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Based on the accrual basis of accounting, what is L Corporation’s net income for the year
ending October 31, 2011?
a. $184,000
b. $154,000
c. $152,000
d. $170,000
79. The following is selected information from C Corporation for the fiscal year ending October
31, 2011.
Based on the accrual basis of accounting, what is C Corporation’s net income for the year
ending October 31, 2011?
a. $102,000
b. $87,000
c. $86,000
d. $95,000
80. La More Company had the following transactions during 2011:
Sales of $4,500 on account
Collected $2,000 for services to be performed in 2012
Paid $1,375 cash in salaries for 2011
Purchased airline tickets for $250 in December for a trip to take place in 2012
141. If a company fails to adjust for accrued expenses, what effect will this have on that month's
financial statements?
a. Failure to make an adjustment does not affect the financial statements.
b. Expenses will be understated and net income and stockholders’ equity will be over-
stated.
c. Assets will be overstated and net income and stockholders’ equity will be under-stated.
d. Assets will be overstated and net income and stockholders’ equity will be overstated.
142. On January 1, 2010, Leardon Inc. purchased equipment for $45,000. The company is de-
preciating the equipment at the rate of $600 per month. At January 31, 2011, the balance in
Accumulated Depreciation is:
a. $600 debit
b. $7,200 credit
c. $7,800 credit
d. $39,900 debit
143. At December 31, 2011, before any year-end adjustments, Dallis Company's Prepaid Insur-
ance account had a balance of $2,700. It was determined that $1,000 of the Prepaid Insur -
ance had expired. The adjusted balance for Insurance Expense for the year would be:
a. $1,000.
b. $1,700.
c. $2,700.
d. $1,400.
144. At December 31, 2011, before any year-end adjustments, Janus Company's Prepaid Insur-
ance account had a balance of $2,400. It was determined that $1,000 of the Prepaid Insur -
ance had expired. The adjusted balance for Prepaid Insurance for the year would be:
a. $1,000.
b. $1,400.
c. $3,800.
d. $2,400.
145. At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was
omitted. Which of the following statements is true?
a. Net income will be overstated for the current year.
b. Total assets will be understated at the end of the current year.
c. The balance sheet and income statement will be misstated but the Retained Earnings
statement will be correct for the current year.
d. Total expenses will be overstated at the end of the current year.
146. The trial balance for Greenway Corporation appears as follows:
Greenway Corporation
Trial Balance
December 31, 2011
Cash $ 300
Accounts Receivable 500
Prepaid Insurance 60
Supplies 140
Office Equipment 4,000
Accumulated Depreciation, Office Equipment $ 800
Accounts Payable 300
Common Stock 1,000
Retained Earnings 1,400
Service Revenue 3,000
Salaries Expense 1,000
Rent Expense 500 0
$6,500 $6,500
If, on December 31, 2011, supplies on hand were $30, the adjusting entry would contain a:
a. debit to Supplies for $30.
b. credit to Supplies for $30.
c. debit to Supplies Expense for $110.
d. credit to Supplies Expense for $110.
147. The trial balance for Greenway Corporation appears as follows:
Greenway Corporation
Trial Balance
December 31, 2011
Cash $ 300
Accounts Receivable 500
Prepaid Insurance 60
Supplies 140
Office Equipment 4,000
Accumulated Depreciation, Office Equipment $ 800
Accounts Payable 300
Common Stock 1,000
Retained Earnings 1,400
Service Revenue 3,000
Salaries Expense 1,000
Rent Expense 500 0
$6,500 $6,500
If, on December 31, 2011, the insurance still unexpired amounted to $15, the adjusting en -
try would contain a:
a. debit to Prepaid Insurance for $45.
b. credit to Prepaid Insurance for $15.
c. debit to Insurance Expense for $45.
d. debit to Prepaid Insurance for $15.
