ACCT 2301 Chapter 3 Homework PDF

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For each separate case below, follow the three-step process for adjusting the prepaid asset account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. a. Prepaid Insurance. The Prepaid Insurance account has a $5,700 debit balance to start the year. A review of insurance policies shows that $1,400 of unexpired insurance remains at year-end. $5,700 Debit Step 1: Determine what the current account balance equals Step 2: Determine what the current $1,400 Debit account balance should equal Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Adjusting Entry Debit Credit Insurance Expense 4,300 Prepaid Insurance 4,300 b. Prepaid Insurance. The Prepaid Insurance account has a $6,890 debit balance at the start of the year. A review of insurance policies shows $1,440 of insurance has expired by year-end. Step 1: Determine what the current $6,890 Debit account balance equals Step 2: Determine what the current $5,450 Debit account balance should equal Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Adjusting Entry Debit Credit Insurance Expense 1,440 Prepaid Insurance 1,440 c. Prepaid Rent. On September 1 of the current year, the company prepaid $36,000 for two years of rent for facilities being occupied that day. The company debited Prepaid Rent and credited Cash for $36,000. Step 1: Determine what the current $36,000 Debit account balance equals Step 2: Determine what the current $30,000 Debit account balance should equal Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Adjusting Entry Debit Credit Rent Expense 6,000 Prepaid Rent 6,000 For each separate case, record the necessary adjusting entry. a. On July 1, Lopez Company paid $2,900 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31. b. Zim Company has a Supplies account balance of $8,400 at the beginning of the year. During the year, it purchases $3,700 of supplies. As of December 31, a physical count of supplies shows

$1,650 of supplies available. Prepare the year-end adjusting entries to reflect expiration of the insurance and correctly report the balance of the Supplies account as of December 31. Transaction A

B

General Journal Insurance Expense Prepaid Insurance

Debit 2900

Supplies Expense Supplies

10450

Credit 2900

10450

For each separate case, record an adjusting entry (if necessary). a. Barga Company purchases $29,000 of equipment on January 1. The equipment is expected to last five years and be worth $3,800 at the end of that time. b. Welch Company purchases $10,900 of land on January 1. The land is expected to last forever. Prepare the entries to record one year’s depreciaition expense of $5,040 for the equipment and what depreciation adjustment, if any, should be made with respect to the Land account as of December 31? Transaction A

B

General Journal Depreciation expense—Equipment Accumulated depreciation—Equipment

Debit 5040

Credit 5040

No journal entry required

For each separate case below, follow the three-step process for adjusting the unearned revenue liability account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. a. Tao Co. receives $10,100 cash in advance for four months of evenly planned legal services beginning on October 1. Tao records it by debiting Cash and crediting Unearned revenue both for $10,100. It is now December 31, and Tao has provided legal services as planned. What adjusting entry should Tao make to account for the work performed from October 1 through December 31? Step 1 10100 Credit Step 2 2525 Credit Step 3 Adjusting Entry Debit Credit Unearned Revenue 7575 Legal Revenue 7575 b. Caden started a new publication called Contest News. Its subscribers pay $24 to receive 12 monthly issues. With every new subscriber, Caden debits Cash and credits Unearned Subscription Revenue for the amounts received. The company has 100 new subscribers as of

July 1. It sends Contest News to each of these subscribers every month from July through December. Assuming no changes in subscribers, prepare the year-end journal entry that Caden must make as of December 31 to adjust the Subscription Revenue account and the Unearned Subscription Revenue account. Step 1 Step 2 Step 3 Adjusting Entries Unearned Subscription Revenue Subscription Revenue

2400 1200

Credit Credit

Debit 1200

Credit 1200

Molly Mocha employs one college student every summer in her coffee shop. The student works the five weekdays and is paid on the following Monday. The coffee shop adjusts its books monthly, if needed, to show salaries earned but unpaid at month-end. The student works the last week of July, which is Monday, July 28, through Friday, August 1. If the student earns $110 per day, what adjusting entry must the coffee shop make on July 31 to correctly record accrued salaries expense for July? Date July 31

General Journal Salaries expense Salaries payable

Debit 440

Credit 440

For the entries below, identify the account to be debited and the account to be credited. Indicate which of the accounts is the income statement account and which is the balance sheet account. Assume the company records prepayments of expenses in asset accounts, and cash receipts of unearned revenues in liability accounts. a. Entry to record expiration of prepaid insurance. b. Entry to record annual depreciation expense c. Entry to record consulting services performed but not yet billed or recorded. d. Entry to record interest revenue earned but not yet billed or recorded. e. Entry to record service revenues performed but not yet billed or recorded. Accounts Account to be debited Account to be credited B Account to be debited Account to be credited C Account to be debited Account to be credited D Account to be debited Account to be credited E Account to be debited Account to be credited A

