8. Prepare year-end adjusting entries for each of the following situations.
a. The Office Supplies account showed a beginning debit balance of $600 and purchases of $1,000.
The ending debit balance was $400.
b. Depreciation on buildings is estimated to be $7,600.
c. A one-year insurance policy was purchased for $6,000. Four months have passed since the purchase.
d. Accrued interest on notes payable amounted to $1,500.
e. The company received a $14,400 advance payment during the year on services to be performed. By
the end of the year, two-thirds of the services had been performed.
f. Payroll for the five-day workweek, to be paid on Friday, is $14,000. The last day of the period is a
Wednesday.
g. Services totaling $780 had been performed but not yet billed or recorded.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Interest Income
Unearned Revenue*
Service Revenue
Rent Expense**
Prepaid Rent
Accounts Receivable
Service Revenue
Depreciation Expense–Trucks
Supplies
Wages Payable
Income Taxes Expense
Income Taxes Payable
Office Supplies Expense
Office Supplies
Depreciation Expense–Buildings
Accumulated Depreciation–Buildings
Recorded annual depreciation
Insurance Expense
Prepaid Insurance
Interest Expense
Interest Payable
Unearned Service Revenue
9. Prepare year-end adjusting entries for each of the following situations:
a. The Store Supplies account showed a beginning debit balance of $400 and purchases of $2,800. The
ending debit balance was $800.
b. Depreciation on buildings is estimated to be $7,300.
c. A one-year insurance policy was purchased for $2,400. Nine months have passed since the purchase.
d. Accrued interest on notes payable amounted to $200.
e. The company received a $9,600 advance payment during the year on services to be performed. By
the end of the year, one-third of the services had been performed.
f. Payroll for the five-day workweek, to be paid on Friday, is $10,000. The last day of the period is a
Tuesday.
g. Services totaling $920 had been performed but not yet billed or recorded.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Wages Expense
Wages Payable
8,400
Accounts Receivable
Services Revenue
Store Supplies Expense
Store Supplies
Depreciation Expense–Buildings
Accumulated Depreciation–Buildings
Recorded annual depreciation
Insurance Expense
Prepaid Insurance
Interest Expense
Interest Payable
Unearned Service Revenue
Service Revenue
($9,600 ´ 1/3 = $3,200)
Wages Expense
Wages Payable
Accounts Receivable
Services Revenue
10. Use the following unadjusted trial balance to prepare adjusting entries, given the additional
information below it. Assume financial statements are prepared quarterly. Omit explanations.
Crivelli Financial Services
Unadjusted Trial Balance
September 30, 2013
Cash
$ 20,000
Accounts Receivable
6,400
Office Supplies
1,000
Prepaid Rent
3,600
Office Furniture
9,600
Accumulated Depreciation–Office Furniture
$ 400
Accounts Payable
14,800
Unearned Revenue
2,000
Common Stock
20,400
Consulting Revenue
12,000
Salaries Expense
7,400
Insurance Expense
1,600
_______
$49,600
$49,600
a. Of the revenue received in advance, 60 percent remained unearned on September 30.
b. The office furniture has an estimated five-year useful life and zero value at the end of that time.
Record depreciation for the quarter.
c. Salaries earned, but unpaid, totaled $1,520.
d. The Prepaid Rent applies to the six months beginning July 1, 2013.
e. Office supplies on hand totaled $300 at the end of the quarter.
f. Services performed but not yet billed or recorded amount to $1,800.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
11. Use the following unadjusted trial balance to prepare adjusting entries, given the additional
information below it. Assume that financial statements are prepared quarterly. Omit explanations.
Shayna’s Financial Services
Unadjusted Trial Balance
September 30, 2013
Cash
$ 30,000
Accounts Receivable
9,600
Office Supplies
1,600
Prepaid Rent
5,400
Office Furniture
14,400
Accumulated Depreciation–Office Furniture
$ 600
Page 1
Unearned Revenue*
Consulting Revenue
Depreciation Expense–Office Furniture**
Salaries Expense
Salaries Payable
Prepaid Rent
Office Supplies
Accounts Receivable
Consulting Revenue
Accounts Payable
22,200
Unearned Revenue
3,000
Common Stock
30,600
Consulting Revenue
18,000
Salaries Expense
11,000
Insurance Expense
2,400
_______
$74,400
$74,400
a. Of the revenue received in advance, 60 percent remained unearned on September 30.
b. The office furniture has an estimated 12-year useful life and zero value at the end of that time.
