Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card
Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card
18th Edition
ISBN: 9781260149197
Author: williams
Publisher: MCG
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Chapter 4, Problem 6AP

a.

To determine

Prepare the adjusting entry as at December 31, Year 1.

a.

Expert Solution
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Explanation of Solution

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Prepare the adjusting entries:

DateAccount titles and ExplanationDebit ($)Credit ($)
December 31Accounts receivable6,400 
Client revenue earned 6,400
(To record the accrued but uncollected revenue)  
   
December 31Unearned client revenue6,600 
Client revenue earned 6,600
(To record  the unearned to earned revenue)  
   
December 31Insurance expense (1)3,000 
Unexpired insurance 3,000
(To record  the insurance expense)  
   
December 31Advertising expense1,100 
Prepaid advertising 1,100
(To record the advertising expense)  
   
December 31Climbing supplies expense (2)2,900 
Climbing supplies 2,900
(To record the climbing supplies expense)  
   
December 31Depreciation expense: Climbing Equipment (3)1,200 
 Accumulated depreciation: Climbing Equipment 1,200
 (To record the depreciation expense)  
   
December 31Interest expense (4)75 
Interest payable 75
(To record the interest expense)  
    
December 31Salaries expense3,100 
 Salaries payable 3,100
 (To record the salaries expense)  
    
December 31Income taxes expense1,250 
 Income taxes payable 1,250
 (To record the income tax expense)  

Table (1)

1. To record the accrued but uncollected revenue:

  • Accounts receivable is an asset account and it is increased. Therefore, debit accounts receivable with $6,400.
  • Client revenue earned is a revenue account and it increases the stockholders’ equity account. Therefore, credit client revenue earned with $1,500.

2. To record the previously unearned revenue to earned revenue:

  • Unearned revenue is a liability account and it is decreased. Therefore, debit unearned revenue with $6,600.
  • Client revenue earned is a revenue account and it increases the stockholders’ equity account. Therefore, credit fees earned with $6,600.

3. To record the insurance expense:

  • Insurance expense is an expense account and it decreases the stockholders’ equity account. Therefore, debit insurance expense with $3,000.
  • Unexpired insurance is an asset account and it is decreased. Therefore, credit unexpired insurance with $3,000.

Working note:

Calculate the amount of insurance expense:

Insurance expense=Policy amountNumber of months =$36,00012Months=$3,000 (1)

4. To record the advertising expense:

  • Advertising expense is an expense account and it decreases the stockholders’ equity. Therefore, debit advertising expense with $1,100.
  • Prepaid advertising is an asset account and it is decreased. Therefore, credit prepaid adverting with $1,100.

5. To record the climbing supplies expense:

  • Climbing supplies expense is an expense account and it decreases the stockholders’ equity account. Therefore, debit climbing supplies expense with $2,900.
  • Climbing supplies are an asset account and it is decreased. Therefore, credit climbing supplies with $2,900.

Working note:

Calculate the climbing supplies expense:

Climbing supplies expenses=(Climbing supplies in unadjusted trial balanceClimbing supplies in hand)=$4,900$2,200=$2,900 (3)

6. To record the depreciation expense, Climbing Equipment:

  • Depreciation expense is an expense account and it decreases the stockholders’ equity account. Therefore, debit depreciation expense with $1,200.
  • Accumulated depreciation is a contra-account and it decreases the value of asset. Therefore, credit accumulated depreciation with $1,200.

Working note:

Calculate the amount of depreciation expense:

Depreciation expense=Cost of the climbing equipmentNumber of months depreciated=$57,60048Months=$1,200 (3)

7. To record the interest expense:

  • Interest expense is an expense account and it decreases the stockholders’ equity. Therefore, debit interest expenses with $75.
  • Interest payable is a liability account and it is increased. Therefore, credit interest payable with $75.

Working note:

Calculate the amount of interest expense:

Interest expense=Note payable amount×Interest rate×Number of monthsMonths in a year=$10,000×9%×1(December)12=$75 (4)

8. To record the salaries expense:

  • Salaries expense is an expense account and it decreases the stockholders’ equity. Therefore, debit salaries expenses with $3,100.
  • Salaries payable is a liability account and it is increased. Therefore, credit salaries payable with $3,100.

9. To record the income tax expense:

  • Income tax expense is an expense account and it decreases the stockholders’ equity. Therefore, debit income tax expenses with $1,250.
  • Income tax payable is a liability account and it is increased. Therefore, credit salaries payable with $1,250.

b.

To determine

Determine the amount for the given accounts that will be reported in the balance sheet for the Year 1.

b.

