close solutoin list

Adjusting entries Crazy Mountain Outfitters Co., an outfitter store for fishing treks, prepared the following un­adjusted trial balance at the end of its first year of operations: Crazy Mountain Outfitters Co Unadjusted Trial Balance April 30, 2018 Debit Balances Credit Balances Cash 11,400 Accounts Receivable 72,600 Supplies 7,200 Equipment 112,000 Accounts Payable 12,200 Unearned Fees 19,200 Common Stock 20,000 Retained Earnings 117,800 Dividends 10,000 Fees Earned 305,800 Wages Expense 157,800 Rent Expense 55,000 Utilities Expense 42,000 Miscellaneous Expense 7,000 475,000 475,000 For preparing the adjusting entries, the following data were assembled: Supplies on hand on April 30 were $ 1,380. Fees earned but unbilled on April 30 were $3,900. Depreciation of equipment was estimated to be $3,000 for the year. Unpaid wages accrued on April 30 were $2,475. The balance in unearned fees represented the April 1 receipt in advance for services to be provided. Only $ 14,140 of the services was provided between April 1 and April 30. Instructions 1. Journalize the adjusting entries necessary on April 30, 2018. 2. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. before the adjusting entries. 3. Determine the revenues, expense, and net income of Crazy Mountain Outfitters Co. after the adjusting entries. 4. Determine the effect of the adjusting entries on Retained Earnings.

BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

Solutions

Chapter
Section
Chapter 3, Problem 3.3BPR
Textbook Problem

Adjusting entries

Crazy Mountain Outfitters Co., an outfitter store for fishing treks, prepared the following un­adjusted trial balance at the end of its first year of operations:

Crazy Mountain Outfitters Co Unadjusted Trial Balance April 30, 2018
    Debit Balances Credit Balances
Cash   11,400  
Accounts Receivable   72,600  
Supplies   7,200  
Equipment   112,000  
Accounts Payable     12,200
Unearned Fees     19,200
Common Stock     20,000
Retained Earnings     117,800
Dividends   10,000  
Fees Earned     305,800
Wages Expense   157,800  
Rent Expense   55,000  
Utilities Expense   42,000  
Miscellaneous Expense   7,000  
    475,000 475,000

For preparing the adjusting entries, the following data were assembled:

  • Supplies on hand on April 30 were $ 1,380.
  • Fees earned but unbilled on April 30 were $3,900.
  • Depreciation of equipment was estimated to be $3,000 for the year.
  • Unpaid wages accrued on April 30 were $2,475.
  • The balance in unearned fees represented the April 1 receipt in advance for services to be provided. Only $ 14,140 of the services was provided between April 1 and April 30.

Instructions

  1. 1. Journalize the adjusting entries necessary on April 30, 2018.
  2. 2. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. before the adjusting entries.
  3. 3. Determine the revenues, expense, and net income of Crazy Mountain Outfitters Co. after the adjusting entries.

4. Determine the effect of the adjusting entries on Retained Earnings.

Expert Solution

4.

To determine

Adjusting Entries

Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.

Adjusted Trial Balance

Adjusted trial balance is a trial balance prepared at the end of a financial period, after all the adjusting entries are journalized and posted. It is prepared to prove the equality of the total debit and credit balances.

Rule of Debit and Credit:

Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity.

Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.

To record: The adjusting entries on April 30, 2019 of CMO Company.

Explanation of Solution

The following entry shows the adjusting entry for supplies on April 30.

Date Account Titles and Explanation Debit ($) Credit ($)
April 30 Supplies Expense (1) 5,820  
       Supplies  5,820
 (To record the supplies expense at the end of the accounting period)   

Table (1)

The impact on the accounting equation for the above referred adjusting entry is as follows:

{Assets–$5,820}=Liabilities+{Stockholders'Equity-$5,820}

  • Supplies expense is a component of stockholders’ equity, and it decreased the stockholders’ equity by $5,820. So debit supplies expense by $5,820.
  • Supplies are an asset for the business, and it is decreased by $5,820. So credit supplies by $5,820.

Working Note:

Calculation of fees earned for the accounting period

(Suppliesexpensefortheyear)=(Amountofsuppliesbeforeadjustment)-(Amountofsuppliesonhand)=$7,200-$1,380=$5,820 (1)

The following entry shows the adjusting entry for accrued fees unearned on April 30.

Date Account Titles and Explanation Debit ($) Credit ($)
April 30 Accounts Receivable 3,900  
       Fees earned  3,900
 (To record the accounts receivable at the end of the year.)   

Table (2)

The impact on the accounting equation for the above referred adjusting entry is as follows:

{Assets+$3,900} = Liabilibilities + {Stockholders' Equities+$3,900}

  • Accounts Receivable is an asset, and it is increased by $3,900
Expert Solution

2.

To determine
The revenues, expenses and net income of CMO Company before adjusting entries

Expert Solution

3.

To determine
The revenues, expenses and net income of CMO Company after adjusting entries

Expert Solution

4.

To determine
The effect of the adjusting entries on the retained earnings of CMO Company.

Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Chapter 3 Solutions

Financial & Managerial Accounting
Show all chapter solutions
Ch. 3 - Account requiring adjustment Indicate with a Yes...Ch. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2018,...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect on omitting adjusting entry The adjusting...Ch. 3 - Adjusting entries for accrued salaries Garcia...Ch. 3 - Determining wages paid The wages payable and wages...Ch. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Effect of omitting adjusting entry When preparing...Ch. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Effect of omitting adjusting entry At the end of...Ch. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At March 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Adjusting entries for p repaid and accrued taxes...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed assets book value The balance in...Ch. 3 - Book value of fixed assets In a recent balance...Ch. 3 - Effect s of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjusting entries for depreciation; effect of...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries On March 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Reliable Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of August,...Ch. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Continuing Company AnalysisAmazon: Vertical...Ch. 3 - Chipotle: Vertical analysis Chipotle Mexican...Ch. 3 - Nike: Vertical analysis The following data are...Ch. 3 - ATT and Verizon: Vertical analysis The following...Ch. 3 - Ethics in Action Chris P. Bacon is the chief...Ch. 3 - Communication Delta Air Lines is a major passenger...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
What is a proximity card?

Accounting Information Systems

Explain how a company accounts for the cost of its intangible assets.

Intermediate Accounting: Reporting And Analysis

How are project classifications used in the capital budgeting process?

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)