Record depreciation for the quarter.
c. Salaries earned, but unpaid, totaled $2,600.
d. The Prepaid Rent applies to the six months beginning July 1, 2013.
e. Office supplies on hand totaled $600 at the end of the quarter.
f. Services performed but not yet billed or recorded amount to $3,000.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Page 1
12. Answer the following questions. (Show your work.)
a. A machine was purchased on July 1, 2012. It had a cost of $72,000 and an estimated useful life of
nine years with zero value at that time. What is the machine’s carrying value after four years?
b. On April 1, 2012, a company paid in advance $108,000 for three years’ insurance. How much
Prepaid Insurance remains on the balance sheet on December 31, 2012?
c. A company began the year with $1,600 in supplies, purchased $4,000 in supplies, and ended the
period with $1,200 in supplies. How much is Supplies Expense for the period?
d. A company was paid $3,600 in advance for services to be performed. At year end, one-third had not
yet been earned. How much in Service Revenue should be recorded?
13. Answer the following questions. (Show your work.)
a. Revenue of $60,000 was earned, but only $45,000 was collected. Expenses of $36,000 were
incurred, but only $30,000 was paid. What is reported net income?
b. Wages of $4,000 are paid every Friday for a five-day workweek. If year end falls on a Tuesday, the
adjusting entry for wages would be recorded at what amount?
c. A company vehicle is purchased for $24,000. Assuming an eight-year useful life and zero value at
that time, what is the balance of accumulated depreciation after five years?
d. Supplies Expense of $3,600 was recorded for a given year. Assuming that $2,400 in supplies were
purchased during the year and that $640 in supplies remained at year end, what was the cost of
supplies at the beginning of the year?
14. For each of the following oversights, state whether total assets will be understated, overstated, or not
affected.
______ a. Failure to record revenue earned but not yet received
______ b. Failure to record expired rent
______ c. Failure to record accrued interest in the bank
______ d. Failure to record depreciation
______ e. Failure to record accrued wages
______ f. Failure to convert unearned revenue to earned revenue
15. For each of the following oversights, state whether stockholders’ equity will be understated, overstated,
or not affected.
______ a. Failure to record depreciation
______ b. Failure to record accrued wages
______ c. Failure to convert unearned revenue to earned revenue
______ d. Failure to record accrued interest in the bank
______ e. Failure to record expired insurance
______ f. Failure to record revenue earned but not yet received
16. Norfolk Company has the following liabilities at year end:
Notes Payable
$40,000
Accounts Payable
30,000
Unearned Contract Revenue
18,000
Wages Payable
5,800
Interest Payable
1,400
Income Taxes Payable
3,000
a. Which of these accounts probably was created at the end of the fiscal year as a result of an accrual?
Which probably was adjusted at year end? Explain your answer.
b. Which adjustments probably reduced net income? Which probably increased net income? Explain
your answers.
17. Given the adjusted trial balance below, prepare (in good form) an income statement, statement of
retained earnings, and balance sheet. The name of the business is Hampden Cleaning Service and the
accounting period coincides with the calendar year.
Hampden Cleaning Service
Adjusted Trial Balance
December 31, 2013
Cash
$ 530
Accounts Receivable
1,200
Supplies
20
Prepaid Insurance
20
Office Equipment
2,000
Accumulated Depreciation–Office Equipment
$ 300
Accounts Payable
1,200
a. Overstated
d. Understated
b. Overstated
e. Overstated
c. Understated
f. Understated
Salaries Payable
70
Common Stock
1,000
Retained Earnings, Dec. 31, 2012
400
Service Revenue Earned
2,200
Salaries Expense
1,120
Supplies Expense
80
Insurance Expense
100
Depreciation Expense–Office Equipment
100
______
$5,170
$5,170
Service revenue earned
Expenses
Salaries expense
Supplies expense
Insurance expense
Depreciation expense–office equipment
Total expenses
Net income
$ 800
Retained earnings, December 31, 2012
Net income
Subtotal
Less dividends
Retained earnings, December 31, 2013
Cash
Accounts receivable
1,200
Supplies
Prepaid insurance
Office equipment
$2,000
Less accumulated depreciation
Total assets
Accounts payable
Salaries payable
Total liabilities
Common Stock
18. The Retained Earnings, Dividends, and Income Summary accounts for Suffolk’s Repair Shop for the
accounting period are presented below in T account form after the recording and posting of closing
entries.
Retained Earnings
Dividends
12/31 200
1/1 1,000
3/1 200
12/31 600
12/31 600
6/1 200
9/1 200
Income Summary
12/31 2,000
12/31 1,800
12/31 200
From the T accounts, determine the following:
a. Revenue for the period
b. Net income (or net loss)
c. Dividends for the period
d. Ending balance of Retained Earnings
19. Presented below are the Retained Earnings, Dividends, and Income Summary accounts for Happy
Puppy Pet Grooming Boutique for the year ended December 31, 2013.
Retained Earnings
Dividends
12/31
2,450
1/1
2,300
5/1
950
12/31
2,450
12/31
3,175
8/19
1,500
Income Summary
12/31
1,125
12/31 4,300
12/31
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
3,175
In the journal provided, prepare the closing entries that resulted in the T accounts above. Assume that
the only revenue is Revenue from Services and the only expense is Advertising Expense (omit
explanations).
