P8. Determining Adjusting Entries and Tracing Their Effects to Financial Statements
1. and 2.
Prepaid InsuranceAccounts Receivable
Cash
3-26
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3.
2,268
1,031
$22,145
$8,300
Expenses:
Note: Unearned Tax Fees does not appear on the adjusted trial balance because
it now has a zero balance.
Office salaries expense
Steven Tax Service
Income Statement
Revenues:
Tax fees revenue
For the Year Ended December 31, 2014
Cash
Accounts Receivable
P8. Determining Adjusting Entries and Tracing Their Effects to Financial Statements
(Continued)
Steven Tax Service
Adjusted Trial Balance
December 31, 2014
3-27
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$ 5,439
$2,268
1,031
Accounts payable $ 654
4.
Accounts receivable
Cash
Liabilities
By definition, adjusting entries cannot include a debit or a credit to Cash. Because
is why it is not necessary to show the effects of adjusting entries on the statement
adjusting entries never involve the cash account, they never affect cash flows. That
P8. Determining Adjusting Entries and Tracing Their Effects to Financial Statements
(Concluded)
K. Steven, capital, December 31, 2013
Steven Tax Service
Assets
Statement of Owner’s Equity
For the Year Ended December 31, 2014
Steven Tax Service
Balance Sheet
December 31, 2014
3-28
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Balance Balance
after after
Adjustment Adjustment
Office Supplies Expense
Amount of
(+ or –) Statement Account
(+ or –)
Amount of
Adjustment
Adjustment Income
3-29
a. Mar. 31 13,151
b. 31 10,610
c. 31 34,000
52,000
d. 31 10,667
e. 31 9,200
f. 31 17,470
g. 31 11,000
h.
2.
*Rounded
Depreciation Expense—Buildings
In transaction “e,” $9,200 has to be recognized as revenue because services have
No entry
Wages Expense
Supplies Expense
Depreciation Expense—Equipment
P10. Preparing Adjusting Entries
1.
Insurance Expense
To record supplies used
To record annual depreciation
Unearned Service Revenue
Accounts Receivable
To record service revenue earned on
a contract to be billed in January
To record accrued interest on note payable
Interest Expense
3-30
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Bal. 35,572 Bal. 2,443 (a) 1,905
Bal. 2,400 (b) 1,200 Bal. 14,300
Bal. 2,640 Bal. 15,000 (f) 1,975 Bal. 5,650
(d) 750 (e) 800 Bal. 88,705
Bal. 15,000 Bal. 89,000 Bal. 58,000
Bal. 3,600 Bal. 13,200 (a) 1,905
P11. Determining Adjusting Entries, Posting to T Accounts, and Preparing an Adjusted Trial
Balance
Cash
Prepaid Rent
Bal.
1. and 2.
Office Equipment Office Equipment
Accounts Payable
Interest Payable
Unearned Service Revenue
3,200
Accumulated Depreciation—
Notes Payable
Office Supplies
E. Lee, Capital
Bal. 59,680
Accounts Receivable
Salaries Payable
E. Lee, Withdrawals Service Revenue
Salaries Expense
Office Supplies ExpenseUtilities Expense
Rent Expense
3-31
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35,572
61,480
4. a.
b.
c.
d.
e.
f.
g.
Balance sheet, income statement, statement of owner’s equity
Balance sheet, income statement, statement of owner’s equity
Balance sheet, income statement, statement of owner’s equity
The statement of cash flows is not affected by the adjustments.
Balance sheet, income statement, statement of owner’s equity
Balance sheet, income statement, statement of owner’s equity
Balance sheet, income statement, statement of owner’s equity
Balance sheet, income statement, statement of owner’s equity
P11. Determining Adjusting Entries, Posting to T Accounts, and Preparing an Adjusted Trial
Balance (Concluded)
3.
December 31, 2014
Lee Technology Corporation
Cash
Adjusted Trial Balance
Accounts Receivable
3-32
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Page 14
Post.
Ref. Debit Credit
30 514 18,000
30 515 2,000
30 518 7,890
30 516 10,030
P12. Determining Adjusting Entries and Tracing Their Effects to Financial Statements
1.
Spare Parts Expense
To record amount of deposit used
Maintenance Expense
To record insurance that expired
during the year
2014
June Rent Expense
during the year
To expense two years’ rent paid
in advance
Insurance Expense
General Journal
Date Description
3-33
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Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
2. and 3.
P12. Determining Adjusting Entries and Tracing Their Effects to Financial Statements
(Continued)
2014
Date Item
Balance
Post.
Prepaid Maintenance Account No. 119
2014
Item
Balance
Prepaid Insurance Account No. 118
Post.
Date
2014
Balance
Prepaid Rent Account No. 117
Date Item
2014
Post.
Post.
Date Item
Accounts Receivable Account No. 113
Balance
2014
Cash Account No. 111
Post. Balance
Date Item
Balance
Post.
Date Item
Spare Parts Account No. 140
2014
3-34
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