Account Title Insurance Expense Prepaid Insurance Depreciation Expense Accumulated Depreciation Accounts Receivable Services Revenue Interest Receivable Interest Revenue Accounts Receivable Services Revenue

Financial Statement Income Statement Balance Sheet Income Statement Balance Sheet Balance Sheet Income Statement Balance Sheet Income Statement Balance Sheet Income Statement

The ledger of Mai Company includes the following accounts with normal balances as of

December 31: Common Stock $10,300; Dividends $1,450; Services Revenue $26,000; Wages Expense $14,900; and Rent Expense $4,200. Prepare its December 31 closing entries. Date Dec 31

Dec 31

Dec 31

Dec 31

General Journal Services Revenue Income Summary

Debit 26000

Income Summary Wages Expense Rent Expense

19100

Income Summary Retained Earnings

6900

Retained Earnings Dividends

1450

Credit 26000

14900 4200

6900

1450

The following is the adjusted trial balance of Sierra Company. The Retained Earnings account balance was $6,500 on December 31 of the prior year. Account Title Debit Credit Cash 7000 Prepaid Insurance 600 Notes Receivable (due in 5 years) 4200 Buildings 25000 Accumulated Depreciation—Buildings 13000 Accounts Payable 3000 Notes Payable (due in 3 years) 3500 Common Stock 5500 Retained Earnings 6500 Dividends 1500 Consulting Revenue 14500 Wages Expense 3600 Depreciation Expense—Buildings 2500 Insurance Expense 1600 Totals 46000 46000 1. Prepare an income statement for the year ended December 31. 2. Prepare a statement of retained earnings for the year ended December 31. 3. SIERRA COMPANY Income Statement For year ended December 31 Revenues: Consulting 14500 Revenue

Total Revenue Expenses: Depreciation expense—Buildings Insurance Expense Wages Expense

14500 2500 1600 3600

Total expense Net Income SIERRA COMPANY Statement of Retained Earnings For Year Ended December 31 Retained earnings, December 31 prior year end Add: Net income

7700 6800

6500 6800 13300 1500

Less: Dividends Retained earnings, December 31 current year end SIERRA COMPANY Balance Sheet December 31 Assets Current Assets Cash Prepaid Insurance

11800

Total current assets Long-term investments Notes receivable

7600

7000 600

4200

Plant Assets Buildings Accumulated depreciation—buildings Total assets Liabilities Current liabilities Accounts payable Long-term liabilities Notes payable

25000 13000

12000 23800

3000

3500

Total liabilities

6500 Equity

Common stock

5500

Retained earnings

11800

Total equity Total liabilities and equity

17300 23800

On April 1, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month. APRIL 1. Nozomi invested $36,000 cash and computer equipment worth $30,000 in the company in exchange for common stock. 2. The company rented furnished office space by paying $2,500 cash for the first month’s (April) rent. 3. The company purchased $1,300 of office supplies for cash. 10. The company paid $2,500 cash for the premium on a 12-month insurance policy. Coverage begins on April 11. 14. The company paid $800 cash for two weeks’ salaries earned by employees. 24. The company collected $14,000 cash for commissions revenue. 28. The company paid $800 cash for two weeks’ salaries earned by employees. 29. The company paid $550 cash for minor repairs to the company’s computer. 30. The company paid $900 cash for this month’s telephone bill. 30. The company paid $2,200 cash in dividends. 101 Cash 405 Commissions revenue 106 Accounts receivable 612 Depreciation expense—computer equip 124 Office supplies 622 Salaries expense 128 Prepaid insurance 637 Insurance expense 167 Computer equipment 640 Rent expense 168 Accumulated Depreciation—Computer equip 650 Office supplies expense 209 Salaries payable 684 Repairs expense 307 Common stock 688 Telephone expense 318 Retained earnings 901 Income summary 319 Dividends Use the following information: a. Prepaid insurance of $139 has expired this month. b. at the end of the month, $500 of office supplies are still available. c. This month’s depreciation on the computer equipment is $600. d. Employees earned $530 of unpaid and unrecorded salaries as of month-end. e. The company earned $1,850 of commissions that are not yet billed at month-end. REQUIRED: 1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts. 3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30. 4. Journalize the adjusting entries for the month and prepare the adjusted trial balance. 5a. Prepare the income statement for the month of April 30. 5b. Prepare the statement of retained earnings for the month of April 30.