148. The trial balance for Greenway Corporation appears as follows:
Greenway Corporation
Trial Balance
December 31, 2011
Cash $ 300
Accounts Receivable 500
Prepaid Insurance 60
Supplies 140
Office Equipment 4,000
Accumulated Depreciation, Office Equipment $ 800
Accounts Payable 300
Common Stock 1,000
Retained Earnings 1,400
Service Revenue 3,000
Salaries Expense 1,000
Rent Expense 500 0
$6,500 $6,500
If the estimated depreciation for office equipment were $800, the adjusting entry would con-
tain a:
a. credit to Accumulated Depreciation, Office Equipment for $800.
b. credit to Depreciation Expense, Office Equipment for $800.
c. debit to Accumulated Depreciation, Office Equipment for $800.
d. credit to Office Equipment for $800.
149. The trial balance for Greenway Corporation appears as follows:
Greenway Corporation
Trial Balance
December 31, 2011
Cash $ 300
Accounts Receivable 500
Prepaid Insurance 60
Supplies 140
Office Equipment 4,000
Accumulated Depreciation, Office Equipment $ 800
Accounts Payable 300
Common Stock 1,000
Retained Earnings 1,400
Service Revenue 3,000
Salaries Expense 1,000
Rent Expense 500 0
$6,500 $6,500
If as of December 31, 2011, rent of $120 for December had not been recorded or paid, the
adjusting entry would include a:
a. credit to Accumulated Rent for $120.
b. credit to Cash for $120.
c. debit to Rent Payable for $120
d. debit to Rent Expense for $120
150. The trial balance for Greenway Corporation appears as follows:
Greenway Corporation
Trial Balance
December 31, 2011
Cash $ 300
Accounts Receivable 500
Prepaid Insurance 60
Supplies 140
Office Equipment 4,000
Accumulated Depreciation, Office Equipment $ 800
Accounts Payable 300
Common Stock 1,000
Retained Earnings 1,400
Service Revenue 3,000
Salaries Expense 1,000
Rent Expense 500 0
$6,500 $6,500
If service for $125 had been performed but not billed, the adjusting entry to record this
would include a:
a. debit to Service Revenue for $125.
b. credit to Unearned Service Revenue for $125.
c. credit for Service Revenue for $125.
d. debit to Unearned Revenue for $125.
151. Depreciation is the process of:
a. valuing an asset at its fair market value.
b. increasing the value of an asset over its useful life in a rational and systematic manner.
c. allocating the cost of an asset to expense over its useful life in a rational and systematic
manner.
d. writing down an asset to its real value each accounting period.
152. The difference between the balance of a plant asset account and the related accumulated
depreciation account is termed:
a. market value.
b. contra asset.
c. book value.
d. liability.
153. A new accountant working for Metcalf Company records $800 Depreciation Expense on
store equipment as follows: Dr. Cr.
Depreciation Expense ……………………................800
Cash ............................................................... 800
211. Which account will have a zero balance after closing entries have been journalized and
posted?
a. Service revenue.
b. Advertising Supplies.
c. Prepaid Insurance.
d. Accumulated Depreciation.
212. A post-closing trial balance will show:
a. zero balances for all accounts.
b. zero balances for balance sheet accounts.
c. only balance sheet accounts.
d. only income statement accounts.
213. Which types of accounts will appear in the post-closing trial balance?
a. Permanent accounts.
b. Temporary accounts.
c. Accounts shown in the income statement columns of a work sheet.
d. None of the above.
214. The purpose of the post-closing trial balance is to:
a. prove that no mistakes were made.
b. prove the equality of the permanent account balances that are carried forward into the
next accounting period.
c. prove the equality of the temporary account balances that are carried forward into the
next accounting period.
d. list all the balance sheet accounts in alphabetical order for easy reference.
215. Which statement is correct concerning the adjusted trial balance?
a. An adjusted trail balance eliminates the need for the preparation of financial statements.
b. The purpose of an adjusted trial balance is to prove the equality of the total debit bal -
ances and the total credit balances in the ledger.
c. An adjusted trial balance will contain only permanent—balance sheet—accounts.
d. The adjusted trial balance is prepared after the adjusting entries have been journalized
but before they have been posted.
216. Which of the following account’s balance will change between the adjusted trial balance and
the post-closing trial balance?
a. Common stock
b. Prepaid rent
c. Unearned service revenue
d. Retained earnings
217. Which type of accounts will not appear in the post-closing trial balance?
a. Asset accounts
b. Permanent accounts
c. Liability accounts
d. Temporary accounts
218. There are usually how many closing journal entries?
a. 5
b. 4
c. 3
d. 2
219. Given the following adjusted trial balance, what will be the totals for the debit and credit col -
umns of the post-closing trial balance?
