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Adjusting entries Trident Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations: For preparing the adjusting entries, the following data were assembled: • Fees earned but unbilled on November 30 were $7,000. • Supplies on hand on November 30 were $1,300. • Depreciation of equipment was estimated to be $7,200 for the year. • The balance in unearned fees represented the November 1 receipt in advance for services to be provided. During November, $13,500 of the services were provided. • Unpaid wages accrued on November 30 were $4,800. Instructions 1. Journalize the adjusting entries necessary on November 30, 20Y3. 2. Determine the revenues, expenses, and net income of Trident Repairs & Service before the adjusting entries. 3. Determine the revenues, expense, and net income of Trident Repairs & Service after the adjusting entries. 4. Determine the effect of the adjusting entries on Retained Earnings.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 3, Problem 3PA
Textbook Problem
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Adjusting entries

Trident Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Chapter 3, Problem 3PA, Adjusting entries Trident Repairs  Service, an electronics repair store, prepared the following

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

• Fees earned but unbilled on November 30 were $7,000.

• Supplies on hand on November 30 were $1,300.

• Depreciation of equipment was estimated to be $7,200 for the year.

• The balance in unearned fees represented the November 1 receipt in advance for services to be provided. During November, $13,500 of the services were provided.

• Unpaid wages accrued on November 30 were $4,800.

Instructions

1. Journalize the adjusting entries necessary on November 30, 20Y3.

2. Determine the revenues, expenses, and net income of Trident Repairs & Service before the adjusting entries.

3. Determine the revenues, expense, and net income of Trident Repairs & Service after the adjusting entries.

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

1.

To determine

Record the adjusting entries on November 30, 20Y3.

Explanation of Solution

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.

The following entry shows the adjusting entry for accrued fees earned on November 30.

DateAccount Titles and ExplanationDebit ($)Credit ($)
November 30Accounts Receivable7,000 
        Fees earned 7,000
(To record the accounts receivable at the end of the year.)

Table (1)

  • Accounts Receivable is an asset, and it is increased by $7,000. So, debit Accounts receivable by $7,000.
  • Fees earned are component of stockholders’ equity and increased it by $7,000. So, credit fees earned by $7,000.

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

DateAccount Titles and ExplanationDebit ($)Credit ($)
November 30Supplies Expense ($16,200$1,300)14,900
        Supplies14,900
(To record the supplies expense incurred during the period)

Table (2)

  • Supplies expense is a component of stockholders’ equity, and it decreased the stockholders’ equity by $14,900. So, debit supplies expense by $14,900.
  • Supplies are an asset for the business, and it is decreased by $14,900. So, credit supplies by $14,900.

The adjusting entry for recording depreciation is as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
November 30Depreciation expense7,200 
        Accumulated Depreciation-Equipment 7,200
(To record the depreciation on office equipment for the current year

2.

To determine

Determine the revenues, expenses and net income of Company TRS before adjusting entries.

3.

To determine

Determine the revenues, expenses and net income of Company TRS after adjusting entries.

4.

To determine

Determine the effect of the adjusting entries on the retained earnings of Company TRS.

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Chapter 3 Solutions

Financial And Managerial Accounting
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