176. For each of the following, journalize the necessary adjusting entry:
(a)
A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary
adjusting entry at the end of the fiscal period, assuming that the fiscal period ends (1) on Tuesday, (2) on Wednesday.
(b)
The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry
required under each of the following alternatives: (1) the amount of insurance expired during the year is $5,300, (2) the amount
of unexpired insurance applicable to a future period is $2,700.
(c)
On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business
is also required to pay an annual property tax at the end of the year. The estimated amount of the current year’s property tax
allocable to July is $4,800. (1) Journalize the two adjusting entries required to bring the accounts affected by the taxes up to
date as of July 31. (2) What is the amount of tax expense for July?
(d)
The estimated depreciation on equipment for the year is $32,000.
(a)
(1) Salary Expense ($22,000/5 ´ 2)
8,800
(2) Salary Expense ($22,000/5 ´ 3)
13,200
Salaries Payable
13,200
(b)
(1) Insurance Expense
5,300
Prepaid Insurance
5,300
Prepaid Insurance
15,300
(c)
(1) Taxes Expense ($54,000/12)
4,500
Property Taxes Payable
4,800
(d)
Depreciation Expense
32,000
Accumulated Depreciation – Equipment
32,000
177. On November 1st, clients of Great Designs Company prepaid $4,250 for services to be provided in the
future at a rate of $85 per hour.
(a) Journalize the receipt of this cash.
(b) As of November 30th, Great Designs shows that 15 hours of services have been provided on this agreement.
Prepare the necessary journal entry to record this.
(c) Determine the total unearned fees in hours and dollars at November 30th.
178. Prepare the required entries for the following transactions:
(a)
Austin Company pays daily wages of $645 (Monday – Friday). Paydays are every other Friday. Prepare the Monday, January 31
adjusting entry assuming that the last payday was Friday, January 21.
(b)
Prepare the journal entry to record the Austin Company’s payroll on Friday, February 4.
(c)
Annual depreciation expense on the company’s fixed assets is $39,600. Prepare the adjusting entry to recognize depreciation for
the month of January.
(d)
The company’s office supplies account shows a debit balance of $3,755. A count of office supplies on hand on January 31 shows
$635 worth of supplies on hand. Prepare the January 31 adjusting entry for Office Supplies.
(a)
Jan. 31
Wages Expense
3,870
Wages Payable
3,870
Monday, January 24 through Friday January 28
– 5 days ´ $645 = $3,225
Monday, January 31- 1 day ´ $645 = $645
Wages Payable for January 24 through January
31 = $3,225 + $645 = $3,870
(b)
Feb. 4
Wages Expense (4 ´ $645)
2,580
Wages Payable
3,870
Cash
6,450
(c) Jan. 31
Depreciation Expense ($39,600/12)
3,300
Accumulated Depreciation
3,300
(d) Jan. 31
Office Supplies Expense
3,120
Office Supplies
3,120
Account balance
$3,755
Less supplies on hand
$635
January expense
$3,120
179. On December 15th, Great Designs Company hired an independent contractor for a project. The contractor
completed the project on December 29th and submitted an invoice for $2,425 which was due on January 15th.
This was duly paid on January 15th.
(a) Prepare the journal entries necessary to record these transactions.
(b) Explain why you prepared this/these journal entries.
180. On November 15th, Great Designs Company purchased an advertising campaign for the month of
December. Great Designs paid cash of $2,700 in advance. The advertising campaign ran in December.
(a) Prepare all necessary journal entries for the advertising campaign for November and December.
(b) Explain why you prepared this/these journal entries.
181. On January 2, Safe Boating Monthly received a check for $96 from a subscriber for a 12-month
subscription. The January issue was mailed on January 15th. Prepare the necessary entries for the month of
January.
182. Prepare the December 31 adjusting entries for the following transactions. Omit explanations.
1. Fees accrued but unbilled total $6,300.
2. The supplies account balance on December 31 is $4,750. Supplies on hand are $960.
3. Wages accrued but not paid are $2,700.
4. Depreciation of office equipment is $1,650.
5. Rent expired during year, $10,800.
Date
Description
Post. Ref.
