Concept explainers
Exercise 3-11
Adjusting for prepaid recorded as expenses and unearned revenues recorded as revenues.
P4
Ricardo Construction began operations on December 1. In setting up its accounting procedures, the company decided to debit expense accounts when it prepays its expenses and to credit revenue accounts when customers pay for services in advance. Prepare
a. Supplies are purchased on December 1 for $2,000 cash.
b. The company prepaid its insurance premiums for $1,540 cash on December 2.
C. On December 15, the company receives an advance payment of $13,000 cash from a customer for remodelling work.
d. On December 28, the company receives $3,700 cash from another customer for remodelling work to be performed in January.
e. A physical count on December31 indicates that the Company has S1,84o of supplies available.
f. An analysis of the insurance policies in effect on December 31 shows that S340 of insurance coverage had expired,
g. As of December 31, only one remodelling project has been worked on and completed. The $5,570 fee for this project had been received in advance and recorded as remodelling fees earned.
Check (f) Cr. Insurance Expense, $1200
(g)Dr Remodelling Fees Earned, $11,130
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FUND. ACCOUNTING PRINCIPLES >CUSTOM<
- 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?arrow_forwardExercise 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_forwardLedger accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet The unadjusted trial balance of Recessive Interiors at January 31, 2016, the end of the year, follows: The data needed to determine year-end adjustments are as follows: a. Supplies on hand at January 31 are 2,850. b. Insurance premiums expired during the year are 3,150. c. Depreciation of equipment during the year is 5,250. d. Depreciation of trucks during the year is 4,000. e. Wages accrued but not paid at January 31 are 900. Instructions 1. For each account listed in the unadjusted trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark () in the Posting Reference column. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (3) as needed. 3. Journalize and post the adjusting entries, inserting balances in the accounts affected. Record the adjusting entries on Page 26 of the journal. The following additional accounts from Recessive Interiors chart of accounts should be used: Wages Payable, 22; Depreciation ExpenseEquipment, 54; Supplies Expense, 55; Depreciation ExpenseTrucks, 56; Insurance Expense, 57. 4. Prepare an adjusted trial balance. 5. Prepare an income statement, a statement of owners equity (no additional investments were made during the year), and a balance sheet. 6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 7. Prepare a post-closing trial balance.arrow_forward
- Adjustment for Customer Refunds and Returns Assume the following data for Alpine Technologies for the year ending July 31. 20Y2. Illustrate the effects of the adjustments for customer refunds and returns on the accounts and financial statements of Alpine Technologies for the year ended July 31. 20Y2.arrow_forwardAdjusting entries and errors At the end of April, the first month of operations, the following selected data were taken from the financial statements of Shelby Crawford, an attorney: Net income for April 120,000 Total assets at April 30 750,000 Total liabilities at April 30 300,000 Total owner's equity at April 30 450,000 In preparing the financial statements, adjustments for the following data were overlooked: Supplies used during April, 2,750. Unbilled fees earned at April 30, 23,700. Depreciation of equipment for April, 1,800. Accrued wages at April 30, 1,400. Instructions 1. Journalize the entries to record the omitted adjustments. 2. Determine the correct amount of net income for April and the total assets, liabilities, and owner's equity at April 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. The adjustment for supplies used is presented as an example.arrow_forwardAdjusting entries and adjusted trial balances Rowland Company is a small editorial services company owned and operated by Marlene Rowland. On August 31, 2018, the end of the current year, Rowland Companys accounting clerk prepared the following unadjusted trial balance: Rowland Company Unadjusted Trial Balance August 31,2018 Debit Balances Credit Balances Cash 7,500 Accounts Receivable 38,400 Prepaid Insurance 7,200 Supplies 1,980 Land 112,500 Building 150,250 Accumulated DepreciationBuilding 87,550 Equipment 135,300 Accumulated DepreciationEquipment 97,950 Accounts Payable 12,150 Unearned Rent 6,750 Common Stock 75,000 Retained Earnings 146,000 Dividends 15,000 Fees Earned 324,600 Salaries and Wages Expense 193,370 Utilities Expense 42,375 Advertising Expense 22,800 Repairs Expense 17,250 Miscellaneous Expense 6,075 750,000 750,000 The data needed to determine year-end adjustments are as follows: Unexpired insurance at August 31, 6,000. Supplies on hand at August 31, 480. Depreciation of building for the year, 7,500. Depreciation of equipment for the year, 4,150. Rent unearned at August 31, 1,550. Accrued salaries and wages at August 31, 3,200. Fees earned but unbilled on August 31, 11,330. Instructions 1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Kent Revenue; Insurance Expense; Depreciation ExpenseBuilding; Depreciation ExpenseEquipment; and Supplies Expense. 2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.arrow_forward
- 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.arrow_forwardAdjusting entries and adjusted trial balances Reece Financial Services Co., which specializes in appliance repair services, is owned and operated by Joni Reece. Reece Financial Services accounting clerk prepared the following unadjusted trial balance at July 31, 2018: Reece Financial Services Co Unadjusted Trial Balance July 31,2018 Debit Credit Balances Balances Cash 10,200 Accounts Receivable 34,750 Prepaid Insurance 6,000 Supplies 1,725 50,000 Building 155,750 Accumulated DepreciationBuilding 62,850 Equipment 45,000 Accumulated DepreciationEquipment 17,650 Accounts Payable 3,750 Unearned Rent 3,600 Common Stock 60,000 Retained Earnings 93,550 Dividends 8,000 Fees Earned 158,600 Salaries and Wages Expense 56,850 Utilities Expense 14,100 Advertising Expense 7,500 Repairs Expense 6,100 Miscellaneous Expense 4025 400,000 400,000 The data needed to determine year-end adjustments are as follows: Depreciation of building for the year, 6,400. Depreciation of equipment for the year, 2,800. Accrued salaries and wages at July 31, 900. Unexpired insurance at July 31, 1,500. Fees earned but unbilled on July 31, 10,200. Supplies on hand at July 31, 615. Rent unearned at July 31, 300. Instructions 1. Journalize the adjusting entries using the following additional accounts: .Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation ExpenseBuilding; Depreciation ExpenseEquipment; and Supplies Expense. 2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.arrow_forwardProblem 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_forward
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