5c. Prepare the balance sheet at April 30. 6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b. 6b. Post the journal entries to the ledger. 7. Prepare a post-closing trial balance. Date April 01

General Journal Debit Credit Cash 36000 Computer Equipment 30000 Common Stock 66000 April 02 Rent Expense 2500 Cash 2500 April 03 Office Supplies 1300 Cash 1300 April 10 Prepaid Insurance 2500 Cash 2500 April 14 Salaries Expense 800 Cash 800 April 24 Cash 14000 Commissions Revenue 14000 April 28 Salaries Expense 800 Cash 800 April 29 Repairs Expense 550 Cash 550 April 30 Telephone Expense 900 Cash 900 April 30 Dividends 2200 Cash 2200 Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30. ADVENTURE TRAVEL Unadjusted Trial Balance April 30 Account Title 101: Cash 106: Accounts Receivable 124: Office Supplies 128: Prepaid Insurance 167: Computer Equipment 168: Accumulated Depreciation—Computer Equipment 209: Salaries Payable 307: Common Stock 318: Retained Earnings 319: Dividends 405: Commissions Revenue 612: Depreciation Expense—Computer Equipment 622: Salaries Expense 637: Insurance Expense

Debit 38450

Credit

1300 2500 30000

66000 2200 14000 1600

640: Rent Expense 2500 650: Office Supplies Expense 684: Repairs Expense 550 688: Telephone Expense 900 Total 80000 80000 Journalize the adjusting entries for the month, and then post to the ledger on Req 6B tab, using April 30 Adj. as the date. 1. 2. 3. 4. 5. N o 1

Prepaid insurance of $139 has expired this month. At the end of the month, $500 of office supplies are still available. This month’s depreciation on the computer equipment is $600. Employees earned $530 of unpaid and unrecorded salaries as of month-end. The company earned $1,850 of commissions that are not yet billed at month-end.

Transaction

General Journal

Debit

Credit

A

Insurance expense 139 Prepaid Insurance 139 2 B Office Supplies Expense 800 Office Supplies 800 3 C Depreciation Expense—Computer Equipment 600 Accumulated Depreciation—Computer Equipment 600 4 D Salaries Expense 530 Salaries Payable 530 5 E Accounts Receivable 1850 Commissions Revenue 1850 Using adjusted account balances from Requirement 6b, prepare an adjusted trial balance as of April 30. ADVENTURE TRAVEL Adjusted Trial Balance April 30

Account Title 101: Cash 106: Accounts Receivable 124: Office Supplies 128: Prepaid Insurance 167: Computer Equipment 168: Accumulated Depreciation—Computer Equipment 209: Salaries Payable 307: Common Stock 318: Retained Earnings 319: Dividends 405: Commissions Revenue 612: Depreciation Expense—Computer Equipment 622: Salaries Expense 637: Insurance Expense 640: Rent Expense

Debit 38450 1850 500 2361 30000

Credit

600 530 66000 2200 15850 600 2130 139 2500

650: Office Supplies Expense 684: Repairs Expense 688: Telephone Expense 901: Income Summary Total Prepare the Income Statement for the month of April 30.

800 550 900 82980

82980

ADVENTURE TRAVEL Income Statement For Month Ended April 30 Revenues: Commissions Revenue Expenses: Depreciation Expense—Computer Equipment Salaries Expense Insurance Expense Rent Expense Office Supplies Expense Repairs Expense Telephone Expense Total Expenses Net Income Prepare the Statement of Retained Earnings for the month of April 30. ADVENTURE TRAVEL Statement of Retained Earnings For Month Ended April 30 Retained earnings, April 1 Add: Net Income Less: Dividends Retained Earnings, April 30 Prepare the balance sheet at April 30.

15850 600 2130 139 2500 800 550 900 7619 8231

0 8231 8231 2200 6031 ADVENTURE TRAVEL Balance Sheet April 30 Assets

Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation—Computer Equipment Total Assets Liabilities Salaries Payable

38450 1850 500 2361 30000 600

29400 72561 530

Equity Common Stock 66000 Retained earnings 6031 Total Equity 66000 Total Liabilities and Equity 66530 Prepare journal entries to close the temporary accounts and then post to Req 6B General Ledger, using April 30 Close as the date. N o 1

Date

General Journal

Debit

April 30

Commissions Revenue Income Summary 2 April 30 Income Summary Depreciation Expense—Computer Equipment Salaries Expense Insurance Expense Rent Expense Office Supplies Expense Repairs Expense Telephone Expense 3 April 30 Income Summary Retained Earnings 4 April 30 Retained Earnings Dividends Prepare a post-closing trial balance.

Credit

15850 15850 7619 600 2130 139 2500 800 550 900 8231 8231 2200 2200

ADVENTURE TRAVEL Post-Closing Trial Balance April 30 Account Title Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Salaries Payable Common Stock Retained Earnings Accumulated Depreciation—Computer Equipment Totals

Debit 38450 1850 500 2361 30000

73161

Credit

530 66000 6031 600 73161...