Exercise 3-20 When the accounts of Sunland Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $5,952, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. 2. On November 1, Rent Revenue was credited for $1,668, representing revenue from a subrental for a 3-month period beginning on that date. 3. Purchase of advertising materials for $745 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $317 are on hand. 4. Interest of $793 has accrued on notes payable. Prepare the following in general journal form. (a) The adjusting entry for each item. (b) The reversing entry for each item where appropriate. Explain why a reversing entry is appropriate or inappropriate for each adjusting entry.

Exercise 3-20 When the accounts of Sunland Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $5,952, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. 2. On November 1, Rent Revenue was credited for $1,668, representing revenue from a subrental for a 3-month period beginning on that date. 3. Purchase of advertising materials for $745 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $317 are on hand. 4. Interest of $793 has accrued on notes payable. Prepare the following in general journal form. (a) The adjusting entry for each item. (b) The reversing entry for each item where appropriate. Explain why a reversing entry is appropriate or inappropriate for each adjusting entry.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 18CE: Cornerstone Exercise 3-18 Accrued Expense Adjusting Entries Manning Manufacturing Inc. had the...

See similar textbooks

Similar questions

Exercise 3-46 Identification and Analysis of Adjusting Entries Medina Motor Service is preparing adjusting entries for the year ended December 31, 2019. The following items describe Medina s continuous transactions during 2019: Medinas salaried employees are paid on the last day of every month. Medinas hourly employees are paid every other Friday for the 2 weeks' work. The next payday falls on January 5, 2020. In November 2019, Medina borrowed $600,000 from Bank One, giving a 9% note payable with interest due in January 2020. The note was properly recorded. Medina rents a portion of its parking lot to the neighboring business under a long-term lease agreement that requires payment of rent 6 months in advance on April 1 and October 1 of each year. The October 1, 2019, payment was made and recorded as prepaid rent. Medinas department recognizes the entire revenue on every auto service job when the job is complete. At December 31, several service jobs are in process. Medina recognizes depreciation on shop equipment annually at the end of each year. Medina purchases all of its office supplies from Office Supplies Inc. All purchases are recorded in the supplies account. Supplies expense is calculated and recorded annually at the end of each year. Required: Indicate whether or not each item requires an adjusting entry at December 31, 2019. If an item requires an adjusting entry, indicate which accounts are increased by the adjustment and which are decreased.
Exercise 3-55 Effect of Adjustments on the Financial Statements VanBrush Enterprises, a painting contractor, prepared the following adjusting entries at year end: a. Wages Expense ................ 2,550 Wages Payable 2,550 b. Accounts Receivable ....... 8,110 Service Revenue .............. 8,110 c. Unearned Service Revenue â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 5,245 Service Revenue â€¦â€¦â€¦..... 5.245 d. Rent Expense ............. 3,820 Prepaid Rem .......... 3,820 Required: 1. Show the effect of these adjustments on assets, liabilities, equity, revenues, expenses, and net Income. 2. CONCEPTUAL CONNECTION If these adjustments were made with estimates that were considered conservative, how would this affect your interpretation of earnings quality?
Appendix 2 Adjusting and reversing entries On the basis of the following data, (A) journalize the adjusting entries at December 31, the end of the current fiscal year, and (B) journalize the reversing entries on January 1, the first day of the following year: 1. Sales salaries are uniformly 11,750 for a five-day workweek, ending on Friday. The last payday of the year was Friday, December 26. 2. Accrued fees earned but not recorded at December 31, 51,300.
Cornerstone Exercise 3-17 Accrued Revenue Adjusting Entries Powers Rental Service had the following items that require adjustment at year end. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. Interest of S650 on a note receivable has been earned but not yet received. Required: Prepare the adjusting entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made?
Cornerstone Exercise 3-18 Accrued Expense Adjusting Entries Manning Manufacturing Inc. had the following items that require adjustment at year end. Salaries of $5,320 that were earned in December are unrecorded and unpaid. Used $1,970 Of utilities in December, which are unrecorded and unpaid. Interest of $925 on a note payable has not been or paid. Required: Prepare the adjusting entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made?
Income: 27,350 accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet The unadjusted trial balance of La Mesa Laundry at August 31, 20Y5, the end of the fiscal year, follows: The data needed to determine ear-end adjustments are as follows: (a) Wages accrued but not paid at August 31 are 2,200. (b) Depreciation of equipment during the year it 8,150 (c) Laundry supplies on hand at August 31 are 2,000. (d) Insurance premiums expired during the year are 5,300. Instructions 1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identify the balance as Aug. 51 Bal. In addition, add T accounts for Wages Payable. Depreciation Expense, Laundry Supplies Expense, and Insurance Expense. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed. 3. Journalize and post the adjusting entries. Identify the adjustments by Adj. and the new balances as Adj. Bal. 4. Prepare an adjusted trial balance. 5. Prepare an income statement, a statement of stockholders equity, and a balance sheet. During the year ended August 51, 20Y5, common stock of 3,000 was issued. 6. Journalize and post the closing entries. Identify the closing entries by Clos. 7. Prepare a post-closing trial balance.