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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
