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E3.4 (LO 1, 2, 3) Yilmaz A.Ş. encounters the following situations: Identify the type of adjusting entry needed. 1. Yilmaz collects ₺1,300 from a customer in 2020 for services to be performed in 2021. 2. Yilmaz incurs utility expense which is not yet paid in cash or recorded. 3. Yilmaz's employees worked 3 days in 2020 but will not be paid until 2021. 4. Yilmaz performs services for customers but has not yet received cash or recorded the transaction. 5. Yilmaz paid ₺2,800 rent on December 1 for the 4 months starting December 1. 6. Yilmaz received cash for future services and recorded a liability until the service was performed. 7. Yilmaz performed consulting services for a client in December 2020. On December 31, it had not billed the client for services provided of ₺1,200. 8. Yilmaz paid cash for an expense and recorded an asset until the item was used up. 9. Yilmaz purchased ₺900 of supplies in 2020; at year ‐end, ₺400 of supplies remain unused. 10. Yilmaz purchased equipment on January 1, 2020; the equipment will be used for 5 years. 11. Yilmaz borrowed ₺12,000 on October 1, 2020, signing an 8% one‐year note payable. Instructions Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense, or accrued revenue) is needed in each situation at December 31, 2020.

Answer E3.4 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Unearned revenue. Accrued expense. Accrued expense. Accrued revenue. Prepaid expense. Unearned revenue. Accrued revenue. Prepaid expense. Prepaid expense. Prepaid expense. Accrued expense.

E3.5 (LO 2, 3) Hwang Ltd. has the following balances in selected accounts on December 31, 2020. Prepare adjusting entries from selected data. Accounts Receivable Accumulated Depreciation—Equipment Equipment Interest Payable Notes Payable Prepaid Insurance Salaries and Wages Payable Supplies Unearned Service Revenue

NT$ –0– –0– 7,000 –0– 10,000 2,100 –0– 2,450 32,000

All the accounts have normal balances. The information below has been gathered at December 31, 2020. 1. Hwang borrowed NT$10,000 by signing a 9%, one‐year note on September 1, 2020. 2. A count of supplies on December 31, 2020, indicates that supplies of NT$900 are on hand. 3. Depreciation on the equipment for 2020 is NT$1,000. 4. Hwang paid NT$2,100 for 12 months of insurance coverage on June 1, 2020. 5. On December 1, 2020, Hwang collected NT$32,000 for consulting services to be performed from December 1, 2020, through March 31, 2021. 6. Hwang performed consulting services for a client in December 2020. The client will be billed NT$4,200. 7. Hwang pays its employees total salaries of NT$9,000 every Monday for the preceding 5‐ day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2020. Instructions Prepare annual adjusting entries for the seven items described above.

Answer E3.5 1.

2. 3. 4.

5.

6. 7.

Interest Expense...................................................... Interest Payable (NT$10,000 X 9% X 4/12)...............................

300

Supplies Expense.................................................... Supplies (NT$2,450 – NT$900).........................

1,550

Depreciation Expense............................................. Accumulated Depreciation—Equipment........

1,000

Insurance Expense.................................................. Prepaid Insurance (NT$2,100 X 7/12)...........................................

1,225

Unearned Service Revenue.................................... Service Revenue (NT$32,000 X 1/4)...........................................

8,000

Accounts Receivable.............................................. Service Revenue...............................................

4,200

Salaries and Wages Expense................................. Salaries and Wages Payable (NT$9,000 X 3/5).............................................

5,400

300 1,550 1,000

1,225

8,000 4,200

5,400

E3.6 (LO 2, 3) Orwell Surf Shop accumulates the following adjustment data at December 31. Identify types of adjustments and account relationships. 1. Services performed but unbilled total €3,000. 2. Supplies of €300 have been used. 3. Utility expenses of €552 are unpaid. 4. Services performed of €260 collected in advance. 5. Salaries of €800 are unpaid. 6. Prepaid insurance totaling €350 has expired. Instructions For each of the above items indicate the following. a. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense). b. The status of accounts before adjustment (overstatement or understatement).

Answer E3.6 Item

(a) Type of Adjustment

(b) Accounts before Adjustment

1.

Accrued Revenues

Assets Understated Revenues Understated

2.

Prepaid Expenses

Assets Overstated Expenses Understated

3.

Accrued Expenses

Expenses Understated Liabilities Understated

4.

Unearned Revenues

Liabilities Overstated Revenues Understated

5.

Accrued Expenses

Expenses Understated Liabilities Understated

6.

Prepaid Expenses

Assets Overstated Expenses Understated

E3.7

(LO 2, 3) The ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Prepare adjusting entries from selected account data. Debit Credi t Prepaid Insurance

€ 3,600

Supplies Equipment

2,800 25,000

Accumulated Depreciation—Equipment

€ 8,400

Notes Payable

20,000

Unearned Rent Revenue

10,200

Rent Revenue

60,000

Interest Expense Salaries and Wages Expense

–0– 14,000

An analysis of the accounts shows the following. 1. The equipment depreciates €400 per month. 2. One‐third of the unearned rent revenue was recognized as revenue during the quarter. 3. Interest of €500 is accrued on the notes payable. 4. Supplies on hand total €750. 5. Insurance expires at the rate of €300 per month. Instructions Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

Answer E3.7 1.

