be provided evenly over three months starting at the date of
payment.
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MGAB01 FINANCIAL ACCOUNTING I – 2013 Fall
Cr Revenue 340,000
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