• Urban Outfitters achieved compounded annual sales growth of approximately 19% from 2005 to
2010, with sales of approximately $1.9 billion in fiscal 2010.
• The first Urban Outfitters store opened 1970 near the University of Pennsylvania campus in
Philadelphia.
• The company circulates nearly 40 million catalogs per year.
• The company employs 14,000 people; the number fluctuates based upon seasonal demand.
1. Debiting Allowance for Doubtful Accounts and Crediting Accounts Receivable.
3. Dr. Uncollectible Accounts Expense, Cr. Allowance for Doubtful Accounts.
5. Long-term assets whose usefulness is consumed over the life of the assets. (Buildings, furniture
and fixtures, machinery.)
6. a. Estimated selling price upon disposal of an asset. b. Cost of asset less salvage value. c. Number
8. An expense that does not yet appear in the accounts. (Accrued salaries, accrued payroll taxes, and
accrued interest on notes payable.)
10. Item that has been paid for and recorded in the accounts in advance of its use. (Prepaid rent,
prepaid insurance, prepaid interest on notes payable.)
12. Dr. Insurance Expense, Cr. Prepaid Insurance
Note to instructor : These questions are designed to check students’ understanding of new terms,
concepts, and procedures presented in the chapter.
Discussion Questions
Chapter Opener: Thinking Critically
ACCRUALS, DEFERRALS, AND THE WORKSHEET
CHAPTER 12
Students may assess that an unexpected decline in sales would mean surplus inventory which would have
to be reduced—most likely by selling the too sophisticated merchandise at lower prices. Expenses for
market research to determine a better merchandise strategy would also need to be recorded.
Fast Facts
Managerial Implications: Thinking Critically
Financial results and financial condition will be incorrectly stated.
14. Income earned but not yet received in cash or recorded as a receivable. (Interest on notes
receivable.)
16. Income for which payment has been received in advance, but which has not been earned. (Rent
income received in advance.)
18. Dr. Unearned Income, Cr. Income.
20. Provides a single location for all information necessary to journalize adjusting entries and to
prepare the financial statements.
Discussion Questions (continued)
POST.
REF.
1 2013 1
POST.
REF.
1 2013 1
2 Dec. 31 Uncollectible Accounts Expense 564600 2
3 Allowance for Doubtful Accounts 564600 3
4 4
5 31 Depreciation Expense—Equipment 306800 5
6 Accumulated Depreciation—Equipment 306800 6
GENERAL JOURNAL PAGE
EXERCISE 12.1
DATE DESCRIPTION DEBIT CREDIT
EXERCISE 12.3
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Interest Expense 2 1 0 00 2
3 Interest Payable 2 1 0 00 3
13 13
POST.
REF.
1 2013 1
8 8
POST.
REF.
1 2013 1
4 4
EXERCISE 12.4
EXERCISE 12.5
EXERCISE 12.6
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
PAGE
DATE DESCRIPTION DEBIT CREDIT
PAGE
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Interest Receivable 6 4 0 00 2
3 Interest Income 6 4 0 00 3
13 13
PAGE
EXERCISE 12.7
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
POST.
REF.
1 2013 1
2 June 30 2
3 7500 00 3
4750000 4
17 17
18 30 18
19 2 2 5 00 19
20 2 2 5 00 20
21 21
22 30 22
23 2 5 0 00 23
24 2 5 0 00 24
PROBLEM 12.1A
(Adjustment f)
Wages Expense
Wages Payable
(Adjustment e)
Depreciation Expense – Store Equipment
Accumulated Depreciation – Store Equipment
Income Summary
Merchandise Inventory
GENERAL JOURNA
L
18
(Adjustment a)
DATE DESCRIPTION DEBIT CREDIT
PAGE
PROBLEM 12.1A (continued)
POST.
REF.
41 30 41
42 2 5 0 00 42
Notes on calculations:
a.-b.
c.
k.
DATE DESCRIPTION DEBIT CREDIT
Amounts given.
$6,000 cash received/5 seminars = $1,200/seminar.
$6,000 principal × 7% interest rate × 1/12 time factor = $35
Analyze: The balance of the Prepaid Rent account will be $2,200 ($6,600 – $4,400 expired).
18
Supplies Expense
GENERAL JOURNAL PAGE
(Adjustment j)
POST.
REF.
1 2013 1
2 July 1 Prepaid Rent 1320000 2
3 Cash 1320000 3
4 4
PAGE
PROBLEM 12.2A
1
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
PROBLEM 12.2A (continued)
POST.
REF.
