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SOLUTION
Requirement 1
E3-28, cont.
Requirement 2
E3-29 Using the worksheet to record the adjusting journal entries
Learning Objective 6
1. Adjustments $3,700 total
The worksheet of Best Jobs Employment Service follows but is incomplete.
The following data at April 30, 2018, are given for Best Jobs Employment Service:
a. Service revenue accrued, $700.
b. Office supplies used, $300.
c. Depreciation on equipment, $1,300.
d. Salaries owed to employees, $1,400.
Requirements
1. Calculate and enter the adjustment amounts directly in the Adjustments columns. Use letters a
through d to label the four adjustments.
2. Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns.
3. Prepare each adjusting journal entry calculated in Requirement 1. Date the entries, and include
explanations.
SOLUTION
Requirements 1 and 2
E3-29, cont.
Requirement 3
E3-30 Using the worksheet to prepare the adjusted trial balance
Learning Objective 6
Adj. trial balance $273,700 total
The worksheet of Macey’s Landscaping Services follows but is incomplete.
Requirements
1. Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns.
2. Describe each adjusting entry. For example, a. Prepaid rent expires, $1,150.
SOLUTION
Requirement 1
E3A-31 Understanding the alternative treatment of prepaid expenses
Learning Objectives 3, 7 Appendix 3A
At the beginning of the year, office supplies of $1,200 were on hand. During the year, Tempo Air
Conditioning Service paid $4,000 for more office supplies. At the end of the year, Tempo has
$800 of office supplies on hand.
Requirements
1. Record the adjusting entry assuming that Tempo records the purchase of office supplies by
initially debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies
Expense T-accounts. Make sure to include the beginning balance and purchase of office supplies
in the Office Supplies T-account.
2. Record the adjusting entry assuming that Tempo records the purchase of office supplies by
initially debiting an expense account. Post the adjusting entry to the Office Supplies and
Supplies Expense T-accounts. Make sure to include the beginning balance in the Office Supplies
T-account and the purchase of office supplies in the Supplies Expense T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
SOLUTION
E3A-32 Understanding the alternative treatment of unearned revenues
Learning Objectives 3, 7 Appendix 3A
At the beginning of the year, Modish Advertising owed customers $2,100 for unearned
revenue collected in advance. During the year, Modish received advance cash receipts of
$6,100 and earned $20,000 of service revenue (exclusive of any amount earned from
advance payments). At year-end, the liability for unearned revenue is $3,100 and unadjusted
service revenue is $20,000.
Requirements
1. Record the adjusting entry assuming that Modish records the cash receipt of unearned
revenue by initially crediting a liability account. Post the adjusting entry to the Unearned
Revenue and Service Revenue T-accounts. Make sure to include the beginning balance
and additional unearned revenue in the Unearned Revenue T-account.
2. Record the adjusting entry assuming that Modish records the cash receipt of unearned
revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned
Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in
the Unearned Revenue T-account and the additional unearned revenue in the Service
Revenue T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the
same?
SOLUTION
E3A-32, cont.
Requirement 3
The ending balances in the Unearned Revenue account and the Service Revenue account are the
same, regardless of which of the two approaches is used.
Problems (Group A)
P3-33A Journalizing adjusting entries and subsequent journal entries
Learning Objective 3
Laughter Landscaping has collected the following data for the December 31 adjusting entries:
a. Each Friday, Laughter pays employees for the current week’s work. The amount of the
weekly payroll is $8,000 for a five-day workweek. This year, December 31 falls on a Tuesday.
Laughter will pay its employees on January 3.
b. On January 1 of the current year, Laughter purchases an insurance policy that covers two
years, $8,000.
c. The beginning balance of Office Supplies was $4,300. During the year, Laughter purchased
office supplies for $5,600, and at December 31 the office supplies on hand total $1,500.
d. During December, Laughter designed a landscape plan and the client prepaid $6,500.
Laughter recorded this amount as Unearned Revenue. The job will take several months to
complete, and Laughter estimates that the company has earned 40% of the total revenue during
the current year.
e. At December 31, Laughter had earned $3,000 for landscape services completed for Turnkey
Appliances. Turnkey has stated that it will pay Laughter on January 10.
f. Depreciation for the current year includes Equipment, $3,000; and Trucks, $2,200.
g. Laughter has incurred $250 of interest expense on a $550 interest payment due on January
15.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the previous items
affecting Laughter Landscaping. Assume Laughter records adjusting entries only at the end of
the year.
2. Journalize the subsequent journal entries for adjusting entries a, d, and g.
