Individual Exercise for session 3

E3.5

Adjusting entries for the seven items described above:

Devin Wolf Company

December 31, 2020
1. Interest Expense………………………………………………………………………… 300
Interest Payable…………………………………………………………………… 300
( $10,000 × 9% × 4/12 = $300)

2. Supplies Expense……………………………………………………………………….. 1,550

Supplies ($2,450-$900)………………………………………………………… 1,550

3. Depreciation Expense…………………………………………………………………
Accumulated Depreciation-Equipment……………………………….. 1,000 1,000
 4. Insurance Expense…………………………………………………………………….. 1,225
Prepaid Insurance……………………………………………………………….. 1,225
($2,100 x 7/12 = $1,225)

5. Unearned Service Revenue……………………………………………………… 8,000

Service Revenue………………………………………………………………… 8,000
($32,000 x 1/4 = $8,000)

6. Account Receivable……………………………………………………………………. 4,200

Service Revenue…………………………………………………………………… 4,200

7. Salaries and wages expense……………………………………………………….. 5,400

Salaries and wages payable………………………………………………….. 5,400
( $9,000 x 3/5 = $5,400)
E3.6.

a) Type of Adjustment:
1. Accrued Revenues
2. Prepaid Expenses
3. Accrued Expenses
4. Unearned Revenues
5. Accrued Expenses
6. Prepaid Expenses
b) Status of accounts before adjustment:
1. Assets understatement
Revenues understatement
 2. Assets overstatement
Expenses understatement
3. Liabilities understatement
Expenses understatement
4. Liabilities overstatement
Revenue understatement
5. Expenses understatement
Liabilities understatement
6. Assets overstatement
Expenses understatement
E3.7.

Passehl Rental Agency

March 31
1. Depreciation…………………………………………………………………………… 1,200
Accumulated Depreciation-Equipment………………………………. 1,200
($400 x 3 = $1,200)
2. Unearned Rent Revenue…………………………………………………………. 3,400
Rent Revenue…………………………………………………………………….. 3,400
($10,200 x 1/3 = $3,400)
3. Interest Expense………………………………………………………………………. 500
Interest Payable…………………………………………………………………… 500

4. Supplies Expense……………………………………………………………………… 2,050

Supplies………………………………………………………………………………. 2,050
($2,800 - $750 = $2,050)

5. Insurances Expense………………………………………………………………….. 900

Prepaid Insurance………………………………………………………………… 900
($300 x 3 = $900)