Debit Credit
Cash $1,562
Accounts receivable 2,098
Inventory 3,124
Prepaid rent 86
Property, plant & equipment 300
Accumulated depreciation $ 52
Accounts payable 82
Unearned revenue 172
Common stock 206
Retained earnings 6,610
Service revenue 218
Interest revenue 56
Salary expense 160
Travel expense 66
Totals $7,396 $7,396
a. $7,396
b. $7,118
c. $7,344
d. $7,170
220. Given the following adjusted trial balance, what will be the totals for the debit and credit col -
umns of the post-closing trial balance?
Debit Credit
Cash $ 781
Accounts receivable 1,049
Inventory 1,562
Prepaid rent 43
Property, plant & equipment 150
Accumulated depreciation $ 26
Accounts payable 41
Unearned revenue 86
Common stock 103
Retained earnings 3,305
Service revenue 109
Interest revenue 28
Salary expense 80
Travel expense 33
Totals $3,698 $3,698
a. $3,585
b. $3,559
c. $3,698
d. $3,672
221. The final step in the accounting cycle is to prepare:
a. closing entries.
b. financial statements.
c. a post-closing trial balance.
d. adjusting entries.
222. All of the following are required steps in the accounting cycle except:
a. journalizing and posting closing entries.
b. preparing an adjusted trial balance.
c. preparing a post-closing trial balance.
d. preparing a work sheet.
223. The following information is from the Income Statement of the Dirt Poor Laundry Service:
____________________________________________________________________________
Revenues
Laundry Service Revenues $5,500
Expenses
Wages expense $ 1,450
Advertising expense 500
Rent expense 300
Supplies expense 200
Insurance expense 100
Total expenses 2,550
Net Income $2,950
The entry to close the Laundry Service Revenue account includes a:
a. debit to Laundry Service Revenue for $5,500.
b. credit to Laundry Service Revenue for $5,500.
c. debit to Income Summary for $5,500.
d. debit to Retained Earnings for $5,500.
224. The following information is from the Income Statement of the Dirt Poor Laundry Service:
____________________________________________________________________________
Revenues
Laundry Service Revenues $5,500
Expenses
Wages expense $ 1,450
Advertising expense 500
Rent expense 300
Supplies expense 200
Insurance expense 100
Total expenses 2,550
Net Income $2,950
The entry to close the expense accounts includes a:
a. credit to Income Summary for $2,550.
b. debit to Income Summary for $2,550.
c. debit to Wages Expense for $1,450.
d. credit to Retained Earnings for $2,550.
225. The following information is from the Income Statement of the Dirt Poor Laundry Service:
____________________________________________________________________________
Revenues
Laundry Service Revenues $5,500
Expenses
Wages expense $ 1,450
Advertising expense 500
Rent expense 300
Supplies expense 200
Insurance expense 100
Total expenses 2,550
Net Income $2,950
The entry to close the Income Summary includes a:
a. credit to Income Summary for $2,950.
b. debit to Income Summary for $2,950.
c. debit to Retained Earnings for $2,950.
d. credit to Common Stock for $2,950.
226. The first required step in the accounting cycle is:
a. adjusting entries.
b. journalizing transactions.
c. analyzing transactions.
d. posting transactions.
227. The Accounts Receivable account has a beginning balance of $52,000 and an ending bal -
ance of $74,000. If $42,000 was sold on account during the year, what were the total col -
lections on account?
a. $20,000
b. $64,000
c. $84,000
d. $94,000
228. How many required steps are there in the accounting cycle?
a. 11
b. 9
c. 7
d. 5
229. Which of the following steps in the accounting cycle usually occurs only at the end of a com-
pany’s annual accounting period?
a. Step 3: Post to the ledger accounts.
b. Step 7: Prepare financial statements.
c. Step 6: Prepare adjusting trial balance.
d. Step 9: Prepare a post-closing trial balance.
*230. The work sheet is:
a. part of the journal.
b. a financial statement.
c. part of the ledger.
d. none of the above.