Debit
Credit
Dec 31
Accounts Receivable
6,300
Revenues
6,300
Dec 31
Supplies Expense ($4,750 – $960)
3,790
Supplies
3,790
Dec 31
Wages Expense
2,700
Wages Payable
2,700
Dec 31
Depreciation Expense
1,650
Accumulated Depreciation-Equipment
1,650
Dec 31
Rent Expense
10,800
Prepaid Rent
10,800
183. Prepare adjusting entries for the following transactions:
(a)
The beginning balance of the Supplies account was $245. During the month, the company bought additional supplies in the
amount of $735. At the end of the month, a physical inventory showed $343 of unused supplies.
(b)
The company has a 12% note payable in the amount of $17,000 due in 6 months. The interest expense for the month has not been
recorded.
(c)
The company has two employees. The manager is paid on the 15th of every month for work performed during the first half of the
month and on the 1st of the following month for the work performed during the second half of the month. His monthly salary is
$5,500. The other employee is paid $650 for each 5-day work week (Monday – Friday). The last day of the month fell on
Thursday.
(d)
The unearned revenue account shows a balance of $46,000. According to the manager, 60% of that amount has been earned.
(e)
At the end of the month, $5,700 of services have been performed but not yet billed.
(a)
Supplies Expense ($245 + $735 – $343)
(b)
Interest Expense ($17,000 ´ 12%/12)
Interest Payable
(c)
Wages and Salary Expense
3,270
Wages and Salary Payable
(($5,500 /2) + ($650/5 ´ 4))
(d)
Unearned Revenues
27,600
Fees Earned
($46,000 ´ 60%)
(e)
Accounts Receivable
5,700
184. At the end of the fiscal year, the following adjusting entries were omitted:
(a)
No adjusting entry was made to transfer the $1,750 of prepaid insurance from the asset account to the expense account.
(b)
No adjusting entry was made to record accrued fees of $525 for services provided to customers.
Assuming that financial statements were prepared before the errors were discovered, indicate the effect of each error, considered individually, by
inserting the dollar amount in the appropriate spaces. Insert “0” if the error does not affect the item.
Error (a)
Error (b)
Over-
stated
Under-
stated
Over-
stated
Under-
stated
(1)
Assets at December 31 would be
$
$
$
$
(2)
Liabilities at Dec. 31 would be
$
$
$
$
(3)
Net income for the year would be
$
$
$
$
(4)
Stockholders’ equity at Dec. 31 would be
$
$
$
$
Error (a)
Error (b)
Over-
stated
Under-
stated
Over-
stated
Under-
stated
(2)
Liabilities at Dec. 31 would be
(3)
Net income for the year would be
$1,750
$525
(4)
Stockholders’ equity at Dec. 31 would be
185. On April 30, a business estimates depreciation on equipment used during the first year of operations to be
$2,900. (a) Journalize the adjusting entry required as of April 30. (b) If the adjusting entry in (a) were omitted,
which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of
April 30?
186. Journalize the six entries to adjust the accounts at December 31. (Hint: One of the accounts was affected
by two different adjusting entries).
Unadjusted
Trial Balance
Adjusted
Trial Balance
Debit
Balances
Credit Balances
Debit
Balances
Credit Balances
Cash
5,000
5,000
Accounts Receivable
32,000
32,600
Supplies
3,600
100
Prepaid Insurance
4,000
1,400
Equipment
11,000
11,000
Accumulated Depreciation
1,700
Wages Payable
2,000
Unearned Fees
8,900
3,500
Capital Stock
10,000
10,000
Retained Earnings
12,000
12,000
Fees Earned
69,000
75,000
Wages Expense
44,300
46,300
Supplies Expense
3,500
Insurance Expense
2,600
Depreciation Expense
1,700
Total
99,900
99,900
104,200
104,200
Accounts Receivable
600
Fees Earned
600
Supplies Expense
3,500
Supplies
3,500
Insurance Expense
2,600
Prepaid Insurance
2,600
Depreciation Expense
1,700
Accumulated Depreciation
1,700
Unearned Fees
5,400
Fees Earned
5,400
Wages Expense
2,000
Wages Payable
2,000
187. Jacki Lopez started JVL Consulting on January 1, 2014. The following are the account balances at the end
of the first month of business, before adjusting entries were recorded:
Accounts Payable
$300
Accounts Receivable
750
Cash
6,300
Consulting Revenue
4,925
Equipment
7,000
Capital Stock
15,000
Dividends
1,375
Prepaid Rent
4,000
Supplies
800
Adjustment data:
Supplies on hand at the end of the month: $150
Unbilled Consulting Revenue: $700
Rent expense for the month: $1,000
Depreciation on equipment: $90
(a) Prepare the required adjusting entries, adding accounts as needed.
