Concept explainers
Preparing
P4
Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned revenues are credited to revenue when
cash is received. Given this company’s accounting practices, which one of the following applies to the preparation of adjusting entries at the end of its first accounting period?
a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit to Consulting Fees Earned of $500 and a credit to Unearned Consulting Fees of $500.
b. Unpaid salaries of $400 are recorded with a debit to Prepaid Salaries of $400 and a credit to Salaries Expense of $400.
C. Office supplies purchased for the period were $1,000. The cost of unused office supplies of $650 is recorded with a debit to Supplies Expense of $650 and a credit to Office Supplies of $650.
d. Earned but unbilled (and unrecorded) consulting fees for the period were $1,200, which are recorded with a debit to Unearned Consulting Fees of $1,200 and a credit to Consulting Fees Earned of $1,200.
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FUND. ACCOUNTING PRINCIPLES >CUSTOM<
- 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_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_forwardAdjustment 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_forward
- Problem 3-68A Inferring Adjusting Entries from Account Balance Changes The following schedule shows all the accounts of Fresno Travel Agency 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_forwardAdjusting entries and adjusted trial balances Reece Financial Services Co., which specializes in appliance repair services, it owned and operated by Joni Reece. Reece Financial Services accounting clerk prepared the following unadjusted trial balance at July 31, 20Y9: The data needed to determine year-end adjustment 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 tile accounts affected by the adjusting entries, and prepare an adjusted trial balance.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
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- (Appendix 3.1) Cash-Basis Accounting Puntarelli Contracting keep its accounting records on a cash basis during the year. At year end, it adjusts its books to the accrual basis for preparing its financial statements. At the end of 2018, Puntarelli reported the following balance sheet items. It is now the end of 2019. The companys checkbook shows a balance of 4,700, which includes cash receipts from customers of 51,300 and cash payments of 49,300. An examination of the cash payments shows that: (1) 30,600 was paid to suppliers, (2) 12,700 was paid for other operating costs (including 7,200 paid on January 1 for 2 years annual rent), and (3) 6,000 was withdrawn by T. Puntarelli. On December 51, 2019, (1) customers owed Puntarelli Contracting 55,900, (2) Puntarelli owed suppliers and employees 7,000 and 900, respectively, and (3) the ending inventory was 6,300. Puntarelli is depreciating the equipment using straight line depreciation over a 10-year life (no residual value). Required: 1. Using accrual based accounting, prepare a 2019 income statement (show supporting calculations). 2. Using accrual-based accounting, prepare a December 31, 2019, balance sheet (show supporting calculations).arrow_forwardAdjustments for unearned and accrued fees The balance in the unearned fees account, before adjustment at the end of the year, is $900,000. Of these fees, $775,000 have been earned. In addition, $289,500 of fees have been earned hut not hilled to clients. What are the adjustments (a) to adjust the unearned fees account and (h) to record the accrued fees? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.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_forward
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