*231. The work sheet starts with two columns for the:
a. adjustments.
b. financial statements.
c. trial balance.
d. adjusted trial balance.
*232. The work sheet does not contain columns for the:
a. income statement.
b. statement of retained earnings.
c. balance sheet.
d. adjusted trial balance.
*233. The work sheet contains columns for the:
a. statement of retained earnings.
b. statement of cash flows.
c. post-closing trial balance.
d. balance sheet.
*234. Net income is recorded on the work sheet under the:
a. debit column of the adjusted trial balance and the credit column of retained earnings.
b. debit column of the income statement and the credit column of the balance sheet.
c. credit column of the adjusted trial balance and the debit column of retained earnings.
d. credit column of the income statement and the debit column of the balance sheet.
BRIEF EXERCISES
https://www.studocu.com/ca-es/document/universitat-de-
barcelona/financial-accounting/problemas-unit-4/2464024
Be. 235
Identify the effect, if any, that each of the following transactions would have upon cash and re-
tained earnings. Show the dollar amount and the effect (+, –, N).
Retained
_Cash__ Earnings
Be. 236
Before month-end adjustments are made, the February 28 trial balance of Cole’s Enterprise con -
tains revenue of $11,000 and expenses of $8,600. Adjustments are necessary for the following
items:
Instructions:
Calculate the correct net income for Cole's Enterprise for February 3.
Be. 237
Before month-end adjustments are made, the September 30 trial balance of Horton Enterprise con-
tains revenue of $9,200 and expenses of $6,300. Adjustments are necessary for the following
items:
Instructions:
Calculate the correct net income for Horton’s Enterprise for September.
Be. 238
For each of the following oversights, state whether total assets will be understated (U), overstated
(O), or no affect (NA).
Be. 239
State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued revenue
(AR) or an accrued expense (AE).
Be. 240
Identify the impact on the balance sheet for that month if the following information is not used to
adjust the accounts.
Be. 241
On January 1, the Biddle & Biddle, CPAs received a $6,000 cash retainer for legal services to be
provided rateably over the next 3 months. The full amount was credited to the liability account Un-
earned Revenue. Assuming that the revenue is earned rateably over the 3 month period, what ad -
justing journal entry should be made at January 31?
Be. 242
On February 1, the Acts Tax Service received a $2,800 cash retainer for tax preparation services to
be provided rateably over the next 4 months. The full amount was credited to the liability account
Unearned Revenue. Assuming that the revenue is earned rateably over the 4 month period, what
balance would be reported on the February 28 balance sheet for Unearned Revenue?
Be. 243
Better Publications, sold annual subscriptions to their magazine for $36,000 in December, 2010.
The magazine is published monthly. The new subscribers received their first magazine in January,
2011.
1. What adjusting entry should be made in January if the subscriptions were originally recor-
ded as a liability?
2. What amount will be reported on the January 2011 balance sheet for Unearned Revenue?
Be. 244
River Ridge Music School borrowed $30,000 from the bank signing a 10%, 6-month note on
November 1. Principal and interest are payable to the bank on May 1. If the company prepares
monthly financial statements, what adjusting entry should the company make at November 30 with
regard to the note (round answer to the nearest dollar)?
Be. 245
Match the statements below with the appropriate terms by entering the appropriate letter code in
the spaces provided.
TERMS:
A. Prepaid Expenses
B. Unearned Revenues
C. Accrued Revenues
D. Accrued Expenses
STATEMENTS:
Be. 247
Prepare adjusting entries for the following transactions. Omit explanations.
Be. 249
The adjusted trial balance of Warbocks Corporation at December 31, 2011 includes the following
accounts: Retained Earnings $12,600; Dividends $5,000; Service Revenue $30,000; Salaries Ex -
pense $15,000; Insurance Expense $2,000; Rent Expense $3,500; Supplies Expense $500; and
Depreciation Expense $1,000. Prepare a retained earnings statement for the year.
Be. 250
The following selected accounts appear in the adjusted trial balance for Blender Company. Identify
the accounts that would be included in the post-closing trial balance.
