P3-39B, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
a. Jan. 3
Salaries Expense
3,600*
Salaries Payable
2,400
Cash
6,000
To record payment of salaries.
d.
Unearned Revenue
2,000*
2,000*
advance.
g. Jan. 15
Interest Expense
Interest Payable
Cash
1,200
To record payment of interest.
* Calculations:
a:
$6,000
Payroll for a 5-day work week
5
work days
$1,200
Salaries expense per work day
$1,200
Salaries expense per work day
work days
$4,000
Collected in advance during December
Revenue earned during December (see requirement 1)
$2,000
Revenue earned after December
$1,200
Total interest paid on January 15
Interest expense previously accrued on December 31
$ 400
Interest expense for January 1 through January 15
P3-40B Journalizing adjusting entries and identifying the impact on financial statements
Learning Objectives 3, 5
1. d. DR Depreciation Expense $15,000
Henderson Fishing Charters has collected the following data for the December 31 adjusting entries:
a. The company received its electric bill on December 20 for $150 but will not pay it until January 5.
(Use the Utilities Payable account.)
b. Henderson purchased a nine-month boat insurance policy on November 1 for $8,100. Henderson
recorded a debit to Prepaid Insurance.
Requirements
1. Journalize the adjusting entries needed on December 31 for Henderson Fishing Charters. Assume
Henderson records adjusting entries only at the end of the year.
2. If Henderson had not recorded the adjusting entries, indicate which specific category of accounts on
the financial statements would be misstated and if the misstatement is overstated or understated. Use
the following table as a guide:
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Utilities Expense
150
Utilities Payable
150
To accrue utilities expense.
b. Dec. 31
Insurance Expense
1,800*
Prepaid Insurance
1,800*
To record insurance expense.
c. Dec. 31
Accounts Receivable
Service Revenue
To accrue service revenue.
d. Dec. 31
Depreciation Expense—Boat
15,000*
15,000*
To record depreciation on boat.
e. Dec. 31
Unearned Revenue
Service Revenue
advance.
* Calculations:
b:
$8,100
Insurance prepaid on November 1 for 9 months
9
months
$ 900
Insurance expense per month
$ 900
Insurance expense per month
months
$1,800
Insurance expense for November and December
P3-40B, cont.
d:
Requirement 2
Adjusting
Entry
Specific Category
of Accounts on the
Balance Sheet
Over /
Understated
Specific Category
of Accounts on the
Income Statement
Over /
Understated
a.
Liability
Understated
Expense
Understated
Equity
Overstated
b.
Asset
Overstated
Expense
Understated
Equity
Overstated
c.
Asset
Understated
Revenue
Understated
Equity
Understated
d.
Asset
Overstated
Expense
Understated
Equity
Overstated
e.
Liability
Overstated
Revenue
Understated
Equity
Understated
P3-41B Journalizing and posting adjustments to the T-accounts and preparing an adjusted trial
balance
Learning Objectives 3, 4
3. Adjusted trial balance $71,700 total
The unadjusted trial balance of Alston Air Purification System at December 31, 2016, and the data
needed for the adjustments follow.
Adjustment data at December 31 follow:
a. On December 15, Alston contracted to perform services for a client receiving $2,600 in advance.
Alston recorded this receipt of cash as Unearned Revenue. As of December 31, Alston has
completed $1,200 of the services.
Requirements
1. Journalize the adjusting entries on December 31.
2. Using the unadjusted trial balance, open the T-accounts with the unadjusted balances. Post the
adjusting entries to the T-accounts.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Unearned Revenue
1,200
Service Revenue
1,200
To record service revenue earned that was collected in
advance.
b. Dec. 31
Rent Expense
1,350*
Prepaid Rent
1,350*
c. Dec. 31
Supplies Expense
Office Supplies
d. Dec. 31
Depreciation Expense—Equipment
e. Dec. 31
Advertising Expense
Accounts Payable
f. Dec. 31
Salaries Expense
3,300*
Salaries Payable
3,300*
g. Dec. 31
Accounts Receivable
2,100*
Service Revenue
2,100*
P3-41B, cont.
* Calculations:
b:
$2,700
Rent prepaid on December 1 for two months
2
months
$1,350
Rent expense for December
Payroll for a 5-day work week
Salaries expense per work day
work days
Salaries expense for Monday through Wednesday
Service revenue to be earned October through January
Service revenue earned per month
Service revenue earned per month
months
Service revenue earned October through December
P3-41B, cont.
Requirement 2
Cash
Accounts Payable
Service Revenue
Bal.
7,400
3,100
Bal.
15,400
Bal.
Bal.
7,400
600
e.
1,200
a.
3,700
Bal.
2,100
g.
18,700
Bal.
Accounts Receivable
Salaries Payable
Salaries Expense
Bal.
3,300
Bal.
3,400
2,100
3,300
Bal.
3,300
Bal.
Bal.
6,700
Bal.
2,700
b.
a.
2,600
Bal.
b.
1,350
Bal.
1,350
Bal.
Bal.
1,350
Common Stock
Bal.
1,100
650
c.
40,100
Bal.
d.
500
Bal.
450
40,100
Bal.
Bal.
500
Bal.
Bal.
e.
