SOLUTION
Requirement 1
E3-24, cont.
Requirement 2
E3-24, cont.
Requirement 3
E3-25 Journalizing adjusting entries and posting to T-accounts
Learning Objective 3
3. Office Supplies bal. $300 DR
The unadjusted trial balance for All Mopped Up Company, a cleaning service, is as follows:
During the 12 months ended December 31, 2018, All Mopped Up:
a. used office supplies of $1,700.
b. used prepaid insurance of $580.
c. depreciated equipment, $500.
d. accrued salaries expense of $310 that hasn’t been paid yet.
e. earned $400 of unearned revenue.
Requirements
1. Open a T-account for each account using the unadjusted balances.
2. Journalize the adjusting entries using the letter and December 31 date in the date column.
3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s
adjusted balance.
SOLUTION
E3-25, cont.
Requirement 2
E3-25, cont.
Requirement 3
Note: Exercise E3-26 should be used only in conjunction with Exercise E3-25.
E3-26 Preparing an adjusted trial balance
Learning Objective 4
Adj. trial balance $46,210 total
Refer to the data in Exercise E3-25, and prepare an adjusted trial balance.
SOLUTION
E3-27 Identifying the impact of adjusting entries on the financial statements
Learning Objectives 3, 5
Austin Acoustics recorded the following transactions during October:
a. Received $2,500 cash from customer for three months of service beginning October 1 and
ending December 31. The company recorded a $2,500 debit to Cash and a $2,500 credit to
Unearned Revenue.
b. Employees are paid $3,000 on Monday following the five-day workweek. October 31 is on
Friday.
c. The company pays $440 on October 1 for its six-month auto insurance policy. The company
recorded a $440 debit to Prepaid Insurance and a $440 credit to Cash.
d. The company purchased office furniture for $8,300 on January 2. The company recorded a
$8,300 debit to Office Furniture and an $8,300 credit to Accounts Payable. Annual
depreciation for the furniture is $1,000.
e. The company began October with $50 of office supplies on hand. On October 10, the
company purchased office supplies on account of $100. The company recorded a $100 debit
to Office Supplies and a $100 credit to Accounts Payable. The company used $120 of office
supplies during October.
f. The company received its electric bill on October 31 for $325 but did not pay it until
November 10.
g. The company paid November’s rent of $2,500 on October 30. On October 30, the company
recorded an $2,500 debit to Rent Expense and a $2,500 credit to Cash.
Indicate if an adjusting entry is needed for each item on October 31 for the month of October.
Assuming the adjusting entry is not made, indicate which specific category or categories of
accounts on the financial statements are misstated and if they are overstated or understated. Use
the following table as a guide. Item a is completed as an example:
SOLUTION
E3-28 Journalizing adjusting entries and analyzing their effect on the income statement
Learning Objectives 3, 5
The following data at July 31, 2018, are given for RCO:
a. Depreciation, $600.
b. Prepaid rent expires, $200.
c. Interest expense accrued, $700.
d. Employee salaries owed for Monday through Thursday of a five-day workweek; weekly
payroll, $8,000.
e. Unearned revenue earned, $1,000.
f. Office supplies used, $150.
Requirements
1. Journalize the adjusting entries needed on July 31, 2018.
2. Suppose the adjustments made in Requirement 1 were not made. Compute the overall
overstatement or understatement of net income as a result of the omission of these
adjustments.