EXERCISES
Ex. 251
The balance sheets of Palle’ Company include the following:
12/31/11 12/31/10
Interest Receivable $4,300 $ -0-
Supplies 5,000 3,900
Wages Payable 3,700 3,800
Unearned Service Revenue -0- 4,000
Instructions:
Calculate the following for 2011:
1. Cash received for interest.
2. Cash paid for supplies.
3. Cash paid for wages.
4. Cash received for service revenue.
Ex. 252
The 2011 income statement for Moring Company showed rent expense of $8,500 and wages ex-
pense of $9,600. The related balance sheet account balance at year-end last year and this year
were as follows:
2011 2010
Prepaid Rent $900 $300
Wages Payable 500 400
2011 2010
Accounts receivable $3,450 $5,100
Supplies on hand 1,740 1,950
Wages payable 3,600 2,250
Other unpaid amounts 2,400 2,100
Instructions:
Determine the company’s net income under the accrual basis of accounting. Show your cal-
culations. Use the column headings shown below.
Explanation Amount
Ex. 254
Double-entry Accounting Services begin operations on July 1. It allows its clients 90 days to pay for
services received. On the other hand, the company’s suppliers require payment for their goods and
services within 30 days. Double-entry prepaid its office rent for 12 months on July 1. At the end of
the year, December 31, the company had yet to pay its last month’s utility bill.
Instructions:
Explain how cash and accrual basis accounting would handle each of the events described
above. Use the column heading s shown below.
Event Cash Basis Accrual Basis
Ex. 255
Hooper Company prepared the following income statement using the cash basis of accounting:
HOOPER COMPANY
Income Statement, Cash Basis
For the Year Ended December 31, 2011
Additional data:
1. Depreciation on a company automobile for the year amounted to $7,000. This amount is not in -
cluded in the expenses above.
2. On January 1, 2011, paid for a two-year insurance policy on the automobile amounting to
$1,600. This amount is included in the expenses above.
Instructions:
(a) Recast the above income statement on the accrual basis in conformity with generally ac-
cepted accounting principles. Show computations and explain each change.
(b) Explain which basis (cash or accrual) provides a better measure of income.
Ex. 256
On December 31, 2011, Çolski Company prepared an income statement and balance sheet and
failed to take into account three adjusting entries. The incorrect income statement showed net in -
come of $40,000. The balance sheet showed total assets, $130,000; total liabilities, $60,000; and
stockholders’ equity, $70,000.
The data for the three adjusting entries were:
(1) Depreciation of $7,000 was not recorded on equipment.
(2) Wages amounting to $10,000 for the last two days in December were not paid and not
recorded. The next payroll will be in January.
(3) Rent of $9,000 was paid for two months in advance on December 1. The entire amount was
debited to Prepaid Rent when paid.
Instructions:
Complete the following tabulation to correct the financial statement amounts shown (indicate de -
ductions with parentheses):
Wages
Rent
Correct Balances
Ex. 257
The Downtown Company accumulates the following adjustment data at December 31.
1. Revenue of $1,100 collected in advance has been earned.
2. Salaries of $600 are unpaid.
3. Prepaid rent totaling $450 has expired.
4. Supplies of $550 have been used.
5. Revenue earned but unbilled totals $750.
6. Utility expenses of $300 are unpaid.
7. Interest of $250 has accrued on a note payable.
Instructions:
(a) For each of the above items indicate:
1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued
expense).
2. The account relationship (asset/liability, liability/revenue, etc.).
3. The status of account balances before adjustment (understatement or overstatement).
4. The adjusting entry.
(b) Assume net income before the adjustments listed above was $24,500. What is the adjusted
net income?
Prepare your answer in the tabular form presented below.
Account Balances
Before Adjustment Income Effect
Type of Account (Understatement Increase
Adjustment Relationship or Overstatement) Adjusting Entry (Decrease)
Ex. 258
The adjusted trial balance of Masters Company includes the following balance sheet accounts that
frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid
expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related ac-
count in the adjusting entry.
(a) (b)
Balance Sheet Account Type of Adjusting Entry Related Account
1. Supplies
2. Accounts Receivable
3. Prepaid Insurance
4. Accumulated Depreciation—
Equipment
5. Interest Payable
6. Salaries Payable
7. Unearned Service Revenue
Ex. 259
Match the statements below with the appropriate terms by entering the appropriate letter code in
the spaces provided.
