GEN COMBO LOOSELEAF SURVEY OF ACCOUNTING; CONNECT ACCESS CARD
5th Edition
ISBN: 9781260149210
Author: Thomas P Edmonds, Christopher Edmonds, Philip R Olds, Frances M McNair, Bor-Yi Tsay
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 33P
Problem 2-37A Effect of
CHECK FIGURES
d. Adjustment amount: $4,000
Required
Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is shown as an example.
- a. Paid $4,800 cash in advance on October 1 for a one-year insurance policy.
- b. Received a $3,600 cash advance for a contract to provide services in the future. The contract required a one-year commitment, starting April 1.
- c. Purchased $1,200 of supplies on account. At year’s end, $175 of supplies remained on hand.
- d. Paid $9,600 cash in advance on August 1 for a one-year lease on office space.
Expert Solution & Answer
To determine
Show the manner in which the events and its related adjusting entries would affect the accounting equation.
Answer to Problem 33P
Prepare a table exhibiting the events and the adjusting entries that would affect the accounting equation are as follows:
| Company | ||||||||
| Accounting equation | ||||||||
| Event / Adjustment | Total Assets | = | Liabilities | + | Stockholder's Equity | |||
| Cash | Other assets | Common Stock | Retained Earnings | |||||
| a. (Given) | ($4,800) | + | $4,800 | = | NA | + | NA | NA |
| Adjustment (1) | NA | + | ($1,200) | = | NA | + | NA | ($1,200) |
| b. | $3,600 | + | NA | = | $3,600 | + | NA | NA |
| Adjustment (2) | NA | + | NA | = | ($2,700) | + | NA | $2,700 |
| c. | NA | + | $1,200 | = | $1,200 | + | NA | NA |
| Adjustment (3) | NA | + | ($1,025) | = | NA | + | NA | ($1,025) |
| d. | ($9,600) | + | $9,600 | = | NA | + | NA | NA |
| Adjustment (4) | NA | + | ($4,000) | = | NA | + | NA | ($4,000) |
Table (1)
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below.
The effects of the events and adjustments can be explained as follows:
a. Paid $4,800 cash in advance on October 1 for a one-year insurance policy.
The cash account (asset) is decreased by $4,800 and the prepaid insurance (asset) account is increased by $4,800. When the insurance expense is recognized for 3 months at the end of the year, the prepaid insurance (asset) account is decreased by $1,200 (1) and amount of insurance expense (expense account) is increased by $1,200. Increase in insurance expense account decreases the retained earnings by the same amount.
b. Received a $3,600 cash advance for a contract to provide services in the future. The contract required a one-year commitment, starting April 1.
The cash account (asset) is increased by $3,600 and the unearned revenue account (liability) is increased by $3,600. The revenue would be recognized when the services are provided to the client. After providing the service for 9 months from April 1 to December 31, revenue should be recognized for 9 months at the end of the year. While recognizing the earned unearned revenue, the unearned revenue (liability) is decreased by $2,700 (2) and the revenue account is increased by $2,700. Increase in revenue account increases the retained earnings by the same amount.
c. Purchased $1,200 of supplies on account. At year’s end, $175 of supplies remained on hand.
The supplies account (asset) is increased by $1,200 and the accounts payable (liability) account is increased by $1,200. When the supplies expenses are recognized, the supplies account (asset) is decreased by $1,025 (3) and the expense account is increased by $1,025. Increase in the expense account decreases the retained earnings by the same amount.
d. Paid $9,600 cash in advance on August 1 for a one-year lease on office space.
The cash account (asset) is decreased by $9,600 and the prepaid rent (asset) account is increased by $9,600. When the rent expense is recognized at the end of the year for 3 months, the prepaid rent (asset) account is decreased by $4,000 (4) and amount of insurance expense (expense account) is increased by $4,000. Increase in insurance expense account decreases the retained earnings by the same amount.
Working Note:
Determine the amount of prepaid insurance recognized at the end of year.
Determine the amount of revenue recognized at the end of year.
Determine the amount of supplies used at the end of year.
Determine the amount of prepaid rent recognized at the end of year.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Chapter 2 Solutions
GEN COMBO LOOSELEAF SURVEY OF ACCOUNTING; CONNECT ACCESS CARD
Ch. 2 - 1. What does accrual accounting attempt to...Ch. 2 - 2. Define recognition. How is it independent of...Ch. 2 - 3. What does the term deferral mean?Ch. 2 - 4. If cash is collected in advance of performing...Ch. 2 - Prob. 5QCh. 2 - 6. What effect does the issue of common stock have...Ch. 2 - 7. How does the recognition of revenue on account...Ch. 2 - 8. Give an example of an asset source transaction....Ch. 2 - 9. When is revenue recognized under accrual...Ch. 2 - 10. Give an example of an asset exchange...