2. 3. 4. 5.

Mar. 31Depreciation Expense (€400 X 3)....................... Accumulated Depreciation— Equipment............................................... 31 31 31 31

1,200 1,200

Unearned Rent Revenue............................... Rent Revenue (€10,200 X 1/3)...............

3,400

Interest Expense............................................ Interest Payable......................................

500

Supplies Expense.......................................... Supplies (€2,800 – €750)........................

2,050

Insurance Expense (€300 X 3)...................... Prepaid Insurance..................................

900

3,400 500 2,050 900

E3.8 (LO 2, 3) Lorena Manzone opened a dental practice on January 1, 2020. During the first month of operations, the following transactions occurred. Prepare adjusting entries. 1. Performed services for patients who had dental plan insurance. At January 31, €785 of such services were performed but not yet recorded. 2. Utility expenses incurred but not paid prior to January 31 totaled €650. 3. Purchased dental equipment on January 1 for €80,000, paying €30,000 in cash and signing a €50,000, 3‐year note payable. The equipment depreciates €400 per month. Interest is €500 per month. 4. Purchased a one‐year malpractice insurance policy on January 1 for €24,000. 5. Purchased €1,600 of dental supplies. On January 31, determined that €400 of supplies were on hand. Instructions Prepare the adjusting entries on January 31. Account titles are Accumulated Depreciation— Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.

Answer E3.8 1. Jan. 31 Accounts Receivable..................................... Service Revenue....................................

785

2.

Utilities Expense............................................ Utilities Payable......................................

650

Depreciation Expense................................... Accumulated Depreciation— Equipment...........................................

400

Interest Expense............................................ Interest Payable......................................

500

Insurance Expense (€24,000 ÷ 12)................ Prepaid Insurance..................................

2,000

Supplies Expense (€1,600 – €400)................ Supplies..................................................

1,200

3.

31 31

31 4. 5.

31 31

785 650

400 500 2,000 1,200

E3.9

(LO 2, 3) The trial balance for Yazici Advertising is shown A. Ş. in Illustration 3.3. Instead of the adjusting entries shown in the text at October 31, assume the following adjustment data. Prepare adjusting entries. 1. Supplies on hand at October 31 total ₺500. 2. Expired insurance for the month is ₺120. 3. Depreciation for the month is ₺50. 4. Services related to unearned service revenue in October worth ₺600 were performed. 5. Services performed but not recorded at October 31 are ₺360. 6. Interest accrued at October 31 is ₺95. 7. Accrued salaries at October 31 are ₺1,625. Instructions Prepare the adjusting entries for the items above.

Answer E3.9 1. 2. 3.

4. 5. 6. 7.

Oct. 31 31 31

31 31 31 31

Supplies Expense.......................................... Supplies ( 2,500 – 500).......................

2,000

Insurance Expense........................................ Prepaid Insurance..................................

120

Depreciation Expense................................... Accumulated Depreciation— Equipment...........................................

50

Unearned Service Revenue........................... Service Revenue....................................

600

Accounts Receivable..................................... Service Revenue....................................

360

2,000 120

50 600 360

Interest Expense...................................... Interest Payable...............................

95

Salaries and Wages Expense................. Salaries and Wages Payable...........

1,625

95 1,625

E3.11

(LO 1, 2, 3, 4) A partial adjusted trial balance of Rooney Sports at January 31, 2020, shows the following. Analyze adjusted data. Rooney Sports Adjusted Trial Balance January 31, 2020 Deb Cred it it Supplies

£ 850

Prepaid Insurance

2,400

Salaries and Wages Payable

£ 920

Unearned Service Revenue

750

Supplies Expense

950

Insurance Expense

400

Salaries and Wages Expense 2,900 Service Revenue

2,000

Instructions Answer the following questions, assuming the year begins January 1. a. If the amount in Supplies Expense is the January 31 adjusting entry and £1,000 of supplies was purchased in January, what was the balance in Supplies on January 1? b. If the amount in Insurance Expense is the January 31 adjusting entry and the original insurance premium was for one year, what was the total premium and when was the policy purchased? c. If £3,800 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2019?

Answer E3.11 Answer

Computation

(a)

Supplies balance = ₤800

Supplies expense Add: Supplies (1/31) Less: Supplies purchased Supplies (1/1)

(b)

Total premium = ₤4,800

Total premium = Monthly premium x 12; ₤400 x 12 = ₤4,800

Purchase date = Aug. 1, 2019

Purchase date: On Jan. 31, there are 6 months’ coverage remaining (₤400 x 6). Thus, the purchase date was 6 months earlier on Aug. 1, 2019.

