89) A business hired a repairman to overhaul their plumbing system. The repairman began working on September
15 and will finish the work on October 15. The business will pay him $4,000 when the work is completed. As of
September 30, the work was 50% complete, and the business made an adjusting entry to accrue repair expense as of
the end of September. Please provide that adjusting entry.
Repair expense
Accounts paybale
90) A business hired a repairman to overhaul their plumbing system. The repairman began working on September
15 and finished the work on October 15. The business agreed to pay him $4,000 when the work was completed. As
of September 30, the work was 50% complete, and the business made an adjusting entry to accrue repair expense as
of the end of September. On October 15, the job was done and the business paid the repairman in full. Please
provide the journal entry for the cash payment on October 15.
Repair expense
Accounts payable
91) Century Security Services had a new customer come in to their office and request their services for a two-month
period. Century will collect a total of $10,000 from the customer at the end of the two-month period. Century
began providing services on June 1. On June 30, Century needs to make an adjusting entry to accrue service
revenue. Please provide that adjusting entry.
Accounts receivable
Service revenue
92) Century Security Services had a new customer come in to their office and request their services for a two-month
period. Century will collect a total of $10,000 from the customer at the end of the two-month period. Century
began providing services on June 1. On June 30, Century accrued service revenue for the first one-month period.
On July 31, Century completed the services and collected $10,000 from the customer. Please provide the journal
entry made to record the collection of cash from the customer on July 31.
Cash
Accounts receivable
Service revenue
93) Century Security Services purchased new communications equipment for $30,000 on October 1, 2012. It will
have a useful life of 5 years. Century records depreciation every month. Please provide the depreciation entry
needed on October 31, 2012.
Depreciation expense
Accumulated depreciation
94) Double-A Public Relations Firm got a new client on September 1. Double-A will provide services to the new
client at a rate of $250 per month for a three-month period beginning September 1. Double-A required the client to
pay for the entire period in advance. Please show the journal entry for the cash collected by Double-A on September
1.
Cash
Unearend revenue
95) Double-A Public Relations Firm got a new client on September 1. Double-A agreed to provide services to the
new client at a rate of $250 per month for a three-month period beginning September 1. Double-A required the
client to pay for the entire period on September 1. On September 30, Double-A needs to make an adjusting entry.
Please provide that adjusting entry.
Unearend revenue
Service revenue
96) Fleet Tutoring Services borrowed $12,000 and signed a one–year note payable on December 1, 2012. The note
bears interest at a rate of 5% per year. Fleet will repay the principal amount of $12,000 plus one year’s interest of
$600 on November 30 of the following year. Fleet accrues interest expense every month. What adjusting entry is
needed on December 31?
Revenue
Service revenue
1) The accountant for Jones Auto Repair Company failed to make an adjusting entry to record $5,000 of unpaid
salaries for the last 2 weeks of the year. Which of the following is TRUE?
A) Net income is overstated.
B) Total assets are understated.
C) Total liabilities are overstated.
D) Total assets are overstated.
2) Financial statements are prepared from a(n):
A) general journal.
B) general ledger.
C) unadjusted trial balance.
D) adjusted trial balance.
3) All of a company’s accounts and their balances appear on the:
A) statement of retained earnings.
B) balance sheet.
C) adjusted trial balance.
D) income statement.
4) The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3,000 of unearned
service revenue that has now been earned. Which of the following is TRUE?
A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.
5) The accountant for Hobson Electrical Repair Company failed to make an adjusting entry to record $5,000 of
unpaid salaries for the last two weeks of the year. Which of the following is TRUE?
A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.
6) The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7,000 of
depreciation expense. Which of the following is TRUE?
A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.
7) The accountant for Duman Legal Services failed to make an adjusting entry for supplies that had been used for
the year. Which of the following is TRUE?
A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.
8) The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3,000 of unearned
service revenue that has now been earned. Which of the following is TRUE?
A) Total revenue is overstated.
B) Total revenue is understated.
C) Total expenses are overstated.
D) Total expenses are understated.
9) The accountant for Hobson Electrical Repair Company failed to make an adjusting entry to record $5,000 of
unpaid salaries for the last two weeks of the year. Which of the following is TRUE?
A) Total revenue is overstated.
B) Total revenue is understated.
C) Total expenses are overstated.
D) Total expenses are understated.
