P3-35A, cont.
Requirement 2
Cash
Accounts Payable
Service Revenue
Bal.
7,800
3,000
Bal.
15,400
Bal.
Bal.
7,800
1,000
e.
1,800
a.
4,000
Bal.
2,250
g.
19,450
Bal.
Salaries Payable
Salaries Expense
Bal.
2,250
Bal.
900
4,000
Unearned Revenue
Rent Expense
Bal.
2,600
b.
1,800
2,800
Bal.
1,300
Bal.
1,300
1,000
Bal.
1,300
Bal.
1,100
c.
39,600
Bal.
700
Bal.
500
39,600
Bal.
700
Bal.
Bal.
9,300
1,000
2,300
Bal.
600
d.
600
Bal.
P3-35A, cont.
Requirement 3
AURORA AIR PURIFICATION SYSTEM
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 7,800
Accounts Receivable
22,050
Prepaid Rent
1,300
Office Supplies
500
Equipment
19,900
Accounts Payable
4,000
Salaries Payable
900
Unearned Revenue
1,000
Common Stock
39,600
Dividends
9,300
Service Revenue
19,450
Salaries Expense
4,000
Rent Expense
1,300
Depreciation Expense—Equipment
700
Advertising Expense
2,300
Supplies Expense
600
Requirement 4
Aurora will use the adjusted trial balance to prepare its financial statements. (Additionally, the purpose
of any trial balance is to ensure that total debits equal total credits.)
P3-36A Journalizing and posting adjustments to the four-column accounts and preparing an
adjusted trial balance
Learning Objectives 3, 4
3. Adjusted trial balance $555,220 total
The unadjusted trial balance of Newport Inn Company at December 31, 2016, and the data needed for
the adjustments follow.
Adjustment data at December 31 follow:
a. As of December 31, Newport had $600 of Prepaid Insurance remaining.
b. At the end of the month, Newport had $700 of office supplies remaining.
Requirements
1. Journalize the adjusting entries on December 31.
2. Using the unadjusted trial balance, open the accounts (use a four-column ledger) with the unadjusted
balances. Post the adjusting entries to the ledger accounts.
3. Prepare the adjusted trial balance.
4. Assuming the adjusted trial balance has total debits equal to total credits, does this mean that the
adjusting entries have been recorded correctly? Explain.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Insurance Expense
2,900*
Prepaid Insurance
2,900*
To record insurance expense.
b. Dec. 31
Supplies Expense
400*
Office Supplies
400*
To record office supplies used.
c. Dec. 31
Depreciation Expense—Building
To record depreciation on building.
d. Dec. 31
Salaries Expense
900*
Salaries Payable
900*
To accrue salaries expense.
e. Dec. 31
Unearned Revenue
1,000*
1,000*
advance.
$3,500
$2,900
P3-35A, cont.
b:
$1,100
Office Supplies prior to adjustment
(700)
Office Supplies remaining
$ 400
Supplies Expense (cost of office supplies used)
d:
$1,500
Salaries for a five-day work week
$ 300
Salaries Expense per work day
Salaries Expense per work day
work days
Salaries Expense for Monday through Wednesday
Unearned Revenue prior to adjustment
Unearned Revenue still unearned
Service Revenue earned
Requirement 2
CASH
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
11,900
ACCOUNTS RECEIVABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
13,900
P3-36A, cont.
PREPAID INSURANCE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
3,500
Dec. 31
a.
2,900
600
OFFICE SUPPLIES
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
1,100
Dec. 31
b.
700
BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
ACCUMULATED DEPRECIATION—BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
350,000
Dec. 31
c.
3,500
353,500
ACCOUNTS PAYABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
SALARIES PAYABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
d.
P3-36A, cont.
UNEARNED REVENUE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
2,500
Dec. 31
e.
1,000
1,500
COMMON STOCK
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
DIVIDENDS
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
SERVICE REVENUE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
18,200
Dec. 31
e.
1,000
19,200
SALARIES EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
Dec. 31
d.
INSURANCE EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
a.
2,900
P3-36A, cont.
DEPRECIATION EXPENSE—BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
c.
3,500
3,500
ADVERTISING EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
SUPPLIES EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
b.
