97) Bayside Technical Services signed a contract on a six-month job for a client, starting on March 1.
Bayside will collect $24,000 from its customer when the job is finished but the revenue is earned evenly
over the six months. On March 31, before adjusting entries are made, Bayside‘s Accounts Receivable
account had a debit balance of $4,000. After the March 31 monthly adjusting entry has been made, what
will be the balance in Accounts Receivable?
A) Debit balance of $4,000
B) Credit balance of $20,000
C) Debit balance of $8,000
D) Debit balance of $24,000
98) Adkins Company is hired on December 15, 2018 to perform services, beginning on December 16, 2018.
Under this agreement, Adkins will earn $4,400 monthly and receive payment on January 15, 2019. What
amount of service revenue should be recorded for the year ending December 31, 2018?
A) 0
B) $2,200
C) $4,400
D) There is not enough information to answer this.
99) Athens Delivery Service is hired on October 31, 2018 to perform services, beginning on November 1,
2018. The delivery services will be performed for six months at a rate of $3,500 per month. Athens’ fiscal
year ends on December 31. What amount of service revenue should be recorded as an adjusting entry on
December 31, 2018?
A) $3,500
B) 0
C) $7,000
D) $10,500
100) Luminous Electrical, Inc. performed services of $8,000 on January 24 and invoiced the customer.
Luminous received the $8,000 on January 31. Provide the journal entry on January 24 when services were
performed. (Ignore explanation.)
101) West Electrical, Inc. performed services of $8,000 on January 24 and invoiced the customer. West
received the $8,000 on January 31. Provide the journal entry on January 31 when the cash was received.
(Ignore explanation.)
102) The accounting records of Mason Service Company include the following selected, unadjusted
balances at June 30: Accounts Receivable, $2,700; Office Supplies, $1,800; Prepaid Rent, $3,600;
Equipment, $15,000; Accumulated Depreciation – Equipment, $1,800; Salaries Payable, $0; Unearned
Revenue, $2,400; Office Supplies Expense, $2,800; Rent Expense, $0; Salaries Expense, $15,000; Service
Revenue, $40,500.
The following data developed for adjusting entries are as follows:
a. Service revenue accrued, $1,400
b. Unearned Revenue that has been earned, $800
c. Office Supplies on hand, $700
d. Salaries owed to employees, $1,800
e. One month of prepaid rent has expired, $1,200
f. Depreciation on equipment, $1,500
Journalize the adjusting entries. Omit explanations.
Accounts
Debit
a
b
c
d
e
f
Accounts
Debit
a
Accounts Receivable
Service Revenue
1,400
b
Unearned Revenue
Service Revenue
800
c
Office Supplies Expense
Office Supplies
1,100
d
Salaries Expense
Salaries Payable
1,800
e
Rent Expense
Prepaid Rent
1,200
f
Depreciation Expense – Equipment
Accumulated Depreciation –
Equipment
1,500
Diff: 3
LO: 3-3
54
Copyright © 2018 Pearson Education, Inc.
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2: Accrued Revenues
3.4 Learning Objective 3-4
1) An adjusted trial balance does not list the revenues and expenses of a business.
2) The adjusted trial balance is prepared after the adjustments have been journalized and posted.
3) The purpose of the adjusted trial balance is to ensure that no errors were made during the adjusting
process.
4) The adjusted trial balance shows ________.
A) account balances after adjustments
B) revenue and expense accounts only
C) account balances before adjustments
D) balance sheet accounts only
5) Deborah Consultants had the following accounts and account balances after adjusting entries. Assume
all accounts have normal balances. Calculate the amount of service revenue and prepare the adjusted trial
balance for Deborah Consultants as of December 31, 2019.
Cash $6,000 Dividends $3,000
Accounts Receivable 2,000 Service Revenue ?
Office Supplies 1,800 Salaries Expense 4,000
Equipment 15,000 Rent Expense 800
Accumulated Depreciation— 9,000 Depreciation Expense— 1,500
Equipment Equipment
Common Stock 15,000 Supplies Expense 500
6) Reece Consultants had the following balances before preparing adjusting entries in the books on
December 31, 2019.
Cash $6,000 Dividends $3,000
Accounts Receivable 2,000 Service Revenue 10,600
Office Supplies 1,800 Salaries Expense 4,000
Equipment 15,000 Rent Expense 800
Accumulated Depreciation— 9,000 Depreciation Expense— 1,500
Equipment Equipment
Common Stock 15,000 Supplies Expense 500
Prepare the adjusted trial balance after considering these adjustments:
a. Office Supplies used, $800. Assume the office supplies were initially recorded as an asset.
b. Accrued salaries on December 31, $600.
c. Revenue earned but not recorded, $200.
