SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
a. Jul. 31
Depreciation Expense
400
Accumulated Depreciation
400
To record depreciation.
b. Jul. 31
Rent Expense
800
800
To record rent expense.
c. Jul. 31
Interest Expense
600
600
To accrue interest expense.
d. Jul. 31
Salaries Expense
10,400*
10,400*
To accrue salaries expense.
e. Jul. 31
Unearned Revenue
Service Revenue
collected in advance.
f. Jul. 31
Supplies Expense
100
Office Supplies
100
To record office supplies used.
$10,400
E3-28, cont.
Requirement 2
If the adjustments in Requirement 1 were not made, net income would be overstated by $10,700 overall.
Calculations:
E3-29 Using the worksheet to record the adjusting journal entries
Learning Objective 6
1. Adjustments $3,300 total
The worksheet of Just Jobs Employment Service follows but is incomplete.
Requirements
1. Calculate and enter the adjustment amounts directly in the Adjustments columns. Use letters a
through d to label the four adjustments.
2. Prepare each adjusting journal entry calculated in Requirement 1. Date the entries, and include
explanations.
SOLUTION
Requirement 1
JUST JOBS EMPLOYMENT SERVICES
Worksheet
April 30, 2016
Account Names
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 1,100
$ 1,100
Accounts Receivable
4,900
a.
$ 1,300
6,200
Office Supplies
1,200
$ 300
b.
Equipment
32,900
Accumulated Depreciation—Equipment
$ 14,300
$ 15,200
Salaries Payable
d.
Common Stock
Dividends
5,000
5,000
Service Revenue
1,300
Salaries Expense
2,600
800
3,400
Rent Expense
1,300
1,300
Depreciation Expense—Equipment
c.
900
Supplies Expense
300
E3-29, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
a. Apr. 30
Accounts Receivable
1,300
Service Revenue
1,300
To accrue service revenue.
b. Apr. 30
Supplies Expense
300
300
To record office supplies used.
c. Apr. 30
Depreciation Expense—Equipment
900
900
To record depreciation on equipment.
d. Apr. 30
Salaries Expense
800
800
To accrue salaries expense.
E3-30 Using the worksheet to prepare the adjusted trial balance
Learning Objective 6
Adjusted trial balance
$216,070 total
The worksheet of Moore’s Landscaping Services follows but is incomplete.
Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns.
SOLUTION
MOORE’S LANDSCAPING SERVICES
Worksheet
December 31, 2016
Account Names
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 27,500
$ 27,500
Accounts Receivable
6,600
h.
$ 2,500
9,100
Office Supplies
Prepaid Rent
2,900
1,450
Accumulated Depreciation—Equipment
Trucks
Accumulated Depreciation—Trucks
Accounts Payable
Salaries Payable
Interest Payable
Unearned Revenue
5,000
3,500
Notes Payable
Dividends
Service Revenue
Rent Expense
1,450
Salaries Expense
5,000
Utilities Expense
4,800
4,800
Depreciation Expense – Equipment
Depreciation Expense – Trucks
d.
1,000
1,000
Interest Expense
g.
150
E3A-31 Understanding the alternative treatment of prepaid expenses
Learning Objectives 3, 7
Appendix 3A
2. CR Office Supplies $300
At the beginning of the year, office supplies of $800 were on hand. During the year, Rocket Air
Conditioning Service paid $6,000 for more office supplies. At the end of the year, Rocket has $500 of
office supplies on hand.
Requirements
1. Record the adjusting entry assuming that Rocket records the purchase of office supplies by initially
debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies Expense T-
accounts. Make sure to include the beginning balance and purchase of office supplies in the Office
Supplies T-account.
2. Record the adjusting entry assuming that Rocket records the purchase of office supplies by initially
debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies Expense T-
accounts. Make sure to include the beginning balance in the Office Supplies T-account and the
purchase of office supplies in the Supplies Expense T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Supplies Expense
6,300*
6,300 Adj.
Requirement 2
Requirement 3
E3A-32 Understanding the alternative treatment of unearned revenues
Learning Objectives 3, 7
Appendix 3A
2. DR Service Revenue $200
At the beginning of the year, Dapper Advertising owed customers $2,400 for unearned revenue collected
in advance. During the year, Dapper received advance cash receipts of $7,500 and earned $15,000 of
service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for
unearned revenue is $2,600 and unadjusted service revenue is $15,000.
Requirements
1. Record the adjusting entry assuming that Dapper records the cash receipt of unearned revenue by
initially crediting a liability account. Post the adjusting entry to the Unearned Revenue and Service
Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in
the Unearned Revenue T-account.
2. Record the adjusting entry assuming that Dapper records the cash receipt of unearned revenue by
initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service
Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-
account and the additional unearned revenue in the Service Revenue T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Unearned Revenue
7,300*
Service Revenue
7,300*
To record service revenue earned that
was collected in advance.
Unearned Revenue at the beginning of the year
Cash collected for future services
Unearned Revenue still unearned
Service Revenue earned
2,400 Bal.
15,000
7,500
7,300 Adj.
2,600 Bal.
22,300 Bal.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Service Revenue
200*
Unearned Revenue
To record additional unearned revenue.
Unearned Revenue still unearned
Unearned Revenue prior to adjustment
Additional Unearned Revenue to be recorded
2,400 Bal.
15,000
200 Adj.
7,500
2,600 Bal.
22,300 Bal.
Requirement 3
The ending balances in the Unearned Revenue account and the Service Revenue account are the same,
regardless of which of the two approaches is used.
Problems (Group A)
P3-33A Journalizing adjusting entries and subsequent journal entries
Learning Objective 3
1. b. DR Insurance Expense $1,250
Laroche Landscaping has collected the following data for the December 31 adjusting entries:
a. Each Friday, Laroche pays employees for the current week’s work. The amount of the weekly
payroll is $7,500 for a five-day workweek. This year, December 31 falls on a Wednesday. Laroche
will pay its employees on January 2.
b. On January 1 of the current year, Laroche purchases an insurance policy that covers two years,
$2,500.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting
Laroche Landscaping. Assume Laroche 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
4,500*
Salaries Payable
4,500*
To accrue salaries expense.
b. Dec. 31
Insurance Expense
1,250*
Prepaid Insurance
1,250*
To record insurance expense.
c. Dec. 31
Supplies Expense
6,700*
Office Supplies
6,700*
To record office supplies used.
d. Dec. 31
Unearned Revenue
3,000*
3,000*
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.
P3-33A, cont.
* Calculations:
a:
b:
$2,500
Insurance prepaid on January 1 for two years
2
Years
$1,250
Insurance expense for one year
c:
P3-33A, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
a. Jan. 2
Salaries Expense
3,000*
Salaries Payable
4,500
Cash
7,500
To record payment of salaries.
d.
Unearned Revenue
2,000*
2,000*
advance.
g. Jan. 15
Interest Expense
Interest Payable
Cash
To record payment of interest.
* Calculations:
a:
$7,500
Payroll for a 5-day work week
5
work days
$1,500
Salaries expense per work day
$1,500
Salaries expense per work day
work days
$3,000
Salaries expense for Thursday and Friday of the current week
$5,000
Collected in advance during December
Revenue earned during December (see requirement 1)
$2,000
Revenue earned after December
Total interest paid on January 15
Interest expense previously accrued on December 31
Interest expense for January 1 through January 15
P3-34A Journalizing adjusting entries and identifying the impact on financial statements
Learning Objectives 3, 5
1. d. DR Depreciation Expense $8,000
Wright Fishing Charters has collected the following data for the December 31 adjusting entries:
a. The company received its electric bill on December 20 for $225 but will not pay it until January 5.
(Use the Utilities Payable account.)
Requirements
1. Journalize the adjusting entries needed on December 31 for Wright Fishing Charters. Assume
Wright records adjusting entries only at the end of the year.
2. If Wright 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
225
Utilities Payable
225
To accrue utilities expense.
b. Dec. 31
Insurance Expense
2,000*
Prepaid Insurance
2,000*
To record insurance expense.
c. Dec. 31
Accounts Receivable
Service Revenue
To accrue service revenue.
d. Dec. 31
Depreciation Expense—Boat
8,000*
8,000*
To record depreciation on boat.
e. Dec. 31
Unearned Revenue
Service Revenue
advance.
* Calculations:
b:
$9,000
Insurance prepaid on November 1 for 9 months
9
months
$1,000
Insurance expense per month
$1,000
Insurance expense per month
months
$2,000
Insurance expense for November and December
P3-34A, cont.
d:
depreciation per year
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
P3-35A Journalizing and posting adjustments to the T-accounts and preparing an adjusted trial
balance
Learning Objectives 3, 4
3. Adjusted trial balance $69,750 total
The unadjusted trial balance of Aurora 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, Aurora contracted to perform services for a client receiving $2,800 in advance.
Aurora recorded this receipt of cash as Unearned Revenue. As of December 31, Aurora has
completed $1,800 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.
3. Prepare the adjusted trial balance.
4. How will Aurora Air Purification System use the adjusted trial balance?
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
a. Dec. 31
Unearned Revenue
1,800
Service Revenue
1,800
To record service revenue earned that was collected in
advance.
b. Dec. 31
Rent Expense
1,300*
1,300*
c. Dec. 31
Supplies Expense
600
600
d. Dec. 31
Depreciation Expense—Equipment
700
700
e. Dec. 31
Advertising Expense
1,000
1,000
f. Dec. 31
Salaries Expense
900*
g. Dec. 31
Accounts Receivable
2,250*
2,250*
P3-35A, cont.
* Calculations:
b:
$2,600
Rent prepaid on December 1 for two months
2
months
$1,300
Rent Expense for December
f:
$1,500
Payroll for a 5-day work week
5
work days
$ 300
Salaries Expense per work day
Salaries Expense per work day
work days
Salaries Expense for Monday through Wednesday
$3,000
Service Revenue to be earned October through January
4
$ 750
Service Revenue earned per month
$ 750
Service Revenue earned per month
months
Service Revenue earned October through December