Ch. 2 - 11. What is the effect on the right side of the...Ch. 2 - Prob. 12QCh. 2 - Prob. 13QCh. 2 - Prob. 14QCh. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - 17. Why may net cash flow from operating...Ch. 2 - Prob. 18QCh. 2 - Prob. 19QCh. 2 - 20. What is the difference between a cost and an...Ch. 2 - Prob. 21QCh. 2 - Prob. 22QCh. 2 - 23. What does the term expense mean?Ch. 2 - Prob. 24QCh. 2 - 25. What is the purpose of the statement of...Ch. 2 - Prob. 26QCh. 2 - 27. Why is the balance sheet dated as of a...Ch. 2 - 28. In what order are assets listed on the balance...Ch. 2 - Prob. 29QCh. 2 - Prob. 30QCh. 2 - 31. What types of accounts are closed at the end...Ch. 2 - 32. Give several examples of period costs.Ch. 2 - 33. Give an example of a cost that can be directly...Ch. 2 - Prob. 34QCh. 2 - Prob. 1ECh. 2 - Exercise 2-2 Effect of accrued expenses on the...Ch. 2 - Prob. 3ECh. 2 - Prob. 4ECh. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Exercise 2-9 Supplies on financial statements Yard...Ch. 2 - Prob. 10ECh. 2 - Exercise 2-11 Prepaid items on financial...Ch. 2 - Exercise 2-12 Effect of an error on financial...Ch. 2 - Exercise 2-13 Unearned items on financial...Ch. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - Prob. 18ECh. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Exercise 2-21 Adjusting the accounts Norell Inc....Ch. 2 - Prob. 22ECh. 2 - Prob. 23ECh. 2 - Prob. 24ECh. 2 - Prob. 25ECh. 2 - Prob. 26ECh. 2 - Exercise 2-27 Identifying transaction type and...Ch. 2 - Exercise 2-27A Effect of accounting events on the...Ch. 2 - Prob. 29ECh. 2 - Exercise 2-29A Identifying source, use, and...Ch. 2 - Prob. 31ECh. 2 - Problem 2-32 Recording events in a horizontal...Ch. 2 - Problem 2-37A Effect of adjusting entries on the...Ch. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Problem 2-36 Identifying and arranging elements on...Ch. 2 - Problem 2-37 Missing information in financial...Ch. 2 - Problem 2-38 Events for two complete accounting...Ch. 2 - Prob. 1ATCCh. 2 - ATC 2-3 Research Assignment Identifying accruals...Ch. 2 - ATC 2-4 Writing Assignment Revenue Recognition and...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Problem 3-65A Preparation of Adjusting Entries Bartow Photographic Services takes wedding and graduation photographs. At December 31, the end of Bartows accounting the following information is available: All wedding photographs are paid for in advance, and all cash collected for them is credited to Unearned Service Revenue. Except for a year end adjusting entry, no other entries are made for service revenue from wedding photographs. During the year, Bartow received $42,600 for wedding photographs. At year end, $37,400 of services had been performed. The beginning-of-the-year balance of Unearned Service Revenue was zero. During December, Bartow photographed 225 members of the next years graduating class of Shaw High School The school has asked Bartow to print one copy of a photograph of each student for the school files. Bartow delivers these photographs on December 28 and will bill the school S5.00 per student in January of next year. Revenue from photographs ordered by students will recorded as the orders are received during the early months of next year. Equipment used for developing and printing was rented for $22,500. The rental term was for 1 year beginning on August I and the entire year of rent was paid on August 1. The payment was debited to Prepaid Rent. Depreciation on the firms building for the current year is S9,400. Wages of S4, 170 are owed but unpaid and unrecorded at December 31. Supplies at the beginning of the year were $2,400. During the year, supplies costing $19,600 were purchased from Kodak. When the purchases were made, their cost was debited to Supplies. At year end, a physical inventory indicated that supplies costing $4,100 were on hand. Required: l. Prepare the adjusting entries for each of these items. 2. CONCEPTUAL CONNECTION By how much would net income overstated or understated if the accountant failed to make the adjusting entries?arrow_forwardExercise 3-45 Identification of Adjusting Entries Conklin Services prepares financial statements only once per year using an annual accounting ending on December 31. Each of the following statements describes an entry made by Conklin on December 31 of a recent year. On December 31, Conklin completed a service agreement for Pizza Planet and recorded the related revenue. The job started in August. Conklin provides weekly service visits to the local C.J. Nickel department store to check and maintain various pieces of computer printing equipment. On December 31, Conklin recorded revenue for the visits completed during December. The cash will not be received until January. Conklins salaried employees are paid on the last day of every month. On December 31, Conklin recorded the payment Of December salaries. Conklins hourly wage employees are paid every Friday. On 31, Conklin recorded as payable the wages for the first three working days of the week in which the year ended. On December 31, Conklin recorded the receipt of a shipment of office supplies from Office Supplies Inc. to be paid for in January. On December 31, Conklin recorded the estimated use of supplies for the year. The supplies were purchased for cash earlier in the year. Early in December, Conklin was in by Parker Enterprises for 2 months of weekly visits. Conklin recorded the advance payment as a liability. On December 31 , Conklin recorded revenue for the service visits to Parker Enterprises that were completed during December. On December 3 1, Conklin recorded depreciation expense on office equipment for the year. Required: Indicate whether each entry is an adjusting entry or a regular journal entry, and, if it is an adjusting entry, identify it as one of the following types: (1) revenue recognized before collection of cash, (2) expense recognized before payment of cash, (3) revenue recognized after collection of cash, or (4) expense recognized after payment of cash.arrow_forwardExercise 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.arrow_forward
