Alternate Demonstration Problem #1
Chapter Three
On July 1, 2015, Howard M. Tenant, Inc., rents office space from John Q.
Landlord for two years, starting immediately, at a rate of $100 per month, or
$2,400 in total. The full $2,400 was paid on this date. Record the original
transaction and the appropriate adjusting entries in 2015, 2016, and 2017
from the point of view of Tenant and Landlord.
Solution: Alternate Demonstration Problem #1
Chapter 3
Tenant
Landlord
7/1/15
Prepaid Rent ……………
2,400
Cash ……………………….
2,400
Cash
2,400
Unearned Rent
Rev. ………………..
2,400
12/31/15
Rent Expense…………..
600
Unearned Rent Rev.
600
Prepaid Rent ……..
600
Rent Revenue
600
12/31/16
Rent Expense…………..
1,200
Unearned Rent Rev.
1,200
*Prepaid Rent ……
1,200
Rent Revenue
1,200
12/31/17
*Rent Expense …………
600
Unearned Rent Rev.
600
Prepaid Rent ……..
600
Rent Revenue
600
An Alternative Solution (Based on the Appendix)
Tenant
Landlord
7/1/15
Rent Expense…………..
2,400
Cash ……………………….
2,400
Cash…………………
2,400
Rent Rev. ………….
2,400
12/31/15
Prepaid Rent …………..
1,800
Rent Rev.
1,800
Rent Expense ……
1,800
Unearned Rent
Revenue ………….
1,800
*12/31/15
Rent Expense…………..
1,200
Unearned Rent Rev.
1,200
Prepaid Rent ……..
1,200
Rent Revenue
1,200
*12/31/16
Rent Expense…………..
600
Unearned Rent Rev.
600
Prepaid Rent ……..
600
Rent Revenue
600
*Notice the adjustment is the same in 2016 and 2017 under both
approaches. This is because the adjustment in the appendix alternative
solution places all remaining unexpired/unearned amounts in the
asset/liability accounts to be considered for future adjustment.
Alternate Demonstration Problem #2
Chapter Three
The trial balance of Large Company, Inc., at the end of its annual
accounting period is as follows:
LARGE COMPANY, INC.
Trial Balance
December 31, 2015
Cash ………………………………………………………………..
$ 4,000
Accounts Receivable………………………………..
400
Prepaid Insurance ……………………………………………
1,200
Supplies …………………………………………………………
2,100
Equipment ………………………………………………………
20,000
Accumulated Depreciation—Equipment ……………
$ 2,000
Common Stock ……………………………………….
Retained earnings …………………………………………..
19,000
Dividends ………………………………………………………..
2,000
Revenue ………………………………………………………….
33,000
Salaries Expense ……………………………………………..
18,300
Rent Expense ………………………………………………….
6,000
______
Totals ………………………………………………………………
$54,000
$54,000
Additional information:
1. Expired insurance, $400.
2. Unused supplies, per inventory, $800.
3. Estimated depreciation, $1,000.
4. Earned but unpaid salaries, $700.
5. Services completed for a client by year-end but the client has not been
billed for those services, $500
Required:
Prepare adjusting entries.
Solution: Alternate Demonstration Problem #2
Chapter 3
1.
Insurance Expense …………………………………….
400
Prepaid Insurance ………………………………..
400
Supplies Expense ………………………………………
1,300
Supplies ………………………………………………
1,300
$2,100 – 800 inventory = 1,300 supplies used
Depreciation Expense Equip. ……………………..
1,000
Accumulated Depreciation Equip. …………
1,000
Salaries Expense ……………………………………….
700
Salaries Payable …………………………..………
700
Accounts Receivable …………………………………
500
Revenue ……………………………………………..
500