S3-9 Journalizing and posting an adjusting entry for unearned revenue
Learning Objective 3
Eastside Magazine collects cash from subscribers in advance and then mails the magazines to
subscribers over a one-year period.
Requirements
1. Record the journal entry to record the original receipt of $180,000 cash.
2. Record the adjusting entry that Eastside Magazine makes to record earning $8,000 in subscription
revenue that was collected in advance.
3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their
balances after adjustments. (Ignore the Cash account.)
SOLUTION
S3-10 Journalizing and posting an adjusting entry for accrued salaries expense
Learning Objective 3
Birch Park Senior Center has a weekly payroll of $12,500. December 31 falls on Wednesday, and Birch
Park Senior Center will pay its employees the following Monday (January 5) for the previous full week.
Assume Birch Park Senior Center has a five-day workweek and has an unadjusted balance in Salaries
Expense of $620,000.
Requirements
1. Record the adjusting entry for accrued salaries on December 31.
2. Post the adjusting entry to the accounts involved, and show their balances after adjustments.
3. Record the journal entry for payment of salaries made on January 5.
SOLUTION
S3-11 Journalizing and posting an adjusting entry for accrued interest expense
Learning Objective 3
Resort Travel borrowed $33,000 on September 1, 2018, by signing a one-year note payable to State One
Bank. Resort’s interest expense on the note payable for the remainder of the fiscal year (September
through November) is $355.
Requirements
1. Record the adjusting entry to accrue interest expense at November 30, 2018.
2. Post the adjusting entry to the T-accounts of the two accounts affected by the adjustment.
SOLUTION
S3-12 Journalizing an adjusting entry for accrued revenue
Learning Objective 3
At the end of June, Gerber Dental had performed $9,000 of dental services but has not yet billed
customers.
Record the adjusting entry for accrued revenue.
SOLUTION
Learning Objective 4
Seth’s Tax Services had the following accounts and account balances after adjusting entries. Assume all
accounts have normal balances.
Prepare the adjusted trial balance for Seth’s Tax Services as of December 31, 2018.
SOLUTION
S3-14 Determining the effects on financial statements
Learning Objective 5
In recording adjusting entries, Reagan Financial Advisors failed to record the adjusting entries for the
following situations:
a. Office supplies on hand, $100.
b. Accrued revenues, $5,000.
c. Accrued interest expense, $250.
d. Depreciation, $800.
e. Unearned revenue that has been earned, $550.
Determine the effects on the income statement and balance sheet by identifying whether assets,
liabilities, equity, revenue, and expenses are either overstated or understated. Use the following table.
Adjustment a has been provided as an example.
SOLUTION
S3-15 Preparing a partial worksheet
Learning Objective 6
Just Right Hair Stylists has begun the preparation of its worksheet as follows:
Year-end data include the following:
a. Office supplies on hand, $300.
b. Depreciation, $700.
c. Accrued interest expense, $800.
Complete Just Right’s worksheet through the adjusted trial balance section. In the adjustments section, mark each adjustment by letter.
SOLUTION
S3A-16 Journalizing the alternative treatment of deferred expenses
Learning Objective 7 Appendix 3A
On October 1, 2018, Kitchen Design paid $15,000 for store rent covering the six-month period ending
March 31, 2019.
Requirements
1. Journalize the entry on October 1 by using the alternative treatment of deferred expenses.
2. Record the December 31, 2018 adjusting entry.
SOLUTION
S3A-17 Journalizing the alternative treatment of deferred revenues
Learning Objective 7 Appendix 3A
On September 1, 2018, Salem Landscaping collected $24,000 in advance from customers for
landscaping services. The service revenue will be earned monthly over the 12-month period
ending August 31, 2019.
Requirements
1. Journalize the entry on September 1 by using the alternative treatment of deferred revenues.
2. Record the December 31, 2018 adjusting entry.
SOLUTION