113.
On the adjusted trial balance, retained earnings is:
114.
Before any month-end adjustments are made, the net income of Bennett Company is
$76,000. The following adjustments are necessary: office supplies used, $3,160; services
performed for clients but not yet recorded or collected, $3,640; interest accrued on note
payable to bank, $3,040. After adjusting entries are made for the items listed above,
Bennett Company’s
net
income
will
be
:
115.
The accountant for Perfect Painting forgot the following two adjustments at the end of
2015:
(a) The entry to record depreciation: $3,000.
(b) The entry to record the portion of fees received in advance which have now been
earned: $3,000.
As a result of these two omissions:
116.
Before making month-end adjustments, net income of Cardinal Company was $116,000 for
March. Adjusting entries are necessary for the following items:
-Depreciation for the month of March: $2,300.
-Rental income accrued during March, tenant to pay in April: $800.
-Supplies used in March: $100.
-Fees earned in March that had been collected in advance: $2,600.
After recording these adjustments, net income for March is:
117.
Before any month-end adjustments are made, the net income of Russell Company is
$38,000. However, the following adjustments are necessary: office supplies used, $3,160;
services performed for clients but not yet recorded or collected, $3,040; interest accrued
on a note payable to bank, $3,640. After adjusting entries are made for the items listed
above, Russell Company’s
net
income
would
be:
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118.
Before making month-end adjustments, net income of Bobwhite Company was $232,000
for March. Adjusting entries are necessary for the following items:
-Depreciation for the month of March: $4,300.
-Rental income accrued during March, tenant to pay in April: $900.
-Supplies used in March: $300.
-Fees earned in March that had been collected in advance: $3,600.
After recording these adjustments, net income for March is:
Essay Questions
119.
Purpose of adjusting entries
The president of Crown Construction was informed that the first quarter financial
statements would be available “as soon as the adjusting entries are made.” Being a non-
accountant, the president feels adjustments should not be necessary if the accounting
department is operating in a competent manner. Does the need for adjusting entries at the
end of the quarter imply that transactions are not being recorded properly? Explain.
120.
Adjusting Entries
Identify four types of timing differences between cash flows and the recognition of
expenses or revenues that may require adjusting entries.
121.
Accounting terminology
Listed below are nine technical accounting terms emphasized in this chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided below each statement, indicate the accounting term described, or
answer “None” if the statement does not correctly describe any of the terms.
______ (a.) An account with a credit balance that is an offset against an asset account.
______ (b.) A contra-account.
______ (c.) A liability to customers who have paid in advance.
______ (d.) The estimated current value of an asset.
______ (e.) Entries made to achieve the goals of accrual accounting when revenue or
expense transactions span more than one accounting period.
______ (f.) An asset that will expire shortly.
______ (g.) Revenue that has been earned, but not yet received.
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122.
Adjusting entries
Selected ledger accounts used by Cross Country Truck Rentals, Inc. are listed along with
identifying numbers. Following this list of account numbers and titles is a series of
transactions. For each transaction, you are to indicate the proper accounts to be debited
and credited.
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123.
Adjusting entries
Selected ledger accounts used by American Advertising, Inc., are listed along with
identifying numbers. Following this list of account numbers and titles is a series of
transactions. For each transaction, you are to indicate the proper accounts to be debited
and credited.
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124.
End-of-period adjustments – selected computations
Allied Architects adjusts its books each month and closes its books at the end of the year.
The trial balance at January 31, 2015, before adjustments is as follows:
The following information relates to month-end adjustments:
(a) According to contracts, consulting fees received in advance that were earned in
January total $13,500.
(b) On November 1, 2015, the company paid in advance for 5 months’ advertising in
professional journals.
(c) At January 31, supplies on hand amount to $2,250.
(d) The equipment has an original estimated useful life of 4 years.
(e) The corporation is subject to income taxes of 25% of taxable income. (Assume taxable
income is the same as “income before taxes.”)
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1) Unearned consulting fees: $4,050
2) Advertising expense: $2,520
Supplies expense: $1,125
3) Book value: $40,950
4) Net income: $39,859