Expert Solution
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Explanation of Solution

Determine the amount for the given accounts that will be reported in the balance sheet:

S.NoParticularsAmount ($)
1Cash (No adjustments)$13,900
2 Accounts receivable (unadjusted)$78,000
  Add: Adjusting entry (1)$6,400
  Accounts receivable at December, Year 1$84,400
   
3 Unexpired insurance (unadjusted)$18,000
  Less: Adjusting entry (3)$3,000
  Unexpired insurance at December, Year 1$15,000
   
4 Prepaid advertising (unadjusted)$2,200
  Less: Adjusting entry (4)$1,100
  Prepaid rent at December, Year 1$1,100
   
5Climbing supplies (unadjusted)$4,900
  Less: Adjusting entry (5)$2,900
  Climbing supplies at December, Year 1$2,000
   
6 Climbing equipment (No adjustments) $57,600
   
7 Accumulated depreciation: Climbing equipment (unadjusted)$38,400
  Add: Adjusting entry (6)$1,200
  Accumulated depreciation at December, Year 1$39,600
   
8 Salaries payable (unadjusted)0
  Add: Adjusting entry (8)$3,100
  Salaries payable at December 31, Year 1$3,100
   
9 Notes payable (No adjustments)$10,000
   
10 Interest payable (unadjusted)$150
  Add: Adjusting entry (7)$75
  Income taxes payable at December 31, Year 1$225
   
11 Income taxes payable (unadjusted)$1,200
  Add: Adjusting entry (9)$1,250
  Income taxes payable at December 31, Year 1$2,450
  
12 Unearned client revenue (unadjusted) $9,600
  Less: Adjusting entry (2)$6,600
  Unearned client revenue at December 31, Year 1$3,000

Table (2)

1. Amount of cash that is to be reported in the balance sheet is $13,900.

2. Amount of accounts receivable that is to be reported in the balance sheet is $84,400.

3. Amount of unexpired insurance that is to be reported in the balance sheet is $15,000.

4. Amount of prepaid advertising that is to be reported in the balance sheet is $1,100.

5. Amount of climbing supplies that is to be reported in the balance sheet is $2,000.

6. Amount of climbing equipment that is to be reported in the balance sheet is $57,600.

7. Amount of accumulated depreciation, climbing equipment that is to be reported in the balance sheet is $39,600.

8. Amount of salaries payable that is to be reported in the balance sheet is $3,100.

9. Amount of notes payable that is to be reported in the balance sheet is $10,000.

10. Amount of interest payable that is to be reported in the balance sheet is $225.

11. Amount of income tax payable that is to be reported in the balance sheet is $2,450.

12. Amount of unearned client revenue that is to be reported in the balance sheet is $3,000.

c.

To determine

Identify and explain the accounts listed in part b that represents deferred expenses.

c.

Expert Solution
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Explanation of Solution

Deferred expenses: Advance payment for future expenses is called as prepaid expenses. These prepaid expenses are considered as assets until they are expensed or used. For the portion of used assets, expenses would be recognized by way of passing an adjusting entry. Prepaid expenses are also known as deferred expenses, because at the time of making payment, expenses are not recognized but deferred until they are used up.

Following are the deferred expenses that are listed in part b:

  • Unexpired insurance
  • Prepaid advertising
  • Climbing supplies
  • Climbing equipment

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Chapter 4 Solutions

Gen Combo Looseleaf Financial And Managerial Accounting; Connect Access Card

Ch. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 10DQCh. 4 - Prob. 11DQCh. 4 - 12. How is deferred revenue reported in the...Ch. 4 - 13. How do accrued but unpaid expenses affect the...Ch. 4 - 14. How does accrued but uncollected revenue...Ch. 4 - Prob. 15DQCh. 4 - Prob. 1BECh. 4 - BRIEF EXERCISE 4.2 Prepaid Expenses and Unearned...Ch. 4 - Prob. 3BECh. 4 - BRIEF EXERCISE 4.4 Accounting for Depreciation On...Ch. 4 - Prob. 5BECh. 4 - BRIEF EXERCISE 4.6 Unearned Revenue Jasper’s...Ch. 4 - Prob. 7BECh. 4 - Prob. 8BECh. 4 - BRIEF EXERCISE 4.9 Accruing Unpaid Income...Ch. 4 - Prob. 10BECh. 4 - EXERCISE 4.1 Accounting Terminology Listed as...Ch. 4 - Prob. 2ECh. 4 - EXERCISE 4.3 Preparing Adjusting Entries to...Ch. 4 - EXERCISE 4.4 Preparing Adjusting Entries to...Ch. 4 - EXERCISE 4.5 Preparing Adjusting Entries to Accrue...Ch. 4 - EXERCISE 4.6 Deferred Revenue When Delta Airlines...Ch. 4 - EXERCISE 4.7 Preparing Various Adjusting...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - EXERCISE 4.10 Adjusting Entries and the Balance...Ch. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - EXERCISE 4.14 Accounting Principles For each of...Ch. 4 - EXERCISE 4.15 Using the Financial Statements of...Ch. 4 - PROBLEM 4.1A Preparing Adjusting Entries Florida...Ch. 4 - PROBLEM 4.2A Preparing and Analyzing the Effects...Ch. 4 - Prob. 3APCh. 4 - PROBLEM 4.4A Preparing Adjusting Entries from a...Ch. 4 - Prob. 5APCh. 4 - Prob. 6APCh. 4 - Prob. 7APCh. 4 - Prob. 8APCh. 4 - Prob. 1BPCh. 4 - Prob. 2BPCh. 4 - Prob. 3BPCh. 4 - Prob. 4BPCh. 4 - Prob. 5BPCh. 4 - Prob. 6BPCh. 4 - Prob. 7BPCh. 4 - Prob. 8BPCh. 4 - CASE 4.1 Should This Be Adjusted? Property...Ch. 4 - Prob. 2CTCCh. 4 - Prob. 3CTCCh. 4 - Prob. 4CTC
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