Chapter 03 – Adjustments: Accruals and Deferrals
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Page 71
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
176. On January 2, Dog Mart prepaid $30,000 rent for the year and recorded the prepayment in an asset account. Prepare
the January 31 adjusting entry for rent expense.
ANSWER:
Jan. 31
Rent Expense
($30,000/12)
2,500
Prepaid Rent
2,500
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
177. The prepaid insurance account had a beginning balance of $6,600 and was debited for $2,300 for premiums paid
during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance
related to future periods is $4,100.
ANSWER:
Dec. 31
Insurance Expense
4,800
Prepaid Insurance
4,800
$6,600 + $2,300 − $4,100 = $4,800
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
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
178. The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the
adjusting entry required if the amount of unearned fees at the end of the year is $3,125.
ANSWER:
Unearned Fees
($10,250 – $3,125)
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181. The estimated amount of depreciation on equipment for the current year is $5,300. Journalize the adjusting entry to
record the depreciation.
ANSWER:
Depreciation Expense
5,300
Accumulated Depreciation
5,300
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–04 – LO: 03–04
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
182. On November 1, clients of Great Designs Company prepaid $4,250 for services to be provided in the future at a rate
of $85 per hour.
(a) Journalize the receipt of cash.
(b) As of November 30, Great Designs shows that 15 hours of services have been provided on this agreement. Prepare
the necessary journal entry.
(c) Determine the total unearned fees in hours and dollars at November 30.
ANSWER:
(a) Nov. 1
Cash
4,250
Unearned Service Fees
4,250
(b) Nov. 30
Unearned Service Fees ($85 × 15)
1,275
Service Fees
1,275
(c) Original prepaid fees
$4,250
/$85 per hour =
50 hours
November service fees
earned
1,275
15 hours
Balance of unearned service
fees
$2,975
35 hours
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
183. Prepare the required entries for the following transactions:
Chapter 03 – Adjustments: Accruals and Deferrals
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Page 74
(a)
Austin Company pays daily wages of $645 (Monday – Friday). Paydays are every other
Friday. Prepare the Monday, January 31 adjusting entry, assuming that the previous
payday was Friday, January 21.
(b)
Prepare the journal entry to record the Austin Company’s payroll on Friday, February 4.
(c)
Annual depreciation expense on the company’s fixed assets is $39,600. Prepare the
adjusting entry to recognize depreciation for the month of January.
(d)
The company’s office supplies account shows a debit balance of $3,755. A count of
office supplies on hand on January 31 shows $635 worth of supplies on hand. Prepare
the January 31 adjusting entry for Office Supplies.
ANSWER:
(a)
Jan. 31
Wages Expense
3,870
Wages Payable
3,870
($645 × 6 days)
Monday, January 24 through Friday January 28
5 days × $645 = $3,225
Monday, January 31
1 day × $645 = $645
Wages Payable for January 24 through January 31
$3,225 + $645 = $3,870
(b)
Feb. 4
Wages Expense (4 × $645)
2,580
Wages Payable
3,870
Cash
6,450
Payment of Feb. 4 payroll.
(c) Jan. 31
Depreciation Expense ($39,600/12)
3,300
Accumulated Depreciation
3,300
January depreciation.
(d) Jan. 31
Office Supplies Expense
3,120
Office Supplies
3,120
Office supplies used.
Account balance
$3,755
Less supplies on hand
635
January expense
$3,120
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.03–03 – LO: 03–03
FNMN.WAJO.19.03–04 – LO: 03–04
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
Prepaid Advertising
2,700
December and eliminates the prepaid asset.
184. On December 15, Great Designs Company hired an independent contractor for a project. The contractor completed
the project on December 29 and submitted an invoice for $2,425 which was due on January 15. The amount was duly paid
on January 15.
(a) Prepare the journal entry or entries necessary to record these transactions.
(b) Explain why you prepared this/these journal entries.
ANSWER:
(a)
Dec. 29
Professional
ServicesExpense
2,425
Accounts Payable
2,425
Jan. 15
Accounts Payable
2,425
Cash
2,425
(b)
The first journal entry is required to record the expense of the
independent contractor in the period in which the services were
received. This journal entry created an expense in December’s income
statement and a liability on December’s balance sheet. The second
entry was to pay the contractor when the payment was due. This
removed the liability by resolving it with a cash payment. This
journal entry did not affect January’s income statement.
POINTS:
1
DIFFICULTY:
Challenging
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.04 – Cash vs. Accrual
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
185. On November 15, Great Designs Company purchased an advertising campaign for the month of December. Great
Designs paid cash of $2,700 in advance. The advertising campaign ran in December and was completed on December 31.
(a) Prepare all necessary journal entries for the advertising campaign for November and December .