10) The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7,000 of
depreciation expense. Which of the following is TRUE?
A) Total revenue is overstated.
B) Total revenue is understated.
C) Total expenses are overstated.
D) Total expenses are understated.
11) Pattie’s Event Planning Service collects the fees from their customers in advance. At January 1, 2012, the
balance of her Unearned revenue account was a credit of $4,000. During January and February, she collected
$2,000 and $1,000 respectively. During the two-month period, she rendered services of $5,500. At the end of
February, her adjusted trial balance will show what balance in Unearned revenues?
A) Debit balance of $3,000
B) Credit balance of $3,000
C) Debit balance of $2,300
D) Credit balance of $1,500
12) Pattie’s Event Planning Service has just prepared the unadjusted trial balance, which shows the following
balances:
Salary expense: Debit $6,000
Service revenues: Credit $20,000
Interest expense: 0
Pattie’s salaries are $2,000 per week and are paid out at the end of the day on Fridays. The end of the month falls on
a Thursday. Patti will make the appropriate accrual adjustment and post to the ledger. The final adjusted balance of
Salary payable, as shown on the adjusted trial balance, will be a:
A) credit balance of $1,600.
B) credit balance of $3,600.
C) debit balance of $3,600.
D) credit balance of $400.
13) Pattie’s Event Planning Service has just prepared the unadjusted trial balance, which shows the following
balances:
Salary expense: Debit $8,000
Service revenues: Credit $3,000
Interest expense: 0
Late in this month, she began working with a new client, providing event planning services for an upcoming event.
When the event is complete, in the following month, she will collect the full amount of $900 from her client. As of
the end of this month, she has rendered one-third of the services covered by the contract. She makes accrual
adjustments monthly. The final adjusted balance of Service revenues, as shown on the adjusted trial balance, should
be a:
A) debit balance of $300.
B) credit balance of $3,900.
C) debit balance of $3,300.
D) credit balance of $3,300.
14) Pattie’s Event Planning Service has just prepared the unadjusted trial balance, which shows the following
balances:
Salary expense: Debit $8,000
Service revenues: Credit $3,000
Interest expense: 0
On the first day of January, Pattie borrowed $1,800 on a one-year note payable bearing interest at 4% per year. The
note specifies that principal and interest is to be paid in full at the end of the one-year period. On June 30, the
adjusted trial balance will show what amount for Interest expense?
A) Debit balance of $36
B) Credit balance of $36
C) Debit balance of $72
D) Debit balance of $6
Learning Objective 3-6
1) The financial statements should be prepared in this order: 1) income statement, 2) balance sheet, and 3) owner’s
equity.
2) Net income from the income statement is reported in the assets section of the balance sheet.
3) Which of the following reports a company’s results of operations?
A) Balance sheet
B) Statement of owner’s equity
C) Adjusted trial balance
D) Income statement
4) Which of the following reports a company’s financial position?
A) Balance sheet
B) Income statement
C) Adjusted trial balance
D) Statement of owner’s equity
5) Prepare an income statement for the year ended December 31, 2012 from the adjusted trial balance below.
Deavours Photography
Adjusted Trial Balance
December 31, 2012
Accounts
Debit
Credit
Cash
$2,000
Prepaid insurance
2,000
Office supplies
600
Office equipment
16,000
Accumulated depreciation
$3,000
Accounts payable
5,000
Salaries payable
900
Unearned service revenue
2,500
C. Devours, capital
7,450
C. Devours, drawing
5,600
Service revenue
15,350
Salaries expense
4,600
Depreciation expense
1,000
Supplies expense
400
Insurance expense
2,000
Totals
$34,200
$34,200
Revenue
Expenses
Net income/(loss)
6) Prepare a statement of owner’s equity for the year ended December 31, 2012 from the adjusted trial balance
below.
Deavours Photography Company
Adjusted Trial Balance
December 31, 2012
Accounts
Debit
Credit
Cash
$2,000
Prepaid insurance
2,000
Office supplies
600
Office equipment
16,000
Accumulated depreciation
$3,000
Accounts payable
5,000
Salaries payable
900
Unearned service revenue
2,500
C. Devours, capital
7,450
C. Devours, drawing
5,600
Service revenue
15,350
Salaries expense
4,600
Depreciation expense
1,000
Supplies expense
400
Insurance expense
2,000
Totals
$34,200
$34,200
7) Prepare a balance sheet from the adjusted trial balance below.
