Chapter 03 – Adjustments: Accruals and Deferrals
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BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
159. For each of the following, journalize the necessary adjusting entry:
(a)
A business pays weekly salaries of $22,000 on Friday for a five-day week ending on
that day. Journalize the necessary adjusting entry at the end of the fiscal period,
assuming that the fiscal period ends (1) on Tuesday, (2) on Wednesday.
(b)
The balance in the prepaid insurance account before adjustment at the end of the year
is $18,000. Journalize the adjusting entry required under each of the following
alternatives: (1) the amount of insurance expired during the year is $5,300, (2) the
amount of unexpired insurance applicable to a future period is $2,700.
(c)
On July 1 of the current year, a business pays $54,000 to the city for license taxes for
the coming fiscal year. The same business is also required to pay an annual property
tax at the end of the year. The estimated amount of the current year’s property tax
allocated to July is $4,800. (1) Journalize the two adjusting entries required to bring
the accounts affected by the taxes up to date as of July 31. (2) What is the amount of
tax expense for July?
(d)
The estimated depreciation on equipment for the year is $32,000.
ANSWER:
(a)
(1) Salary Expense ($22,000/5 × 2)
8,800
Salaries Payable
8,800
(2) Salary Expense ($22,000/5 × 3)
13,200
Salaries Payable
13,200
(b)
(1) Insurance Expense
5,300
Prepaid Insurance
5,300
(2) Insurance Expense ($18,000 – $2,700)
15,300
Prepaid Insurance
15,300
(c)
(1) Taxes Expense ($54,000/12)
4,500
Prepaid License Taxes
4,500
Taxes Expense
4,800
Property Taxes Payable
4,800
(2) $9,300 ($4,500 + $4,800)
(d)
Depreciation Expense
32,000
Accumulated Depreciation—
Equipment
32,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–05 – LO: 03–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
Chapter 03 – Adjustments: Accruals and Deferrals
Unearned Fees
6,700
6,500
Common Stock
24,000
24,000
Dividends
4,800
4,800
Fees Earned
25,000
25,500
Depreciation Expense
5,500
on the note payable
j. Depreciation is recorded on office
equipment
ANSWER:
Transactions
Account(s) Debited
Account(s) Credited
a.
21
22
b.
22
6
c.
19
6
d.
10
19
e.
6
20
f.
20
9
g.
17
6, 1
h.
6
16
i.
12
13
j.
7
3
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–02 – LO: 03–02
FNMN.WAJO.19.03–03 – LO: 03–03
FNMN.WAJO.19.03–04 – LO: 03–04
FNMN.WAJO.19.03–05 – LO: 03–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
161. REM Consulting is completing the accounting information processing at the end of the fiscal year, December
31. The following trial balances are available.
Accounts
Unadjusted
Trial Balance
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Cash
13,000
13,000
Accounts Receivable
1,500
1,800
Prepaid Insurance
600
200
Supplies
3,800
3,000
Machines
30,000
30,000
Accumulated Depreciation
12,000
17,500
Wages Payable
900
Chapter 03 – Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 64
Supplies Expense
800
Insurance Expense
400
67,700
67,700
74,400
74,400
(a) Reconstruct the adjusting entries and give a brief explanation of each.
(b) What is the amount of net income?
ANSWER:
(a)
Accounts Receivable
300
Fees Earned
300
Accrued fees.
Insurance Expense
400
Prepaid Insurance
400
Expired insurance.
Supplies Expense
800
Supplies
800
Supplies used ($3,800 – $3,000).
Depreciation Expense
5,500
Accumulated Depreciation
5,500
Depreciation expense.
Wages Expense
900
Wages Payable
900
Accrued wages.
Unearned Fees
200
Fees Earned
200
Fees earned ($6,700 – $6,500).
(b)
$25,500 – $14,900 – $400 – $800 – $5,500 = $3,900
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–02 – LO: 03–02
FNMN.WAJO.19.03–03 – LO: 03–03
FNMN.WAJO.19.03–04 – LO: 03–04
FNMN.WAJO.19.03–05 – LO: 03–05
FNMN.WAJO.19.03–06 – LO: 03–06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
162. Zoey Bella Corp. has a payroll of $10,000 for a five-day workweek. Its employees are paid each Friday for the five-
day workweek. Prepare the adjusting entry on December 31 assuming the year ends on Thursday.
Date
Description
Post. Ref.
Debit
Credit
Chapter 03 – Adjustments: Accruals and Deferrals
ANSWER:
$10,000/5 = $2,000 per day × 4 days = $8,000
Date
Description
Post. Ref.
Debit
Credit
Dec. 31
Wages Expense
8,000
Wages Payable
8,000
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–02 – LO: 03–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
163. A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be:
Date
Description
Post. Ref.
Debit
Credit
ANSWER:
$2,400/12 = $200 per month × 7 months = $1,400
Date
Description
Post.
Ref.
Debit
Credit
Dec. 31
Insurance Expense
1,400
Prepaid Insurance
1,400
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
164. Depreciation on an office building is $2,800. The adjusting entry on December 31 would be
Date
Description
Post. Ref.
Debit
Credit
ANSWER:
