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Mishal Mustafa

BTA111
Prof. Wu

Exercise Chapter Three


Devin Wolf Company has the following balances in selected accounts on December 31,
2019.
Accounts Receivable $0
Accumulated Depreciation-Equipment $0
Equipment $7,000
Interest Payable $0
Notes Payable $10,000
Prepaid Insurance $2,100
Salaries and Wages Payable $0
Supplies $2,450
Unearned Service Revenue $30,000

All the accounts have normal balances. The information below has been gathered at
December 31, 2019.
1. Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on
September 1, 2019.
2. A count of supplies on December 31, 2019, indicates that supplies of $900 are on
hand.
3. Depreciation on the equipment for 2019 is $1,000.
4. Devin Wolf Company paid $2,100 for 12 months of insurance coverage on June
1, 2019.
5. On December 1, 2019, Devin Wolf collected $32,000 for consulting services to be
performed from December 1, 2018, through March 31, 2020.
6. Devin Wolf performed consulting services for a client in December 2019. The
client will be billed $4,200.
7. Devin Wolf Company pays its employees total salaries of $9,000 every Monday
for the preceding 5-day week (Monday through Friday). On Monday, December
29, employees were paid for the week ending December 26. All employees
worked the last 3 days of 2019.

Instructions Prepare adjusting entries for the seven items described above.
Date Account Title and Explanation Debit Credit
Dec 31 Interest expense $300
Interest payable ($10,000*9%*4/12) $300
(To record the accrued interest expense on note payable)

Dec 31 Supplies expense $1,550


Supplies ($2,450-$900) $1,550
(To record supplies expense)

Dec 31 Depreciation Expense $1,000


Accumulated depreciation - Equipment $1,000
(To record the accumulated depreciation)

Dec 31 Insurance Expense $1,225


Prepaid Insurance ($2,100*7/12) $1,225
(To record expired prepaid insurance)

Dec 31 Unearned Service Revenue $32,000


Service Revenue $32,000
(To record the earned service revenue)

Dec 31 Accounts Receivable $4,200


Service Revenue $4,200
(To record the performed service on account)

Dec 31 Salaries and Wages expense $5,400


Salaries and Wages payable ($9,000*3/5) $5,400
(To record accrued salaries)

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