Requirement 3
NEWPORT INN COMPANY
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 11,900
Accounts Receivable
13,900
Prepaid Insurance
600
Office Supplies
700
Building
Accumulated Depreciation—Building
Accounts Payable
Salaries Payable
900
Unearned Revenue
Common Stock
Dividends
Service Revenue
19,200
Salaries Expense
Insurance Expense
Depreciation Expense—Building
Advertising Expense
750
P3-36A, cont.
Requirement 4
No. Even if total debits equals total credits on the adjusted trial balance, this does not mean that the
P3-37A Using the worksheet to record the adjusting journal entries
Learning Objective 6
2. d. CR Accumulated Depreciation $3,800
Ganville Theater Production Company’s partially completed worksheet as of December 31, 2016,
follows.
Requirements
1. Analyze the worksheet to determine the adjusting entries that account for the differences between the
unadjusted trial balance and the adjusted trial balance. Complete the worksheet. Use letters a through
e to label the five adjustments.
2. Journalize the adjusting entries.
SOLUTION
Requirement 1
GANVILLE THEATER PRODUCTION COMPANY
Worksheet
December 31, 2016
Account
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 4,000
$ 4,000
Accounts Receivable
6,000
a.
$ 1,000
7,000
Office Supplies
1,300
$ 900
b.
Prepaid Insurance
3,600
3,150
Equipment
Accumulated Depreciation—Equipment
3,800
d.
$ 12,600
Accounts Payable
5,000
Salaries Payable
Dividends
Service Revenue
1,000
Depreciation Expense—Equipment
3,800
3,800
Supplies Expense
Utilities Expense
5,400
5,400
Salaries Expense
e.
Insurance Expense
c.
450
P3-37A, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Accounts Receivable
1,000
Service Revenue
1,000
To accrue service revenue.
b. Dec. 31
Supplies Expense
Office Supplies
To record office supplies used.
c. Dec. 31
Insurance Expense
Prepaid Insurance
To record insurance expense.
d. Dec. 31
Depreciation Expense—Equipment
3,800
3,800
To record depreciation on equipment.
e. Dec. 31
Salaries Expense
Salaries Payable
To accrue salaries expense.
P3A-38A Understanding the alternative treatment of prepaid expenses and unearned revenues
Learning Objectives 3, 7
Appendix 3A
4. Dec 31, CR Insurance Expense $7,500
Night Flyer Pack’n Mail completed the following transactions during 2016:
Requirements
1. Journalize the transactions assuming that Night Flyer debits an asset account for prepaid expenses
and credits a liability account for unearned revenues.
2. Journalize the related adjusting entries at December 31, 2016.
3. Post the journal and adjusting entries to the T-accounts, and show their balances at December 31,
2016. (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
Date
Accounts and Explanation
Debit
Credit
Nov. 1
Prepaid Rent
2,000
Cash
2,000
To record rent paid in advance.
Nov. 1
Prepaid Insurance
12,500
Cash
12,500
Dec. 1
4,500
4,500
To record cash collected for future services.
Dec. 1
9,000
9,000
P3A–38A, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Rent Expense
1,000*
Prepaid Rent
1,000*
To record rent expense.
Dec. 31
Insurance Expense
5,000*
Prepaid Insurance
5,000*
To record insurance expense.
Dec. 31
Unearned Revenue
Service Revenue
Dec. 31
Unearned Revenue
Service Revenue
advance.
* Calculations:
Adjusting Journal Entry One:
$2,000
Rent prepaid on November 1 for 4 months
4
months
$ 500
Rent expense per month
$ 500
Rent expense per month
months
$1,000
Rent expense for November and December
P3A–38A, cont.
Adjusting Journal Entry Two:
$12,500
Insurance prepaid on November 1 for 5 months
5
Months
$ 2,500
Insurance expense per month
Insurance expense per month
Months
Insurance expense for November and December
Requirement 3
Prepaid Rent
Rent Expense
Nov. 1 2,000
1,000 Dec. 31
Dec. 31 1,000
Bal. 1,000
Bal. 1,000
Insurance Expense
Nov. 1 12,500
5,000 Dec. 31
Dec. 31 5,000
Bal. 7,500
Unearned Revenue
Dec. 31 1,500
4,500 Dec. 1
1,500 Dec. 31
Dec. 31 1,800
9,000 Dec. 1
1,800 Dec. 31
10,200 Bal.
