Chapter 3 WileyPlus


Brief Exercise 1-9

Do It! Review 1-3

Exercise 3-1

Exercise 3-6

Brief Exercise 3-4

Do It! Review 3-4

Problem 3-5A


Brief Exercise 1-9

At the beginning of the year, Goren Company had total assets of $856,100 and total liabilities of $519,000. (Treat each item independently.)

(a) If total assets increased $177,500 during the year and total liabilities decreased $82,900, what is the amount of stockholders’ equity at the end of the year?

Stockholders’ equity$


(b) During the year, total liabilities increased $104,500 and stockholders’ equity decreased $65,800. What is the amount of total assets at the end of the year?

Total assets$


(c) If total assets decreased $83,400 and stockholders’ equity increased $101,700 during the year, what is the amount of total liabilities at the end of the year?

Total liabilities$


Do It! Review 1-3

Marsh Corporation began operations on January 1, 2014. The following information is available for Marsh Corporation on December 31, 2014.

Accounts payable        $ 8,230                        Notes payable              $ 13,460

Accounts receivable    5,230               Rent expense               13,230

Advertising expense    4,260               Retained earnings        ?

Cash                            6,330               Service revenue           31,460

Common stock                        18,230             Supplies                       5,130

Dividends                    5,730               Supplies expense         1,440

Equipment                   30,030


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Prepare an income statement for Marsh Corporation.

Prepare a retained earnings statement for Marsh Corporation. (List items that increase retained earnings first.)

Prepare a balance sheet for Marsh Corporation. (List assets in order of liquidity.)


Exercise 3-1

Selected transactions for Warner Advertising Company, Inc., are listed here.

Describe the effect of each transaction on assets, liabilities, and stockholders’ equity.


1. Issued common stock to investors in exchange for cash received from investors.

2. Paid monthly rent.

3. Received cash from customers when service was performed.

4. Billed customers for services performed.

5. Paid dividend to stockholders.

6. Incurred advertising expense on account.

7. Received cash from customers billed in (4).

8. Purchased additional equipment for cash.

9. Purchased equipment on account.

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Exercise 3-6

Selected transactions for Home Place, an interior decorator corporation, in its first month of business, are as follows.

1. Issued stock to investors for $15,710 in cash.

2. Purchased used car for $10,150 cash for use in business.

3. Purchased supplies on account for $240.

4. Billed customers $4,820 for services performed.

5. Paid $230 cash for advertising start of the business.

6. Received $1,730 cash from customers billed in transaction (4).

7. Paid creditor $360 cash on account.

8. Paid dividends of $390 cash to stockholders.


For each transaction indicate the basic type of account debited and credited (asset, liability, stockholders’ equity); the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); whether the specific account is increased or decreased; and the normal balance of the specific account.

Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)


Brief Exercise 3-4

For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance.

Debit Effect     Credit Effect    Normal Balance

(a)        Accounts Payable

(b)        Advertising Expense

(c)        Service Revenue

(d)        Accounts Receivable

(e)        Retained Earnings

(f)        Dividends


Do It! Review 3-4

Joel Blocker recorded the following transactions during the month of April.

Apr. 3 Cash                                        1,970

Service Revenue                                1,970

16        Rent Expense                           410

Cash                                                  410

20        Salaries and Wages Expense    450

Cash                                                  450


Post these entries to the Cash account of the general ledger to determine the ending balance in cash. The beginning balance in cash on April 1 was $3,370. (Post entries in the order of journal entries presented in the question.)


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