TERMS:
A. Prepaid Expenses
B. Unearned Revenues
C. Accrued Revenues
D. Accrued Expenses
STATEMENTS:
_____ 2. Office supplies on hand that will be used in the next period.
Ex. 260
A review of the ledger of Wilde Insurance Co. at December 31, 2011, produces the following data
pertaining to the preparation of annual adjusting entries:
(a) Salaries Payable $0: Salaries are paid every Friday for the current week. Five employees re-
ceive a weekly salary of $800, and three employees earn a weekly salary of $600. December
31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of
December.
(b) Unearned Insurance Revenue $58,000: The company sold several insurance policies during
the year as shown below:
Premium
Term Per Number of
Date (in months) Policy Policies
Oct. 1 12 $ 8,000 3
Dec. 1 12 18,000 2
(c) Notes Receivable $90,000: This is a 6-month note, dated November 1, 2011, with an 8% inter-
est rate.
Instructions:
Prepare the adjusting entries at December 31, 2011. Show all computations.
Ex. 261
A review of the ledger of Weakly Service Co. at December 31, 2011, produces the following data
pertaining to the preparation of annual adjusting entries:
(a) Notes Payable $70,000: This is a 9-month note, dated September 1, 2011, with an 9% in-
terest rate.
(b) Prepaid Rent $648,000. The company rents offices throughout the Midwest. During 2011
it signed 10 leases as shown below:
(c) Unearned Service Revenue $183,000. During 2011 the company entered into 13 monthly
service contracts with clients. The clients prepaid for the services to be provided over the
contract period in an even manner.
Ex. 262
The Scarlet Pages, a semi-professional hockey team, prepare financial statements on a monthly
basis. Their season begins in October, but in September the team engaged in the following trans-
actions:
(a) Paid $180,000 to Oklahoma City as advance rent for use of Oklahoma City Arena for the six-
month period October 1 through March 31.
(b) Collected $600,000 cash from sales of season tickets for the team's 30 home games. This
amount was credited to Unearned Ticket Revenue.
(c) During the month of October, the Scarlet Pages played five home games.
Instructions:
Prepare the adjusting entries required at October 31 for the transactions above.
Ex. 263
The Jacquers, a semi-professional baseball team, prepare financial statements on a monthly basis.
Their season begins in April, but in March the team engaged in the following transactions:
(a) Paid $90,000 to Lawrence City as advance rent for use of Lawrence City Stadium for the six-
month period April 1 through September 30.
(b) Collected $500,000 cash from sales of season tickets for the team's 20 home games. This
amount was credited to Unearned Ticket Revenue.
(c) During the month of April, the Jacquers played four home games and five road games.
a.
Dr rent expense $15 000
Cr prepaid rent $15 000
b.
Dr Unearned revenue $100 000
Cr Revenue $100 000
Instructions:
Prepare the adjusting entries required at April 30 for the transactions above.
Ex. 264
Prepare adjusting entries for the following transactions. Omit explanations.
1.
Dr depreciation expense 1340
Cr accumulated depreciation 1340
2.
Dr interest expense 275
Cr interest payable 275
3.
Dr Supply expense 400
Cr supplies 400
4.
Rent expense 700
Prepaid rent 700
5.
Salary expense 900
Salary payable 900
Ex. 265
Prepare adjusting entries for the following transactions. Omit explanations.
Ex. 266
Prepare year-end adjustments for the following transactions. Omit explanations.
Ex. 267
Janus Coat Company purchased a delivery truck on June 1 for $24,000, paying $8,000 cash and
signing a 6%, 2-month note for the remaining balance. The truck is expected to depreciate $4,800
each year. Janus Coat Company prepares monthly financial statements.
Instructions:
(a) Prepare the general journal entry to record the acquisition of the delivery truck on June 1 st.
(b) Prepare any adjusting journal entries that should be made on June 30 th.
(c) Show how the delivery truck will be reflected on Janus Coat Company's balance sheet on
June 30th.