(c)

Salaries and wages payable = ₤1,820

Cash paid Salaries and wages payable (1/31/20)

₤3,800 920 4,720

Less: Salaries and wages expense Salaries and wages payable (12/31/19)

E3.12

2,900 ₤1,820

(LO 2, 3) Selected accounts of Al‐Kazaz Interiors are shown as follows.

Journalize basic transactions and adjusting entries. Supplies Expense 7/31

900

Supplies 7/1 Bal. 7/10

Salaries and Wages Payable 1,100 7/31

900

7/31

1,200

650

Accounts Receivable

Unearned Service Revenue

7/31

7/31

500

1,150 7/1 Bal. 7/20

Salaries and Wages Expense

₤ 950 850 (1,000) ₤ 800

1,500 1,000

Service Revenue

7/15

1,200

7/14

2,200

7/31

1,200

7/31

1,150

7/31

500

Instructions After analyzing the accounts, journalize (a) the July transactions and (b) the adjusting entries that were made on July 31. (Hint: July transactions were for cash.)

Answer E3.12 (a) July 10 Supplies.......................................................... Cash........................................................ 14 15 20 (b) July 31 31 31 31

Cash................................................................ Service Revenue.................................... Salaries and Wages Expense....................... Cash........................................................

650 650 2,200 2,200 1,200 1,200

Cash................................................................ Unearned Service Revenue...................

1,000

Supplies Expense.......................................... Supplies..................................................

900

Accounts Receivable..................................... Service Revenue....................................

500

Salaries and Wages Expense....................... Salaries and Wages Payable.................

1,200

Unearned Service Revenue........................... Service Revenue....................................

1,150

1,000 900 500 1,200 1,150

E3.13(LO 2, 3) The ledger of Yoon Lumber Supply on July 31, 2020, includes the selected accounts below before adjusting entries have been prepared. Prepare adjusting entries from selected account data. Debit Notes Payable Supplies

₩ 20,000 ₩ 24,00 0

Prepaid Rent Buildings

Credit

3,600 250,000

Accumulated Depreciation—Buildings Unearned Service Revenue

140,000 11,500

An analysis of the company's accounts shows the following. 1. The notes payable pays interest at a rate of 6% per year. 2. Supplies on hand at the end of the month totaled ₩18,600. 3. The balance in Prepaid Rent represents 4 months of rent costs. 4. Employees were owed ₩3,100 related to unpaid salaries and wages. 5. Depreciation on buildings is ₩6,000 per year. 6. During the month, the company satisfied obligations worth ₩4,700 related to the Unearned Services Revenue. 7. Unpaid maintenance and repairs costs were ₩2,300. Instructions Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly. Use additional accounts as needed.

Answer E3.13 Date

Account Titles

July 31

Interest Expense (￦20,000  .06  1/12)...............

Debit 100

Interest Payable................................................

31

100

Supplies Expense (￦24,000 – ￦18,600).................. 5,400 Supplies............................................................

31

Rent Expense (￦3,600  4).....................................

5,400 900

Prepaid Rent..................................................... 31

900

Salaries and Wages Expense..................................... 3,100 Salaries and Wages Payable..............................

31

Depreciation Expense (￦6,000  12)......................

3,100 500

Accumulated Depreciation—Buildings.............. 31

500

Unearned Service Revenue....................................... 4,700 Service Revenue...............................................

31

Credit

4,700

Maintenance and Repairs Expense........................... 2,300 Accounts Payable..............................................

2,300

E3.15 (LO 2) Action Quest Games adjusts its accounts annually. The following information is available for the year ended December 31, 2020. Prepare and post transaction and adjusting entries for prepayments. 1. Purchased a 1‐year insurance policy on June 1 for $1,800 cash. 2. Paid $6,500 on August 31 for 5 months' rent in advance. 3. On September 4, received $3,600 cash in advance from a company to sponsor a game each month for a total of 9 months for the most improved students at a local school. 4. Signed a contract for cleaning services starting December 1 for $1,000 per month. Paid for the first 2 months on November 30. (Hint: Use the account Prepaid Cleaning to record prepayments.) 5. On December 5, received $1,500 in advance from a gaming club. Determined that on December 31, $475 of these games had not yet been played.

Instructions a. For each of the above transactions, prepare the journal entry to record the initial transaction. b. For each of the above transactions, prepare the adjusting journal entry that is required on December 31, (Hint: Use the account Service Revenue for item 3 and Maintenance and Repair Expense for item 4.) c. Post the journal entries in parts (a) and (b) to T‐accounts and determine the final balance in each account balance. (Note: Posting to the Cash account is not required.)

Answer E3.15 (a) 2020 June

1

Prepaid Insurance..............................................

1,800

Cash........................................................... Aug.

31

Prepaid Rent......................................................

1,800 6,500

Cash........................................................... Sept.

4

Cash...................................................................

6,500 3,600

Unearned Service Revenue......................... Nov.

30

Prepaid Cleaning................................................

3,600 2,000

Cash..............