Deavours Photography
Adjusted Trial Balance
December 31, 2012
Accounts
Debit
Credit
Cash
$2,000
Prepaid insurance
2,000
Office supplies
600
Office equipment
16,000
Accumulated depreciation
$3,000
Accounts payable
5,000
Salaries payable
900
Unearned service revenue
2,500
C. Devours, capital
7,450
C. Devours, drawing
5,600
Service revenue
15,350
Salaries expense
4,600
Depreciation expense
1,000
Supplies expense
400
Insurance expense
2,000
Totals
$34,200
$34,200
8) Below is the adjusted trial balance for Parsons Repair Service. Please prepare the income statement for the year
ended December 31, 2012.
Parsons Repair Service
Adjusted Trial Balance
December 31, 2012
Accounts
Debit
Credit
Cash
$1,600
Accounts receivable
2,400
Prepaid rent
800
Supplies
200
Building
14,000
Accumulated depreciation
$2,000
Accounts payable
4,200
Salary payable
1,000
Unearned revenue
800
D. Parsons, capital
6,000
D. Parsons, drawing
1,000
Service revenue
50,000
Salary expense
21,000
Rent expense
14,000
Depreciation expense
8,500
Supplies expense
500
Total
$64,000
$64,000
Revenue
$50,000
Expenses
14,000
8,500
44,000
Net income/(loss)
9) Below is the adjusted trial balance for Parsons Repair Service. Please prepare the statement of owner’s equity for
the year ended December 31, 2012.
Accounts
Debit
Credit
Cash
$1,600
Accounts receivable
2,400
Prepaid rent
800
Supplies
200
Building
14,000
Accumulated depreciation
$2,000
Accounts payable
4,200
Salary payable
1,000
Unearned revenue
800
D. Parsons, capital
6,000
D. Parsons, drawing
1,000
Service revenue
50,000
Salary expense
21,000
Rent expense
14,000
Depreciation expense
8,500
Supplies expense
500
Total
$64,000
$64,000
10) Below is the adjusted trial balance for Parsons Repair Service. Please prepare the balance sheet at December 31,
2012.
Accounts
Debit
Credit
Cash
$1,600
Accounts receivable
2,400
Prepaid rent
800
Supplies
200
Building
14,000
Accumulated depreciation
$2,000
Accounts payable
4,200
Salary payable
1,000
Unearned revenue
800
D. Parsons, capital
6,000
D. Parsons, drawing
1,000
Service revenue
50,000
Salary expense
21,000
Rent expense
14,000
Depreciation expense
8,500
Supplies expense
500
Total
$64,000
$64,000
Learning Objective 3-7
1) Pattie’s Event Planning Service records prepaid expenses as expenses when cash is paid out, and records unearned
revenues as revenues when cash is collected. She then makes adjusting entries as needed to bring her books up to
the full accrual basis once a year at the end of the year. This year on October 1, she paid out $3,600 for insurance
for a one-year period. At the end of the year, she will make an adjustment entry that debits Insurance expense for
$900.
2) Pattie’s Event Planning Service records prepaid expenses as expenses when cash is paid out, and records unearned
revenues as revenues when cash is collected. She then makes adjusting entries as needed to bring her books up to
the full accrual basis once a year at the end of the year. This year on December 15, she collected $1,000 from a
customer in advance for a series of events that will start in late December and finish in mid-March. At the end of the
year, she has finished approximately 10% of the services for her customer. Her adjusting entry at December 31 will
include a debit to Service revenue of $900.
3) Duncan Services initially records prepaid expenses as expenses, and unearned revenues as revenues. Then at the
end of the year, they make the necessary adjustments to the accrual basis. On July 1, Duncan paid rent for office
space in the amount of $12,000 for the period July 1 through June 30 of the following year. Please provide the
adjusting entry that would be needed at year-end.
Prepaid rent
Rent expense
4) Duncan Services initially records prepaid expenses as expenses, and unearned revenues as revenues. Then at the
end of the year, they make the necessary adjustments to accrual basis. On December 15, Duncan collected revenues
of $1,000 in advance from a new client, and agreed to provide services to the client for the period of December 15
through January 15 of the following year. Please provide the adjusting entry that would be needed at year-end.
Service revenue
Unearned revenue