- 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 ………………… 5,245 Service Revenue ………..... 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?arrow_forwardBrief Exercise 3-31 Adjusting Entries-Accruals Nichols Company had the following items that required adjustment at 31, 2019. Electricity used during December was estimated to $320. This amount will paid in January. Owed wages to employees of $3,250 that were earned in December but unrecorded and unpaid as of the end of the year. Services of $4,900 were performed in December but unbilled and unpaid as of year end. Required: Prepare the adjusting entries needed at December 31. CONCEPTUAL CONNECTION What is the effect on the financial statements if these adjusting entries were not made?arrow_forwardCornerstone Exercise 3-20 Deferred Expense Adjusting Entries Best Company had the following items that require adjustment at year end. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent When paid. At year end, $2,950 Of the prepaid rent had expired. Cash for insurance in the amount of $8,200 was paid in advance. The $8,200 was debited to prepaid insurance when paid. At year end, $1,8SO of the prepaid insurance was still unused. Required: Prepare the adjusting journal entries needed at December 31. What is the effect on the financial statements if these adjusting entries are not made? What is the balance in prepaid equipment rent and insurance expense at December 31?arrow_forward
- 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?arrow_forwardAppendix 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.arrow_forwardCornerstone 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?arrow_forward
- Problem 3-64A Identification and Preparation of Adjusting Entries Kueppers Day Care is a large daycare center in South Orange, New Jersey. The daycare center serves several nearby businesses as well as a number of individual families. The businesses pay $6,180 child per year for daycare services for their employees' children. The businesses pay in on a quarterly basis. For individual families, daycare services are provided monthly and billed at the beginning of the next month. The following transactions describe Kueppers activities during December 2019: On December 1, Kuepper borrowed $50,000 by issuing a 5-year, 9% note payable. Daycare service in the amount of $13,390 was provided to individual families during December. These families will not be billed until January 2020. At l, the balance in unearned service revenue was S26,780. At December 31, determined that$10,300 of this revenue was still unearned. On December 31, the daycare center collected $40,170 from businesses for services to be provided in 2020. On December 31, the center recorded depreciation of $1,875 on a bus that it uses for field trips. The daycare center had prepaid insurance at December 1 of an examination of the insurance policies indicates that prepaid insurance at December 31 is $3,000. Interest on the $50,000 note payable (see Transaction a) is unpaid and unrecorded at December 31. Salaries of $35,480 are owed but unpaid on December 31. Supplies of disposable diapers on December 1 are $4,200. At December 31, the cost of diapers in supplies is $750. Required: Identify whether each transaction is an adjusting entry or a regular journal entry. If the entry is an adjusting entry, identify it as an accrued revenue, accrued expense, deferred revenue, or deferred expense. Prepare the entries necessary to record the transactions above and on the previous page.arrow_forwardProblem 3-68B Inferring Adjusting Entries from Account Balance Changes The following schedule shows all the accounts of Eagle Imports that received year end adjusting entries: Required: Calculate the missing amounts identified by the letters (a) through (e). Prepare the five adjusting entries that must have been made to cause the account changes as indicated.arrow_forwardProblem 3-71B Preparing a Worksheet (Appendix 3A) Flint Inc. operates a cable television System. At December 31, 2019, the following unadjusted account balances were available: The following data are available for adjusting entries: At year end, $1,500 Of office supplies remain unused. Annual depreciation on the building is $20,000. Annual depreciation on the equipment is $150,000 The interest rate on the note is 8%. Four months' interest is unpaid and unrecorded at December 31, 2019. At December 31, 2019, services of $94,000 have performed but are unbilled and unrecorded. Utility bills of $2,800 are unpaid and unrecorded at December 31, 2019. Income taxes of $49,633 were unpaid and unrecorded at year end. Â Required: Prepare a worksheet for Flint. Prepare an income statement, a retained earnings statement, and a classified balance sheet for Flint. Prepare the closing entries.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Corporate Financial AccountingAccountingISBN:9781337398169Author:Carl Warren, Jeff JonesPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781337398169
Author:Carl Warren, Jeff Jones
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY