P3A-38A Understanding the alternative treatment of prepaid expenses and unearned
revenues
Learning Objectives 3, 7 Appendix 3A
Rapid Way Pack’n Mail completed the following transactions during 2018:
Requirements
1. Journalize the transactions assuming that Rapid Way debits an asset account for prepaid
expenses and credits a liability account for unearned revenues.
2. Journalize the related adjusting entries at December 31, 2018.
3. Post the journal and adjusting entries to the T-accounts, and show their balances at December
31, 2018. (Ignore the Cash account.)
4. Repeat Requirements 1–3. This time, debit an expense account for prepaid expenses and
credit a revenue account for unearned revenues.
5. Compare the account balances in Requirements 3 and 4. They should be equal.
SOLUTION
Requirement 1
P3A–38A, cont.
Requirement 3
P3A-38A, cont.
Requirement 4
P3A–38A, cont.
Requirement 5
Problems (Group B)
P3-39B Journalizing adjusting entries and subsequent journal entries
Learning Objective 3
Lopez Landscaping has the following data for the December 31 adjusting entries:
a. Each Friday, Lopez pays employees for the current week’s work. The amount of the weekly
c. The beginning balance of Office Supplies was $3,700. During the year, Lopez purchased
office supplies for $5,800, and at December 31 the office supplies on hand total $3,000.
d. During December, Lopez designed a landscape plan and the client prepaid $6,000. Lopez
recorded this amount as Unearned Revenue. The job will take several months to complete, and
Lopez estimates that the company has earned 70% of the total revenue during the current year.
e. At December 31, Lopez had earned $7,500 for landscape services completed for Tomball
Appliances. Tomball has stated that it will pay Lopez on January 10.
f. Depreciation for the current year includes Equipment, $3,800; and Trucks, $1,400.
g. Lopez has incurred $250 of interest expense on a $350 interest payment due on January 15.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting
Lopez Landscaping. Assume Lopez records adjusting entries only at the end of the year.
2. Journalize the subsequent journal entries for adjusting entries a, d, and g.
SOLUTION
Requirement 1
P3-39B, cont.
P3-39B, cont.
Requirement 2