57
7) The unadjusted trial balance of James Business Consulting at December 31, 2018, and the data for the
adjustments follow:
James Business Consulting
Unadjusted Trial Balance
December 31, 2018
Balance
Balance
Account Title
Debit
Credit
Cash
$40,000
Accounts Receivable
12,000
Prepaid Insurance
3,000
Office Supplies
6,000
Accounts Payable
5,000
Advertising Payable
0
Common Stock
30,000
Retained Earnings
7,000
Dividends
5,000
Service Revenue
44,000
Advertising Expense
500
Insurance Expense
1,500
Office Supplies Expense
0
Rent Expense
6,000
Salaries Expense
12,000
Total
$86,000
$86,000
Data for adjustments:
a. James prepaid 6 months of business insurance on September 30, 2018, with coverage beginning
on October 1. James treats deferred expenses initially as assets.
b. A physical count of office supplies was made on December 31, 2018. This count showed a
balance of $4,200 office supplies on hand.
c. On December 31, 2018, James received a bill for the November and December advertising in a
local newspaper, $800. This bill will be paid on its due date, which is 1/10/2019.
James is preparing financial statements for the quarter ending December 31, 2018.
Requirements
1. Journalize the adjusting entries on December 31, 2018.
2. Prepare the December 31, 2018 adjusted trial balance. Use a proper heading.
58
Copyright © 2018 Pearson Education, Inc.
Answer:
1.
Date Account Title Debit Credit
12/31
Insurance Expense
1,500
Prepaid Insurance
1,500
12/31
Office Supplies Expense
1,800
Office Supplies
1,800
12/31
Advertising Expense
800
Advertising Payable
800
2.
James Business Consulting
Adjusted Trial Balance
December 31, 2018
Balance
Balance
Account Title
Debit
Credit
Cash
$40,000
Accounts Receivable
12,000
Prepaid Insurance
1,500
Office Supplies
4,200
Accounts Payable
5,000
Advertising Payable
800
Common Stock
30,000
Retained Earnings
7,000
Dividends
5,000
Service Revenue
44,000
Advertising Expense
1,300
Insurance Expense
3,000
Office Supplies Expense
1,800
Rent Expense
6,000
Salaries Expense
12,000
Total
$86,800
$86,800
Diff: 3
LO: 3-3, 3-4
AACSB: Application of knowledge
AICPA Functional: Reporting
PE Question Type: Application
H2: What Is the Purpose of the Adjusted Trial Balance and How Do We Prepare It? (H1)
59
8) The unadjusted trial balance of Burton Business Services at December 31, 2018, and the data for the
adjustments follow:
Burton Business Services
Unadjusted Trial Balance
December 31, 2018
Balance
Account Title
Debit
Credit
Cash
$20,000
Accounts Receivable
14,000
Equipment
50,000
Accumulated Depreciation –
Equipment
$17,500
Accounts Payable
10,000
Unearned Revenue
9,000
Common Stock
30,000
Retained Earnings
5,000
Dividends
5,000
Service Revenue
49,000
Advertising Expense
4,000
Depreciation Expense –
Equipment
8,000
Insurance Expense
4,500
Salaries Expense
15,000
Total
$120,500
$120,500
Adjustment data at December 31 follows:
a. Depreciation for the equipment is $4,000.
b. As of December 31, 2018, Burton had performed services for Wilson Company for $3,000. The invoice
will be sent on January 5, 2019 and payment is due on January 15, 2019.
c. On August 31, 2018, Burton agreed to provide consulting services to Allen Company for 6 months,
beginning on September 1, 2018, at $1,500 per month. Allen paid $9,000 on August 31, 2018. Burton
treats deferred revenues initially as liabilities.
Burton is preparing financial statements for the year ending December 31, 2018.
Requirements
1. Journalize the adjusting entries on December 31, 2018.
2. Prepare the December 31, 2018 adjusted trial balance. Use a proper heading.
60
Copyright © 2018 Pearson Education, Inc.
Answer:
1.
Date
Account Title
Debit
Credit
12/31
Depreciation Expense – Equipment
4,000
Accumulated Depreciation – Equipment
4,000
12/31
Accounts Receivable – Wilson
3,000
Service Revenue
3,000
12/31
Unearned Revenue
6,000
Service Revenue
6,000
2.
Burton Business Services
Adjusted Trial Balance
December 31, 2018
Balance
Account Title
Debit
Credit
Cash
$20,000
Accounts Receivable
17,000
Equipment
50,000
Accumulated Depreciation –
Equipment
$ 21,500
Accounts Payable
10,000
Unearned Revenue
3,000
Common Stock
30,000
Retained Earnings
5,000
Dividends
5,000
Service Revenue
58,000
Advertising Expense
4,000
Depreciation Expense –
Equipment
12,000
Insurance Expense
4,500
Salaries Expense
15,000
_____
Total
$127,500
$127,500
Diff: 3
LO: 3-3, 3-4
AACSB: Application of knowledge
AICPA Functional: Reporting
PE Question Type: Application
H2: What Is the Purpose of the Adjusted Trial Balance and How Do We Prepare It? (H1)