32. Joan Miller owns an advertising agency. One of the adjustments her accountant made at the end of
July was $360 for unpaid wages of the secretary. Joan Miller might ask, “Why go to the trouble of
making this adjustment? Why worry about it? Doesn’t everything come out in the end, when the
secretary is paid in August? Because wages expense in total is the same for the two months, isn’t the
net income in total unchanged?” Give three reasons why adjusting entries can help Joan Miller assess
the performance of her business. (Net income was $1,600.)
33. Answer the following questions. (Show your work.)
a. A machine was purchased on July 1, 20xx. It had a cost of $36,000 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, 20xx, a company paid in advance $54,000 for three years’ insurance. How much Prepaid
Insurance remains on the balance sheet on December 31, 20xx?
c. A company began the year with $800 in supplies, purchased $2,000 in supplies, and ended the
period with $600 in supplies. How much is Supplies Expense for the period?
d. A company was paid $1,800 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?
34. 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?
35. In the journal provided, prepare year-end adjustments for the following situations. Omit explanations.
a. Accrued interest on notes receivable is $105.
b. Of the $12,000 received in advance of earning a service, one-third was still unearned by year end.
c. Three years’ rent, totaling $36,000, was paid in advance at the beginning of the year.
d. Services totaling $5,300 had been performed, but not yet billed.
e. Depreciation on trucks totaled $3,400 for the year.
f. Supplies available for use totaled $690. However, by year end, only $100 in supplies remained.
g. Payroll for the five-day work week, to be paid on Friday, is $30,000. Year end falls on a Monday.
h. Estimated federal income taxes were $4,160.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
36. In the journal provided, prepare year-end adjustments for the following situations. Omit explanations.
a. Accrued interest on notes receivable is $560.
b. Of the $7,200 received in advance of earning a service, one-third was still unearned by year end.
c. Two years of rent, totaling $24,000, was paid in advance. By year end, four months’ worth had
expired.
12,000
d. Services totaling $685 had been performed, but not yet billed.
e. Depreciation on trucks totaled $1,700 for the year.
f. Supplies available for use during the year amounted to $3,400. However, by year end, only $700 in
supplies remained.
g. Payroll for the five-day work week, to be paid on Friday, is $6,000. Year end falls on a Tuesday.
h. Estimated federal income taxes were $2,100.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Interest Receivable
Interest Income
Unearned Revenue
Service Revenue
Rent Expense
37. 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, 2010
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, 2010.
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
Post.
Prepaid Rent
Accounts Receivable
Service Revenue
Depreciation Expense–Trucks
1,700
Supplies Expense
2,700
Supplies
Wages Expense
2,400
Wages Payable
Income Taxes Expense
2,100
Income Taxes Payable
Date
Description
Ref.
Debit
Credit
Page 1
Unearned Revenue
Consulting Revenue
Depreciation Expense–Office Furniture
Salaries Expense
Salaries Payable
Rent Expense
Prepaid Rent
Office Supplies Expense
38. 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, 2010
Cash
$ 30,000
Accounts Receivable
9,600
Office Supplies
1,600
Prepaid Rent
5,400
Office Furniture
14,400
Accumulated Depreciation–Office Furniture
$ 600
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, 2010.
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
Accounts Receivable
1,800
Consulting Revenue
39. 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.
Unearned Revenue
Consulting Revenue
Depreciation Expense–Office Furniture
Salaries Expense
Salaries Payable
Rent Expense
Prepaid Rent
Office Supplies Expense
Office Supplies
Accounts Receivable
Consulting Revenue
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
Store Supplies Expense
Store Supplies
2,400
Depreciation Expense–Buildings
Accumulated Depreciation–Buildings
7,300
Recorded annual depreciation
40. 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
Insurance Expense
Prepaid Insurance
($2,400 ´ 9/12 = $1,800)
Interest Expense
Interest Payable
Unearned Service Revenue
Service Revenue
($9,600 ´ 1/3 = $3,200)
Wages Expense
Wages Payable
($10,000 ´ 2/5 = $4,000)
Accounts Receivable
Services Revenue
received
Office Supplies Expense
Office Supplies
Depreciation Expense–Buildings
Accumulated Depreciation–Buildings
Recorded annual depreciation
Insurance Expense
Prepaid Insurance
($6,000 ´ 4/12 = $2,000)
Interest Expense
Interest Payable
Unearned Service Revenue
Service Revenue
($14,400 ´ 2/3 = $9,600)
Wages Expense
41. 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 Duncore Secretarial Service and the
accounting period coincides with the calendar year.
Duncore Secretarial Service
Adjusted Trial Balance
December 31, 2010
Cash
$ 265
Accounts Receivable
600
Supplies
10
Prepaid Insurance
10
Office Equipment
1,000
Accumulated Depreciation–Office Equipment
$ 150
Accounts Payable
600
Salaries Payable
35
Common Stock
500
Retained Earnings
200
Service Revenue Earned
1,100
Salaries Expense
560
Supplies Expense
40
Insurance Expense
50
Depreciation Expense–Office Equipment
50
______
$2,585
$2,585
Duncore Secretarial Service
Service revenue earned
Expenses
Salaries expense
Supplies expense
Insurance expense
Depreciation expense–office equipment
Total expenses
Net income
$ 400
Wages Payable
($14,000 ´ 3/5 = $8,400)
Accounts Receivable
Services Revenue
42. Below are the adjusted accounts of Millennium Realtors, Inc., for the month ended May 31, 2010,
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
Retained earnings, December 31, 2009
Net income
Subtotal
Less dividends
Retained earnings, December 31, 2010
Cash
Accounts receivable
Supplies
Prepaid insurance
Office equipment
Less accumulated depreciation
Total assets
Accounts payable
Salaries payable
Total liabilities
Common Stock
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
43. Below are the adjusted accounts of Slate Realtors, Inc., for the month ended Oct. 31, 2010, 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
May
Commissions Revenue
Income Summary
Income Summary
Income Taxes Expense
Salaries Expense
Utilities Expense
Income Summary
Retained Earnings
Retained Earnings
Dividends
In the journal provided, prepare Slate’s closing entries (omit explanations).
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
44. Below are the adjusted accounts of Century Realtors, Inc., for the month ended October 31, 2010,
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.
45. The income statement for Catlett Corporation included the following revenues and expenses for 20xx:
Fees earned
$103,000
Wages expense
44,700
Insurance expense
8,500
Interest expense
5,200
Listed below are the related balance sheet account balances at year end for this year and last year:
This Year
Last Year
Unearned Fees
$7,800
$6,600
Wages Payable
2,700
3,300
Prepaid Insurance
1,200
—
Interest Payable
—
800
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
$ 1,200
Accounts Receivable
Prepaid Rent
Office Equipment
Accumulated Depreciation–Office Equipment
Accounts Payable
Income Taxes Payable
Common Stock
Retained Earnings
_______
$12,200
46. The following amounts are taken from the balance sheets of Milman Corporation:
December 31
2010
2009
Prepaid expenses
$ 45,000
$56,000
Accrued liabilities
103,000
88,000
During 2010, 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 2010.
Prepaid expenses
2010 ending balance
Expense during 2010
Potential cash payments for expenses
Less 2009 ending balance
56,000
Cash payments related to prepaid expenses in 2010
Accrued liabilities
2009 ending balance
Potential cash payments for expenses
Less 2010 ending balance
Cash payments related to accrued liabilities in 2010