Ex. 268
Sunkan Company prepares monthly financial statements. Below are listed some selected accounts
and their balances on the September 30 trial balance before any adjustments have been made for
the month of September.
SUNKAN COMPANY
Trial Balance (Selected Accounts)
September 30, 2011
____________________________________________________________________________
Debit Credit
Office Supplies ..................................................................................... $ 2,700
Prepaid Insurance ................................................................................ 5,250
Office Equipment ................................................................................. 16,200
Accumulated Depreciation—Office Equipment .................................... $ 1,000
Unearned Rent Revenue ..................................................................... 1,200
(Note: Debit column does not equal credit column because this is a partial listing of selected ac-
count balances.)
An analysis of the account balances by the company's accountant provided the following additional
information:
1. A physical count of office supplies revealed $1,000 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for $4,200.
3. Office equipment depreciates $3,000 per year.
4. The amount of rent received in advance that remains unearned at September 30 is $500.
Instructions:
Using the information given, prepare the adjusting entries that should be made by Sunkan Com-
pany on September 30.
Ex. 269
Prepare the required end-of-period adjusting entries for each independent case listed below.
Case 1
The Thoma Company began the year with a $3,000 balance in the Office Supplies account. Dur -
ing the year, $8,500 of additional office supplies were purchased. A physical count of office sup -
plies on hand at the end of the year revealed that $8,300 worth of office supplies had been used
during the year. No adjusting entry has been made until year end.
Case 2
The Leno Company has a calendar year-end accounting period. On July 1, the company pur-
chased office equipment for $30,000. It is estimated that the office equipment will depreciate $250
each month. No adjusting entry has been made until year end.
Case 3
Yeats Realty is in the business of renting several apartment buildings and prepares monthly finan -
cial statements. It has been determined that 2 tenants in $800 per month apartments and one ten-
ant in the $1,000 per month apartment had not paid their December rent as of December 31 st.
Ex. 270
Greenstream Insurance Agency prepares monthly financial statements. Presented below is an in -
come statement for the month of June that is correct on the basis of information considered.
1. A utility bill for $1,200 was received on the last day of the month for electric and gas service for
the month of June.
2. A company insurance salesman sold a life insurance policy to a client for a premium of
$20,000. The agency billed the client for the policy and is entitled to a commission of 20%.
3. Supplies on hand at the beginning of the month were $2,000. The agency purchased addi-
tional supplies during the month for $1,500 in cash and $1,200 of supplies were on hand at
June 30.
4. The agency purchased a new car at the beginning of the month for $24,000 cash. The car will
depreciate $6,000 per year.
5. Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on
July 5.
Instructions:
Prepare a corrected income statement.
Ex. 271
One part of an adjusting entry is given below.
Instructions:
Indicate the account title for the other part of the entry.
1. Unearned Service Revenue is debited.
2. Prepaid Rent is credited.
3. Accounts Receivable is debited.
4. Depreciation Expense is debited.
5. Utilities Expense is debited.
6. Interest Payable is credited.
7. Service Revenue is credited (give two possible debit accounts).
8. Interest Receivable is debited.
Ex. 272
The following ledger accounts are used by the Heartland Race Track:
Accounts Receivable
Prepaid Printing
Prepaid Rent
Unearned Admissions Revenue
Admissions Revenue
Concessions Revenue
Printing Expense
Rent Expense
Instructions:
For each of the following transactions below, prepare the journal entry (if one is required) to record
the initial transaction and then prepare the adjusting entry, if any, required on November 30, the
end of the fiscal year.
(a) On November 1, paid rent on the track facility for three months, $90,000.
(b) On November 1, sold season tickets for admission to the racetrack. The racing season is
year-round with 25 racing days each month. Season ticket sales totaled $960,000.
(c) On November 1, borrowed $120,000 from First National Bank by issuing a 6% note payable
due in three months.
(d) On November 5, schedules for 20 racing days in November, 25 racing days in December and
15 racing days in January were printed for $3,600.
(e) The accountant for the concessions company reported that gross receipts for November were
$140,000. Ten percent is due to Heartland and will be remitted by December 10.
Ex. 273
Dallison Company has an accounting fiscal year, which ends on June 30. The company also has a
policy of paying the weekly payroll on Friday. Payroll records indicate the following salary costs
were incurred.