(b) Prepare an Adjusted Trial Balance for JVL Consulting as of January 31, 2014.
188. Complete the missing items in the following chart:
Prepaid Expenses
Examples
Adjusting Entry
Financial Statement Impact
if Adjusting Entry is Omitted
Supplies,
(a)
Dr. Expense
Cr. Asset
Income Statement:
Revenues: No effect
Expenses: Understated
Net income: (b)
Balance Sheet:
Assets: (c)
Liabilities: (d)
Stockholders’ equity: Overstated
Unearned Revenues
Examples
Adjusting Entry
Financial Statement Impact if Adjusting Entry is
Omitted
Unearned rent,
(e)
(f)
Income Statement:
Revenues: (g)
Expenses: No effect
Net income: (h)
Balance Sheet:
Assets: (i)
Liabilities: Overstated
Stockholders’ equity: (j)
Accrued Revenues
Examples
Adjusting Entry
Financial Statement Impact if Adjusting Entry is
Omitted
Interest income due on a
note,
(k)
Dr. Asset
Cr. Revenue
Income Statement:
Revenues: (l)
Expenses: (m)
Net income: Understated
Balance Sheet:
Assets: (n)
Liabilities: (o)
Stockholders’ equity: Understated
Accrued Expenses
Examples
Adjusting Entry
Financial Statement Impact if Adjusting Entry is
Omitted
Interest due on a notes
payable,
(p)
(q)
Income Statement:
Revenues: No effect
Expenses: (r)
Net income: (s)
Balance Sheet:
Assets: (t)
Liabilities: Understated
Stockholders’ equity: (u)
189. Income statements for Debra’s Design Services are shown below.
Debra’s Design Services
Income Statements
For the Years Ended December 31, 2012
and 2011
2012
2011
Fees earned
$765,340
$696,520
Operating expenses:
Wages expense
$254,000
$214,600
Rent expense
120,000
108,000
Supplies expense
76,500
98,715
Miscellaneous expense
_ 11,680
16,420
Total operating expenses
$462,180
$437,735
Net income
$303,160
$258,785
(a) Prepare a vertical analysis of Debra’s Design Services income statements.
(b) Does the analysis indicate favorable or unfavorable trend(s)?
(c) What other information would enhance the analysis?
2012 2011
Fees earned
$765,340
100.0%
$696,520
100.0%
Wages expense
$254,000
33.2%
$214,600
30.8%
Rent expense
120,000
15.7%
108,000
15.5%
Supplies expense
76,500
10.0%
98,715
14.2%
Miscellaneous expense
__11,680
1.5%
16,420
2.4%
Total operating expenses
$462,180
60.4%
$437,735
62.8%
Net income
$303,160
39.6%
$258,785
37.2%
190. Two income statements for Galaxy Services are shown below:
Galaxy Services
Income Statements
For the Years Ended December 31, 2012
and 2011
2012
2011
Fees earned
$688,806
$766,172
Operating expenses:
Wages expense
288,806
236,060
Rent expense
108,000
118,800
Supplies expense
68,850
108,587
Miscellaneous expense
__10,512
18,062
Total operating expenses
$415,962
$481,509
Net income
$272,844
$284,663
(a) Prepare a vertical analysis of Galaxy Services income statements.
(b) What type of trend(s) are indicated: favorable or unfavorable trend?
(c) What other information would enhance the analysis?
Amount
Percent
Amount
Percent
Fees earned
$688,806
100.0%
$766,172
100.0%
Operating expenses:
Wages expense
288,806
33.2%
236,060
30.8%
Rent expense
108,000
15.7%
118,800
15.5%
Supplies expense
68,850
10.0%
108,587
14.2%
Miscellaneous expense
__10,512
1.5%
18,062
2.4%
Total operating expenses
$415,962
60.4%
$481,509
62.8%
Net income
$272,844
39.6%
$284,663
37.2%
191. A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period ending on that
day. The last pay day of December is Friday, December 27. Assuming the next pay period begins on Monday,
December 30, journalize the adjusting entry necessary at the end of the fiscal period (December 31).
Date
Description
Post
Ref
Debit
Credit
Date
Description
Post
Debit
Credit
December 31
Salary Expense
4,000