Bal. 660 (b) 305 Bal. 4,620
Bal. 355 (c) 263
Bal. 1,033
Bal. 36,300 Bal. 24,700 Bal. 2,200
(e) 165 (b) 305
(g) 1,550 Bal. 24,865 Bal. 2,505
Bal. 38,752
1. T accounts set up and balances entered
770
Prepaid Rent Office Equipment Office Equipment
2. Adjusting entries posted to the accounts
Bal.
Chapter 3, P 3.
Cash Accounts Receivable Office Supplies
Service Revenue
(f)
Rent Expense
902
Salaries Expense
$ 9,250
2,100
6,000
7,001
11,000
38,752
Adjusted Trial Balance
Chapter 3, P 3. (Continued)
3. Adjusted trial balance prepared
December 31, 2011
Financial Service, Inc.
Service Revenue
Cash
Income Taxes Payable
Common Stock
Retained Earnings
Dividends
a.
b.
c.
d.
Balance sheet, income statement, statement of retained earnings
Balance sheet, income statement, statement of retained earnings
Balance sheet, income statement, statement of retained earnings
Balance sheet, income statement, statement of retained earnings
Chapter 3, P 3. (Continued)
4. User Insight: The following financial statements are affected by the adjustments:
Bal. 480 (b) 280
Bal. 200
Bal. 7,000 Bal. 6,878 Bal. 12,000
Bal. 43,852 Bal. 16,600 Bal. 1,300
(e) 438
Bal. 44,290
2. Adjusting entries posted to the accounts
1. T accounts set up and balances entered
Advertising Expense
Office Salaries Expense
Retained Earnings Dividends
Tax Fees Revenue
Common Stock
2,198
7,400
Chapter 3, P 4.
Cash Accounts Receivable Prepaid Insurance
Bal.
Bal.
$ 7,400
2,198
6,878
12,000
44,290
16,600
1,300
4,800
Rent Expense
Cash
Tax Fees Revenue
3. Adjusted trial balance, income statement, statement of retained earnings,
and balance sheet prepared
Chapter 3, P 4. (Continued)
December 31, 2011
Kazai Tax Service, Inc.
Accounts Receivable
Adjusted Trial Balance
Advertising Expense
Retained Earnings
Dividends
Office Salaries Expense
$44,290
$16,600
4,860
$13,268
$ 6,878
For the Year Ended December 31, 2011
Retained earnings, December 31, 2010
Revenue
Kazai Tax Service, Inc.
Net income
Expenses
Tax fees revenue
Office salaries expense
Income taxes expense
Total expenses
Statement of Retained Earnings
Kazai Tax Service, Inc.
Chapter 3, P 4. (Continued)
Income Statement
For the Year Ended December 31, 2011
$ 7,400
2,198
$ 1,312
4,860
$ 6,172
Assets
Chapter 3, P 4. (Continued)
Kazai Tax Service, Inc.
December 31, 2011
Cash
Balance Sheet
Accounts payable
Accounts receivable
Total liabilities
Liabilities
Income taxes payable
Common stock
Stockholders’ Equity
4. User Insight: The effect of adjusting entries discussed
By definition, adjusting entries cannot include a debit or a credit to Cash. Because
Page 14
Post.
Ref. Debit Credit
2011
a. June 30 514 6,000
117 6,000
c. 30 518 5,472
119 5,472
d. 30 516 4,647
e. 30 517 13,750
143 13,750
$110,000 × 12.5% =
f. 30 519 5,650
$13,750
Interest Expense
Depreciation Expense—Limousines
limousines for the year
1. Adjusting entries recorded in the general journal
Date
Accumulated Depreciation—Limousines
To record depreciation on the
during the year
Spare Parts Expense
Prepaid Maintenance
Maintenance Expense
General Journal
Description
Prepaid Rent
Rent Expense
To record amount of deposit used
Chapter 3, P 5.
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
30 6,000
30 J14 6,000 —
Ref. Debit Credit Debit Credit
2. Ledger accounts opened and balances recorded
3. Adjusting entries posted from the general journal
Account No. 118
Balance
Post.
Date Item
Prepaid Insurance
Date
Post.
Balance
Chapter 3, P 5. (Continued)
Cash
2011
Account No. 111
Post.
Balance
June
2011
Account No. 117
Balance
Item
Prepaid Rent
Item
Adjustment
Date
Ref. Debit Credit Debit Credit
30 110,000
Ref. Debit Credit Debit Credit
30 17,500
30 J14 13,750 31,250
Ref. Debit Credit Debit Credit
June Balance
Date Item
Post.
