Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 3-3

Approach: From the facts given, determine the adjustments needed to report the financial statements in accordance with generally accepted accounting principles. Look at the existing account balances. Make the appropriate entries to adjust the trial balance.

TIP: Notice the account balances that are different on the adjusted trial when compared to the unadjusted trial balance. They are: Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.

TIP: Notice that the balance of the Retained Earnings account on the adjusted trial balance represents the balance of retained earnings at the beginning of the period (August 1). That is, the balance here does not yet reflect the effect of this period's results of operations (revenues and expenses) on owners' equity. Also, the balance here does not yet reflect the effect of dividends declared during this period.

TIP: Refer to the Solution to Exercise 1-3. The financial statements shown in that exercise were prepared before considering the information for the adjusting entries for supplies consumed during the period and accrued utilities expense. Those financial statements did not reflect the two necessary adjustments because the subject of financial statements was introduced in Chapter 1 but, for purposes ...