Date Amount
Monday June 28 $3,200
Tuesday June 29 2,800
Wednesday June 30 2,400
Thursday July 1 3,000
Friday July 2 2,600
Instructions:
(a) Prepare any necessary adjusting journal entries that should be made at year end on June 30.
(b) Prepare the journal entry to record the payment of the weekly payroll on July 2.
Ex. 274
On Friday of each week, Prawn Company pays its factory personnel weekly wages amounting to
$55,000 for a five-day work week.
Instructions:
(a) Prepare the necessary adjusting entry at year end, assuming December 31 falls on Wednes -
day.
(b) Prepare the journal entry for payment of the week's wages on the payday which is Friday,
January 2 of the next year.
Ex. 275
Presented below is the Trial Balance and Adjusted Trial Balance for Stabler Company on Decem -
ber 31.
STABLER COMPANY
Trial Balance
December 31
____________________________________________________________________________
Instructions:
Prepare in journal form, with explanations, the adjusting entries that explain the changes in the bal-
ances from the trial balance to the adjusted trial balance.
Ex. 276
The Golden Petting Zoo operates a drive-through tourist attraction in Colorado. The company ad -
justs its accounts at the end of each month. The selected accounts appearing below reflect bal-
ances after adjusting entries were prepared on April 30. The adjusted trial balance shows the fol -
lowing:
Prepaid Rent $ 15,000
Fencing 42,000
Accumulated Depreciation—Fencing 5,500
Unearned Ticket Revenue 400
Other data:
1. Three months' rent had been prepaid on April 1.
2. The fencing is being depreciated at $6,000 per year.
3. The unearned ticket revenue represents tickets sold for future zoo visits. The tickets were sold
at $4.00 each on April 1. During April, twenty of the tickets were used by customers.
Instructions:
Ex. 277
The adjusted trial balance of Nicks Financial Planners appears below and using the information
from the adjusted trial balance, you are to prepare for the month ending December 31:
1. an income statement;
2. a retained earnings statement; and
3. a balance sheet.
NICKS FINANCIAL PLANNERS
Adjusted Trial Balance
December 31, 2011
____________________________________________________________________________
Debit Credit
Cash .................................................................................................... $ 16,400
Accounts Receivable ........................................................................... 2,200
Office Supplies ..................................................................................... 1,800
Office Equipment ................................................................................. 15,500
Accumulated Depreciation—Office Equipment .................................... $ 4,000
Accounts Payable ................................................................................ 3,000
Unearned Service Revenue ................................................................. 5,000
Common Stock..................................................................................... 17,000
Retained Earnings ............................................................................... 7,400
Dividends ............................................................................................. 2,500
Service Revenue ................................................................................. 7,500
Office Supplies Expense ...................................................................... 1,100
Depreciation Expense .......................................................................... 2,500
Rent Expense ...................................................................................... 1,900
$43,900 $43,900
Ex. 278
The adjusted trial balance shown below is for Rich Company at the end of its fiscal year:
RICH COMPANY
Trial Balance
March 31, 2011
____________________________________________________________________________
Debit Credit
Cash .................................................................................................... $ 12,900
Accounts Receivable ........................................................................... 9,400
Office Supplies ..................................................................................... 700
Prepaid Insurance ................................................................................ 2,500
Office Equipment ................................................................................. 16,000
Accumulated Depreciation—Office Equipment .................................... $ 4,800
Accounts Payable ................................................................................ 5,800
Salaries Payable .................................................................................. 1,100
Unearned Rent Revenue ..................................................................... 600
Common Stock..................................................................................... 10,000
Retained Earnings ............................................................................... 5,600
Dividends ............................................................................................. 3,800
Service Revenue ................................................................................. 39,600
Rent Revenue ...................................................................................... 14,400
Salaries expense ................................................................................. 20,100
Office Supplies Expense ...................................................................... 1,800
Rent Expense ...................................................................................... 12,000
Insurance Expense .............................................................................. 1,500
Depreciation Expense........................................................................... 1,200
$81,900 $81,900
Instructions:
Prepare the closing entries for the temporary accounts at March 31.