61
113) Center Company is completing the accounting cycle at the end of the annual accounting
period, December 31, 2019. Adjusting entries have not been made during the year so three
adjusting entries must be made at this date to update the accounts. The following accounts,
selected from Center Company’s chart of accounts, are to be used for this purpose. They are
coded to the left of each title for convenient reference.
A.
Supplies expense
I.
Unearned rent revenue
B.
Supplies
J.
Rent expense
C.
Interest receivable
K.
Wage expense
D.
Equipment
L.
Depreciation expense
E.
Accumulated
depreciation
M.
Interest expense
F.
Notes payable
N.
Interest revenue
G.
Interest payable
O.
Rent revenue
H.
Wages payable
P.
Some other account
not in this list
Indicate the appropriate account code and amount for each of the required adjusting entries at
December 31, 2019.
Transaction
Debits
Credits
Code
Amount
Amount
A.
On December 1, 2019, collected $9,000 rent
revenue in advance for its warehouse space
temporarily rented to a customer (credited in full
to Unearned rent revenue). The rent was
collected for December, 2019, and January and
February, 2020.
B.
Office supplies purchased during 2019
amounted to $5,000, which was debited in full to
office supplies during the year. The year-end
count of office supplies showed $600 of supplies
on hand. The beginning balance of office
supplies was $800.
C.
On November 1, 2019, the company signed a
$50,000, interest-bearing note payable. It was
for one year and specified 12 percent annual
interest payable at the maturity date of the note.
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114) Lane Company is completing the accounting cycle at the end of its annual accounting
period, December 31, 2019. Adjusting entries have not been made during the year so three
adjusting entries must be made to update the accounts. The following accounts, selected from the
company’s chart of accounts, are to be used for this purpose. They are coded to the left of each
title for convenient reference.
A.
Cash
I.
Unearned rent
revenue
B.
Notes payable
J.
Rent expense
C.
Interest receivable
K.
Wage expense
D.
Machinery
L.
Depreciation expense
E.
Accumulated
depreciation
M.
Interest expense
F.
Notes payable
N.
Interest revenue
G.
Interest payable
O.
Rent revenue
H.
Wages payable
P.
Some other account
not in this list
Indicate the appropriate account code and amount for each of the required adjusting entries at
December 31, 2019.
Transaction Debits Credits
Code
Amount
Code
Amount
A.
Unpaid wages of $2,400 at December
31, 2019, have not been recorded.
B.
On October 1, 2019, a note receivable
was received from a customer. The note
was for $5,000, has a one-year maturity,
and has an interest rate of 14%. The
interest is to be received at the maturity
date of the note.
C.
On December 1, 2019, collected $1,800
rent in advance from a tenant. This was
rent for six months and was credited to
unearned rent revenue.
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115) Below are four transactions that were completed during 2019 by Timber Lodge. The annual
accounting period ends on December 31. Each transaction will require an adjusting entry at
December 31, 2019.
Prepare the 2019 adjusting entries required for Timber Lodge.
A. On July 1, 2019, Timber Lodge paid a two-year insurance premium for a policy on its
facilities. This transaction was recorded as follows:
Prepaid insurance
8,000
Cash
8,000
B. On December 31, 2019, a tenant renting some storage space from Timber Lodge had not paid
the rent of $750 for December.
C. On September 1, 2019, Timber Lodge borrowed $25,000 cash and gave a one-year, 6 percent,
note payable. The interest is payable on the note’s due date of August 31, 2020. The September
1, 2019 transaction was recorded as follows:
Cash
25,000
Note payable
25,000
D. On October 1, 2019, Timber Lodge collected $10,000 from a tenant for two years rent
beginning October 1, 2019. The $10,000 collection was recorded as follows:
Cash
10,000
Unearned rent revenue
10,000
Insurance expense
Prepaid insurance
2,000
$8,000 × 6/24 = $2,000.
Rent revenue receivable
Rent revenue
Interest expense
Interest payable
$25,000 × 6% × 4/12 = $500.
Unearned rent revenue
Rent revenue
$10,000 × 3/24 = $1,250.
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116) Four transactions described below were completed during 2019 by Russell Company. The
books are adjusted only at year-end.
A. On December 31, 2019, Russell Company owed employees $3,750 for wages that were
earned by them during December and were not recorded.
B. During 2019, Russell Company purchased office supplies that cost $1,000, which were placed
in the supplies room for use as needed. The purchase was recorded as follows:
Office supplies
1,000
Cash
1,000
At January 1, 2019, the amount of unused office supplies was $300. At December 31, 2019, a
physical count showed unused office supplies in the supply room amounting to $100.
C. On December 1, 2019, Russell Company rented some office space to another party. Russell
Company collected $900 rent for the period December 1, 2019, to March 1, 2020. The December
1 transaction was recorded as follows:
Cash
900
Unearned rent revenue
900
D. On July 1, 2019, Russell Company borrowed $12,000 cash on a one-year, 8% interest-bearing
note payable. The interest is payable on the due date of the note, June 30, 2020. The borrowing
was recorded as follows on July 1, 2019:
Cash
12,000
Notes payable
12,000
Provide the adjusting entries required for Russell Company on December 31, 2019.
Wages expense
Wages payable
Office supplies expense
1,200
Office supplies
$300 + $1,000- $100 = $1,200.
Unearned rent revenue
300
Rent revenue
$900 × 1/3 = $300.
Interest expense
480
Interest payable
$12,000 × 8% × 6/12 = $480.