600
Bal.
2,000
Accumulated Depreciation—
Equipment
Supplies Expense
4,000
Bal.
c.
650
500
d.
Bal.
650
4,500
Bal.
P3-41B, cont.
Requirement 3
ALSTON AIR PURIFICATION SYSTEM
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 7,400
Accounts Receivable
21,400
Prepaid Rent
1,350
Office Supplies
Equipment
20,000
Accounts Payable
3,700
Salaries Payable
3,300
Unearned Revenue
1,400
Common Stock
40,100
Dividends
9,900
Service Revenue
18,700
Salaries Expense
6,700
Rent Expense
1,350
Depreciation Expense—Equipment
Advertising Expense
2,000
Supplies Expense
Requirement 4
Alston will use the adjusted trial balance to prepare its financial statements. (Additionally, the purpose
P3-42B Journalizing and posting adjustments to the four-column accounts and preparing an
adjusted trial balance
Learning Objectives 3, 4
3. Adjusted trial balance $566,330 total
The unadjusted trial balance of Irvine 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, Irvine Inn had $500 of Prepaid Insurance remaining.
b. At the end of the month, Irvine Inn had $400 of office supplies remaining.
c. Depreciation on the building is $4,100.
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
4,100*
Prepaid Insurance
4,100*
To record insurance expense.
b. Dec. 31
Supplies Expense
Office Supplies
To record office supplies used.
c. Dec. 31
Depreciation Expense—Building
To record depreciation on building.
d. Dec. 31
Salaries Expense
Salaries Payable
To accrue salaries expense.
e. Dec. 31
Unearned Revenue
Service Revenue
advance.
P3-42B, cont.
* Calculations:
a:
$4,600
Prepaid Insurance prior to adjustment
Prepaid Insurance remaining
$4,100
Insurance Expense
b:
Office supplies prior to adjustment
Office supplies remaining
Supplies Expense (cost of office supplies used)
d:
$1,000
Salaries for a five-day work week
5
Work days
$ 200
Salaries Expense per work day
Thus,
Salaries Expense per work day
× 3
work days
e:
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
11,200
ACCOUNTS RECEIVABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
14,600
PREPAID INSURANCE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
Dec. 31
500
OFFICE SUPPLIES
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
700
Dec. 31
b.
300
400
BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
525,000
ACCUMULATED DEPRECIATION—BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
Dec. 31
P3-42B, cont.
ACCOUNTS PAYABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
2,400
SALARIES PAYABLE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
d.
600
600
UNEARNED REVENUE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
1,600
Dec. 31
e.
500
1,100
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
17,100
Dec. 31
e.
500
17,600
P3-42B, cont.
SALARIES EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
3,100
Dec. 31
d.
3,700
INSURANCE EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
a.
4,100
4,100
DEPRECIATION EXPENSE—BUILDING
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
c.
4,100
4,100
ADVERTISING EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
Balance
880
SUPPLIES EXPENSE
Account No.
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
2016
Dec. 31
b.
300
P3-42B, cont.
Requirement 3
IRVINE INN COMPANY
Adjusted Trial Balance
December 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 11,200
Accounts Receivable
14,600
Prepaid Insurance
500
Office Supplies
400
Building
Accounts Payable
Salaries Payable
600
Unearned Revenue
Common Stock
Dividends
Service Revenue
17,600
Salaries Expense
Insurance Expense
Depreciation Expense—Building
Advertising Expense
880
Supplies Expense
300
P3-42B, cont.
Requirement 4
No. Even if total debits equals total credits on the adjusted trial balance, this does not mean that the
P3-43B Using the worksheet to record the adjusting journal entries
Learning Objective 6
2. d. CR Accumulated Depreciation $4,000
Grover 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
GROVER THEATER PRODUCTION COMPANY
Worksheet
December 31, 2016
Account
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 3,500
$ 3,500
Accounts Receivable
6,300
a.
$ 400
6,700
Office Supplies
1,400
b.
Prepaid Insurance
3,850
3,300
Equipment
33,000
Accumulated Depreciation—Equipment
$ 8,500
4,000
d.
$ 12,500
Accounts Payable
4,200
4,200
Salaries Payable
Dividends
32,000
Service Revenue
Depreciation Expense—Equipment
4,000
Supplies Expense
Utilities Expense
5,300
5,300
Salaries Expense
28,500
e.
Insurance Expense
c.
P3-43B, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Accounts Receivable
400
Service Revenue
400
To accrue service revenue.
b. Dec. 31
Supplies Expense
800
Office Supplies
800
To record office supplies used.
c. Dec. 31
Insurance Expense
550
Prepaid Insurance
550
To record insurance expense.
d. Dec. 31
Depreciation Expense—Equipment
To record depreciation on equipment.
e. Dec. 31
Salaries Expense
200
Salaries Payable
200
To accrue salaries expense.
P3A-44B Understanding the alternative treatment of prepaid expenses and unearned revenues
Learning Objectives 3, 7
Appendix 3A
4. Dec 31, CR Insurance Expense $6,400
Speedy Pack’n Mail completed the following transactions during 2016:
Requirements
1. Journalize the transactions assuming that Speedy Pack’n Mail 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.