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
20. Below are the adjusted accounts of Midlesex Realtors, Inc., for the month ended July 31, 2013, listed
in alphabetical order:
Accounts Payable
$2,400
Dividends
$ 6,000
Accounts Receivable
21,600
Income Taxes Expense
600
Accumulated Depreciation–
Income Taxes Payable
600
Office Equipment
24,000
Land
9,000
Cash
6,900
Office Equipment
60,000
Revenue from Services
Income Summary
Income Summary
Advertising Expense
Income Summary
Retained Earnings
Retained Earnings
Dividends
Commissions Revenue
45,000
Salaries Expense
13,800
Common Stock
48,000
Utilities Expense
900
Depreciation Expense–
Office Equipment
1,200
Prepare a post-closing trial balance.
21. Below are the adjusted accounts of Millennium Realtors, Inc., for the month ended May 31, 2013,
listed in alphabetical order:
Accounts Payable
$ 400
Dividends
1,000
Accounts Receivable
3,600
Income Taxes Expense
100
Accumulated Depreciation–
Income Taxes Payable
100
Office Equipment
4,000
Land
1,500
Cash
1,150
Office Equipment
10,000
Commissions Revenue
7,500
Salaries Expense
2,300
Common Stock
8,000
Utilities Expense
150
Depreciation Expense–
Office Equipment
200
In the journal provided, prepare Millennium’s closing entries (omit explanations).
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Cash
Accounts Receivable
Land
9.000
Office Equipment
Accumulated Depreciation–Office Equipment
Accounts Payable
Income Taxes Payable
Retained Earnings
22. Below are the adjusted accounts of Slate Realtors, Inc., for the month ended Oct. 31, 2013, listed in
alphabetical order:
Accounts Payable
$ 1,100
Dividends
$ 1,500
Accounts Receivable
4,800
Income Taxes Expense
100
Accumulated Depreciation–
Income Taxes Payable
100
Office Equipment
6,000
Office Equipment
15,000
Cash
2,400
Prepaid Rent
2,200
Commissions Revenue
10,800
Retained Earnings
8,000
Common Stock
4,000
Salaries Expense
3,500
Depreciation Expense–
Utilities Expense
200
Office Equipment
300
In the journal provided, prepare Slate’s closing entries (omit explanations).
General Journal
Page 1
May
Commissions Revenue
Income Summary
Income Summary
Income Taxes Expense
Salaries Expense
Utilities Expense
Income Summary
Retained Earnings
Retained Earnings
Dividends
Date
Description
Post.
Ref.
Debit
Credit
23. Below are the adjusted accounts of Century Realtors, Inc., for the month ended October 31, 2013,
listed in alphabetical order:
Accounts Payable
$ 520
Dividends
$ 750
Accounts Receivable
2,400
Income Taxes Expense
80
Accumulated Depreciation–
Income Taxes Payable
80
Office Equipment
3,000
Office Equipment
7,500
Cash
1,200
Prepaid Rent
1,100
Commissions Revenue
5,400
Retained Earnings
4,000
Common Stock
2,000
Salaries Expense
1,720
Depreciation Expense–
Utilities Expense
100
Office Equipment
150
Prepare a post-closing trial balance.
24. The income statement for Hampshire Corporation included the following revenues and expenses for
the year:
Fees earned
$206,000
Wages expense
89,400
Insurance expense
17,000
Interest expense
10,400
Listed below are the related balance sheet account balances at year end for this year and last year:
This Year
Last Year
Unearned Fees
$15,600
$13,200
Wages Payable
5,400
6,600
Prepaid Insurance
2,400
—
Interest Payable
—
1,600
a. Compute cash received for fees during the year.
b. Compute cash paid for wages during the year.
c. Compute cash paid for insurance during the year.
d. Compute cash paid for interest during the year.
Cash
Accounts Receivable
Prepaid Rent
Office Equipment
Accumulated Depreciation–Office Equipment
Accounts Payable
Income Taxes Payable
Common Stock
Retained Earnings
6,600*
25. The following amounts are taken from the balance sheets of Milman Corporation:
December 31
2013
2012
Prepaid expenses
$ 45,000
$56,000
Accrued liabilities
103,000
88,000
During 2013, expenses related to prepaid expenses were $103,000, and expenses related to accrued
liabilities were $197,000. Determine the amount of cash payments related to prepaid expenses and to
accrued liabilities for 2013.
Prepaid expenses
2013 ending balance
Potential cash payments for expenses
Cash payments related to prepaid expenses in 2013
Accrued liabilities
2012 ending balance
Expense during 2013
Potential cash payments for expenses
Less 2013 ending balance
Cash payments related to accrued liabilities in 2013