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117) Three transactions described below were completed during 2019 by Story Company.
A. On June 1, 2019, Story Company paid $12,600 for one year’s rent beginning on that date. The
rent payment was recorded as follows:
Prepaid rent
12,600
Cash
12,600
B. On February 1, 2019, Story Company purchased office supplies that cost $700 and placed the
supplies in a storeroom for use as needed. The purchase was recorded as follows:
Office supplies inventory
700
Cash
700
C. On December 31, 2019, Story Company owed employees $2,000 for wages earned during
December. These wages had not been paid or recorded.
Prepare the adjusting entries as of December 31, 2019, assuming no adjusting entries have been
made during the year.
Prepaid rent
($12,600 × 7/12) = $7,350.
Office supplies expense
Office supplies inventory
$700 – $200 = $500.
Wage expense
2,000
Wages payable
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118) For each of the following accounts you are to enter one capital letter in each cell to indicate
normal characteristics for each account.
69
70
119) A list of the accounts of Medford Corporation is given below, followed by some selected
transactions. Indicate the accounts that should be debited and credited for the transaction or the
closing entry by placing the appropriate account codes in the debit and credit columns provided.
Code
Account
Code
Account
A.
Cash
I.
Common stock
B.
Prepaid insurance
J.
Retained earnings
C.
Accounts receivable
K.
Rent revenue
D.
Service trucks
L.
Service revenue
E.
Accumulated depreciation
M.
Expenses
F.
Accounts payable
N.
Income tax payable
G.
Notes payable
O.
Income summary
H.
Unearned service revenue
P.
Rent payable
Transaction or Closing entry
Debit
Credit
Ex.
Purchased a service truck, paid ½ cash and
gave a 90-day interest-bearing note for the
balance.
D
A, G
1.
An investor contributed $55,000 cash to the
business and received common stock.
2.
Paid $600 for a two-year premium on the
insurance policy covering the trucks.
3.
Borrowed $10,000 from a local bank by
signing a one-year, interest-bearing note.
4.
Service revenue earned: cash collected
$40,000; not collected, $12,000.
5.
One month’s rent on the building was paid
at year-end for that month.
6.
Collected $1,000 in advance for service to
be provided next year.
7.
Expenses incurred: paid cash, $28,000; on
credit, $7,000.
8.
Declared and paid a cash dividend, $2,000.
9.
Depreciation of $1,500 on the truck must be
recorded.
10.
Insurance used for one full year must be
recorded (see 2, above).
11.
All revenue accounts must be closed at the
end of the period.
12.
All expense accounts must be closed at the
end of the period.
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Answer:
72
120) On December 31, 2019, Madison Company prepared an income statement and a balance
sheet. In preparing the adjusting entries at year-end, Madison failed to record the adjusting entry
for wages earned by employees, but not yet paid, amounting to $5,000 for the last four days of
the year. The income statement reported net income of $52,000. The balance sheet reported total
assets of $254,000, total liabilities of $170,000, and stockholders’ equity of $84,000.
Complete the following tabulation to show the correct amounts for the financial statements
(ignore income taxes).
Item
Net
Income
Assets
Liabilities
Stockholders’
Equity
Balances
reported
$52,000
$254,000
$170,000
$84,000
Correction
for wages
Corrected
balances
Item
Income
Assets
Liabilities
Stockholders’
Equity
Balances
reported
$254,000
$170,000
$84,000
for wages
-0-
Corrected
balances
$254,000
$175,000
$79,000
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121) Johnson Corporation is completing the accounting information processing cycle at the end
of the fiscal year, June 30, 2019. Johnson has provided the following trial balances as of June 30,
2019:
Johnson Corporation
June 30, 2019
Trial Balances
Account Titles
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
Equipment
60,000
60,000
Accumulated
depreciation
$16,500
$22,000
Wages payable
100
Common stock
25,000
25,000
Retained
earnings
11,600
11,600
Service revenue
38,000
38,300
Wage expense
16,000
16,100
Depreciation
expense
5,500
Insurance
expense
400
Total
$91,100
$91,100
$97,000
$97,000
A. Reconstruct the adjusting entries and prepare a brief explanation of each.
B. What is the amount of net income?
C. Calculate earnings per share (EPS) assuming 1,000 shares of common stock are outstanding.
74
Answer:
122) The comparative balance sheets of Titan Company for the years ended December 31, 2019
and 2020, reported the following selected amounts:
2019
2020
Assets: Office supplies
$2,000
$800
Liabilities: Unearned rent revenue
11,000
10,500
The 2020 income statement reported the following:
Rent revenue
$12,000
Office supplies expense
15,000
A. Calculate the total amount of office supplies purchased during 2020.
B. Calculate the total amount of rent collected during 2020.
C. In what section of the statement of cash flows would the payments for office supplies appear?
D. In what section of the statement of cash flows would the collection for rents appear?
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123) On January 1, 2019, the balance in the prepaid insurance account was $2,500. On
December 31, 2019, after the 2019 adjusting entries were made, the balance of the prepaid
insurance account was $1,200. During 2019, cash payments for insurance premiums amounted to
$5,000, which was debited to the prepaid insurance account. Prepare the adjusting entry, which
must have been made at December 31, 2019.
124) On December 31, 2019, the manager of Jordan Creek Apartments noticed that four tenants
had not paid their December rent amounting to $500 each. What is the adjusting entry required
on December 31, 2019?