1 1
2 2013 2
3 July 31 2200 00 3
42200 00 4
5 5
17 17
18 31 1 3 5 00 18
19 1 3 5 00 19
20 20
Insurance Expense
Prepaid Insurance
Adjusting Entries
Rent Expense
Prepaid Rent
2
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL PAGE
PROBLEM 12.3A
Michael Brady, Consultant
Worksheet
Month Ended July 31, 2013
1 Cash 2501000
2 Accounts Receivable 134000
3 Supplies 8 6 0 00 (a) 2 8 0 00
4 Prepaid Rent 900000 (b) 1 5 0 0 00
16 2822000
17 200000
18 Consulting Fees 800000 (h) 40000
19 Salaries Expense 320000
20 Utilities Expense 2 2 0 00
21 Telephone Expense 1 6 0 00
22 Supplies Expense (a) 2 8 0 00
23 Rent Expense (b) 1 5 0 0 00
24 Insurance Expense (c) 1 3 5 00
25 (e) 1 2 5 00
26 (f) 8 0 00
27 Interest Expense (d) 9 0 00
28 (g) 5 2 00
29 Totals 6222000 6222000 266200 266200
30
Michael Brady, Capital
Michael Brady, Drawing
Depreciation
Expense—Furniture
Depreciation
Expense—Equipment
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.3A Continued
2501000 1
134000 2
58000 3
750000 4
320000 19
22000 20
16000 21
28000 22
150000 23
13500 24
ADJUSTED TRIAL BALANCE INCOME STATEMEN
T
BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.4A
1 570000
2 260000
3 5 2 00 (c) 2 1 0 00
4 11 3 0 0 00 (b) 12 3 2 1 00 (a) 11 3 0 0 00
5 120000 (d) 92500
17 25 4 5 7 00
18 20 0 0 0 00
19 90 0 4 8 00
20 110000
21 46 4 0 0 00
22 4 3 0 00
23 600000
Year Ended December 31, 2013
Worksheet
The Green Thumb Gallery
Beth Argo, Capital
Beth Argo, Drawing
Purchases
Purchases Returns & Allowances
Rent Expense
Sales
Sales Returns & Allowances
Supplies
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Merchandise Inventory
ADJUSTMENTS
DEBIT CREDIT DEBIT CREDITACCOUNT NAME
TRIAL BALANCE
PROBLEM 12.4A (continued)
570000 570000 1
260000 260000 2
26200 2 6 200 3
12 3 2 1 00 12 3 2 1 00 4
27500 27500 5
90 0 4 8 00 90 0 4 8 00 19
110000 110000 20
46 4 0 0 00 46 4 0 0 00 21
43000 43000 22
600000 600000 23
5 9 0 00 5 9 0 00 24
CREDIT DEBIT CREDIT
ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT
PROBLEM 12.4A (continued)
The Green Thumb Gallery
Worksheet (Continued)
Year Ended December 31, 2013
1 120 9 2 0 00 120 9 2 0 00 28 8 8 9 46 29 0 9 9 46
6
Totals Brought Forward
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.4A (continued)
137 1 0 4 46 137 3 1 4 46 86 0 2 8 46 102 7 9 9 00 51 0 7 6 00 34 5 1 5 46 1
ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.5A
Worksheet
1 Cash 30 1 0 0 00
2 3520000
3 4 2 0 00 (c) 2 8 0 0 00
20 56 0 0 0 00
21 Sales 653 7 7 8 00
22 10 0 0 0 00
23 Purchases 350 0 0 0 00
25 Income Summary (a) 86 0 0 0 00 (b) 78 0 0 0 00
26 Rent Expenses 36 0 0 0 00
27 Telephone Expense 220000
28 Salaries Expense 160 0 0 0 00 (i) 5 0 0 0 00
29 Payroll Taxes Expense 13 0 0 0 00 (j) 3 8 2 50
30 (k) 3 1 0 00
31 Supplies Expense (d) 9 2 2 0 00
32 Insurance Expense (e) 3 6 0 0 00
33 Totals Carried Forward 830 6 0 0 00 830 6 0 0 00 182 5 1 2 50 192 0 7 7 50
34
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
Sales Returns and Allowances
Phillip Tucker, Drawing
Healthy Habits Foods Company
Year Ended December 31, 2013
Allowance for Doubtful Accounts
Accounts Receivable
PROBLEM 12.5A (continued)
30 1 0 0 00 30 1 0 0 00 1
35 2 0 0 00 35 2 0 0 00 2
322000 322000 3
78 0 0 0 00 78 0 0 0 00 4
118000 118000 5
10 0 0 0 00 10 0 0 0 00 22
350 0 0 0 00 350 0 0 0 00 23
920000 920000 24
86 0 0 0 00 78 0 0 0 00 86 0 0 0 00 78 0 0 0 00 25
36 0 0 0 00 36 0 0 0 00 26
ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.5A (continued)
1 830 6 0 0 00 830 6 0 0 00 182 5 1 2 50 192 0 7 7 50
2 (f) 1 3 2 5 00
Totals Brought Forward
Depr. Expense—Office Equipment
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT
PROBLEM 12.5A (continued)
914 2 9 2 50 923 8 5 7 50 675 7 1 2 50 740 9 7 8 00 238 5 8 0 00 182 8 7 9 50 1
132500 132500 2
BALANCE SHEET
CREDIT DEBIT CREDITDEBIT CREDIT DEBIT
ADJUSTED TRIAL BALANCE INCOME STATEMENT
PROBLEM 12.6A
The Wine Shop
Worksheet
1 Cash 28 3 8 6 00
2 Accounts Receivable 5 0 0 00
3 Prepaid Advertising 4 8 0 00 (c) 1 6 0 00
4 Supplies 3 0 0 00 (d) 2 0 0 00
5 Merchandise Inventory 15 0 0 0 00 (a) 12 0 0 0 00 15 0 0 0 00
17 Vincent Arroyo, Capital 32 7 0 0 00
18 Vincent Arroyo, Drawing 14 1 1 0 00
19 Income Summary (b) 15 0 0 0 00 (a) 12 0 0 0 00
20 Sales 153 9 7 0 00
21 Sales Discounts 2 0 0 00
22 Seminar Fee Income (g) 2 0 0 0 00
Year Ended December 31, 2013
ACCOUNT NAME
TRIAL BALANCE ADJUSTMENTS
DEBIT CREDIT DEBIT CREDIT