Accumulated Depreciation—Limousines
Date
Item
Adjustment
Balance
Unearned Passenger Service Revenue Account No. 212
Balance
Balance
Spare Parts Account No. 141
2011
Post.
Date Item
Account No. 143
Chapter 3, P 5. (Continued)
Notes Payable Account No. 211
Balance
Post.
June
Post.
Balance
Ref. Debit Credit Debit Credit
30 20,000
Ref. Debit Credit Debit Credit
30 24,106
Income Taxes Payable Account No. 214
Date Item
Balance
Dividends Account No. 313
Account No. 312
Chapter 3, P 5. (Continued)
Balance
Account No. 511
Post.
Balance
BalanceJune
2011
Retained Earnings
Post.
Gas and Oil Expense
ItemDate
Post.
2011
June Balance
Ref. Debit Credit Debit Credit
Ref. Debit Credit Debit Credit
30 J14 900 900
Balance
Post.
Account No. 512Salaries Expense
2011
Item
Post. Balance
Date Item
Post. Balance
Adjustment
June
2011
Chapter 3, P 5. (Continued)
Spare Parts Expense
Advertising Expense Account No. 513
Date
Account No. 516
Ref. Debit Credit Debit Credit
30 J14 5,472 5,472
Ref. Debit Credit Debit Credit
June Adjustment
Account No. 518
Post.
2011
Item
Maintenance Expense
Balance
Date
Interest Expense Account No. 519
Date
Post.
Chapter 3, P 5. (Continued)
Balance
Item
$ 4,906
7,114
6,625
20,000
24,106
10,000
220,341
$339,380 $339,380
Common Stock
Retained Earnings
Cash
Adjusted Trial Balance
June 30, 2011
Elite Livery, Inc.
and balance sheet prepared
4. Adjusted trial balance, income statement, statement of retained earnings,
Chapter 3, P 5. (Continued)
Note: Prepaid Rent does not appear on the adjusted trial balance because it now has
Accounts Receivable
Income Taxes Payable
Passenger Service Revenue
Income Taxes Expense
a zero balance.
Dividends
$220,341
6,000
5,650
5,472
$ 24,106
16,067
Rent expense
Statement of Retained Earnings
Chapter 3, P 5. (Continued)
Elite Livery, Inc.
Income Statement
For the Year Ended June 30, 2011
Revenue
Expenses
Passenger service revenue
For the Year Ended June 30, 2011
Retained earnings, June 30, 2010
Maintenance expense
Interest expense
Elite Livery, Inc.
Net income
$ 4,906
7,114
$ 22,500
$ 20,000
5. User Insight: The effect of adjustments discussed
Chapter 3, P 5. (Continued)
Elite Livery, Inc.
June 30, 2011
Balance Sheet
Common stock
Accounts receivable
Assets
Adjusting entries affect net income on the income statement, and therefore they
Liabilities
Notes payable
Cash
Stockholders’ Equity
affect the cash flow yield. After the adjustments have been posted in the previous
a. 30 5,171
5,171
+–
=
b. 30 6,874
6,874
c. 30 16,000
40,000
16,000
40,000
d. 30 4,650
4,650
1. Adjusting entries recorded
Nov.
Depreciation Expense—Buildings
Service Revenue
Depreciation Expense—Equipment
Unearned Service Revenue
Supplies Expense
Supplies
To record supplies used
Prepaid Insurance
$1,397$2,350 $4,218
$5,171
Insurance Expense
To record expired insurance
To record annual depreciation
Accumulated Depreciation—Equipment
Accumulated Depreciation—Buildings
g. 30 10,000
10,000
2. User Insight: Revenue recognition discussed
the year
In transaction e, $7,000 has to be recognized as revenue because services have
Chapter 3, P 7. (Continued)
already been provided and there is an obligation to pay for them. In transaction h,
Salaries Expense
Salaries Payable
Nov.
Bal. 13,786 Bal. 991 (a) 894
(g) 915 Bal. 97
Bal. 25,755
Bal. 11,000 Bal. 19,387 Bal. 15,000
Bal. 58,500 Bal. 33,400 Bal. 1,750
(e) 230
(g) 915 Bal. 33,630
Bal. 60,865
2. Adjusting entries posted to the accounts
1. T accounts set up and balances entered
Chapter 3, P 8.
Cash Accounts Receivable Office Supplies
Common Stock
(f) 1,450
Service Revenue
Utilities Expense
Dividends
24,840
Bal.
Retained Earnings
Salaries Expense