3,300 Bal.
P3A-38A, cont.
Requirement 4
Date
Accounts and Explanation
Debit
Credit
Nov. 1
Rent Expense
2,000
Cash
2,000
To record rent paid in advance.
Nov. 1
Insurance Expense
12,500
Cash
12,500
To record insurance paid in advance.
Dec. 1
4,500
Service Revenue
4,500
To record cash collected for future services.
Dec. 1
9,000
Service Revenue
9,000
To record cash collected for future services.
Dec. 31
Prepaid Rent
1,000*
Rent Expense
1,000*
To record prepaid rent.
Dec. 31
Prepaid Insurance
7,500*
Insurance Expense
7,500*
To record prepaid insurance.
Dec. 31
Service Revenue
3,000*
Unearned Revenue
3,000*
To record unearned revenue.
Dec. 31
Service Revenue
7,200*
Unearned Revenue
7,200*
To record unearned revenue.
P3A–38A, cont.
* Calculations:
Adjusting Journal Entry One:
$2,000
Rent prepaid on November 1 for 4 months
$ 500
Rent expense per month
Thus,
$ 500
Rent expense per month
× 2
Months
$1,000
Rent still prepaid on December 31
Insurance prepaid on November 1 for 5 months
Insurance expense per month
Thus,
$2,500
Insurance expense per month
× 3
Months
Adjusting Journal Entry Three:
$ 4,500
Collected in advance on December 1 for 3 months
(1,500)
Revenue earned during December
$ 3,000
Revenue still unearned on December 31
(1,800)
Revenue earned during December
Revenue still unearned on December 31
P3A–38A, cont.
Prepaid Rent
Rent Expense
Dec. 31 1,000
Nov. 1 2,000
1,000 Dec. 31
Bal. 1,000
Bal. 1,000
Insurance Expense
Dec. 31 7,500
Nov. 1 12,500
7,500 Dec. 31
Bal. 7,500
Bal. 5,000
Unearned Revenue
3,000 Dec. 31
4,500 Dec. 1
7,200 Dec. 31
9,000 Dec. 1
10,200 Bal.
3,300 Bal.
Requirement 5
P3-39B Journalizing adjusting entries and subsequent journal entries
Learning Objective 3
1. b. DR Insurance Expense $2,000
Lorring Landscaping has the following data for the December 31 adjusting entries:
a. Each Friday, Lorring pays employees for the current week’s work. The amount of the weekly payroll
is $6,000 for a five-day workweek. This year, December 31 falls on a Tuesday. Lorring will pay its
employees on January 3.
b. On January 1 of the current year, Lorring purchases an insurance policy that covers two years,
$4,000.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting
Lorring Landscaping. Assume Lorring 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
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Salaries Expense
2,400*
Salaries Payable
2,400*
To accrue salaries expense.
b. Dec. 31
Insurance Expense
2,000*
Prepaid Insurance
2,000*
To record insurance expense.
c. Dec. 31
Supplies Expense
7,400*
Office Supplies
7,400*
To record office supplies used.
d. Dec. 31
Unearned Revenue
2,000*
Service Revenue
2,000*
advance.
e. Dec. 31
Accounts Receivable
Service Revenue
To accrue service revenue.
f. Dec. 31
Depreciation Expense—Equipment
Depreciation Expense—Trucks
To record depreciation on equipment and trucks.
g. Dec. 31
Interest Expense
Interest Payable
To accrue interest expense.
P3-39B, cont.
* Calculations:
a:
$6,000
Payroll for a 5-day work week
5
work days
$1,200
Salaries expense per work day
Thus,
$1,200
Salaries expense per work day
× 2
work days
$2,400
Salaries expense for Monday through Tuesday
Insurance prepaid on January 1 for two years
years
Insurance expense for one year
$4,100
Beginning balance of office supplies
Office supplies on hand
$7,400
Supplies expense (cost of office supplies used)
$4,000
Collected in advance during December
Percentage earned during December
$2,000
Revenue earned during December