(b) Explain why you prepared this/these journal entries.
ANSWER:
(a)
Nov. 15
Prepaid Advertising
2,700
Cash
2,700
Dec. 31
Advertising Expense
2,700
Chapter 03 – Adjustments: Accruals and Deferrals
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Page 77
ANSWER:
Date
Description
Post.
Ref.
Debit
Credit
Dec. 31
Accounts Receivable
6,300
Revenues
6,300
31
Supplies Expense ($4,750 – $960)
3,790
Supplies
3,790
31
Wages Expense
2,700
Wages Payable
2,700
31
Depreciation Expense
1,650
Accumulated Depreciation
1,650
31
Rent Expense
10,800
Prepaid Rent
10,800
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
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
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:31 PM
DATE MODIFIED:
10/16/2017 4:29 PM
188. Prepare adjusting entries for the following transactions:
(a)
The beginning balance of the supplies account was $245. During the month the
company bought additional supplies in the amount of $735. At the end of the month a
physical inventory showed $343 of unused supplies.
(b)
The company has a 12% note payable in the amount of $17,000 due in 6 months. The
interest expense of $170 for the month has not been recorded.
(c)
The company has two employees. The manager is paid on the 15th of every month for
work performed during the first half of the month and on the 1st of the following month
for the work performed during the second half of the month. His monthly salary is
$5,500. The other employee is paid $650 for each 5-day work week (Monday –
Chapter 03 – Adjustments: Accruals and Deferrals
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Page 78
Friday). The last day of the month fell on Thursday.
(d)
The unearned fees account shows a balance of $46,000. According to the manager 60%
of that amount has been earned.
(e)
At the end of the month $5,700 of services had been performed but not yet billed.
ANSWER:
(a)
Supplies Expense ($245 + $735 – $343)
637
Supplies
637
(b)
Interest Expense [($17,000 × 12%)/12]
170
Interest Payable
170
(c)
Wages and Salary Expense
3,270
Wages and Salary Payable
{($5,500/2) + [($650/5) × 4]}
3,270
(d)
Unearned Fees
27,600
Fees Earned
27,600
($46,000 × 60%)
(e)
Accounts Receivable
5,700
Fees Earned
5,700
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
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
189. Journalize the six entries to adjust the accounts at December 31. (Hint: One of the accounts was affected by two
different adjusting entries).
Unadjusted
Trial Balance
Adjusted
Trial Balance
Balances
Balances
Balances
Balances
Cash
5,000
5,000
Accounts Receivable
32,000
32,600
Supplies
3,600
100
Prepaid Insurance
4,000
1,400
Equipment
11,000
11,000
Accumulated Depreciation
1,700
Wages Payable
2,000
Unearned Fees
8,900
3,500
Chapter 03 – Adjustments: Accruals and Deferrals
Copyright Cengage Learning. Powered by Cognero.
Page 79
ANSWER:
Accounts Receivable
600
Fees Earned
600
Supplies Expense
3,500
Supplies
3,500
Insurance Expense
2,600
Prepaid Insurance
2,600
Depreciation Expense
1,700
Accumulated Depreciation
1,700
Unearned Fees
5,400
Fees Earned
5,400
Wages Expense
2,000
Wages Payable
2,000
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
Common Stock
22,000
22,000
Fees Earned
69,000
75,000
Wages Expense
44,300
46,300
Supplies Expense
3,500
Insurance Expense
2,600
Depreciation Expense
1,700
Totals
99,900
99,900
104,200
104,200
POINTS:
1
DIFFICULTY:
Moderate
190. Bloom’s Company pays biweekly salaries of $40,000 every other Friday for a ten-day period ending on that day. The
last payday of December is Friday, December 27. Assuming the next pay period begins on Monday, December 30,
journalize the adjusting entry necessary at the end of the fiscal period (December 31).
Date
Description
Post.
Ref.
Debit
Credit
ANSWER:
$40,000/10 days = $4,000 per day
$4,000 per day × 2 days = $8,000
Date
Description
Post.
Ref.
Debit
Credit
Dec. 31
Salary Expense
8,000
Salary 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
191. A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last
payday of December is Friday, December 27. Assume the next pay period begins on Monday, December 30 and the
proper adjusting entry is journalized at the end of the fiscal period (December 31). Journalize the entry for the payment of
the payroll on Friday, January 10.
Date
Description
Post.
Ref.
Debit
Credit
ANSWER:
Accrued salaries for December = $20,000/10 days = $2,000 per day; $2,000 per day ×
2 days = $4,000
Salary expense through January 10 = $20,000 – $4,000 = $16,000
Date
Description
Post.
Ref.
Debit
Credit
Jan. 10
Salary Expense
16,000
Salary Payable