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Chapter 3: 15SE (page 161)

Question :Just Right Hair Stylists has begun the preparation of its worksheet as follows:


Year-end data include the following: a. Office supplies on hand, \(300. b. Depreciation, \)700. c. Accrued interest expense, $800. Complete Just Right鈥檚 worksheet through the adjusted trial balance section. In the adjustments section, mark each adjustment by letter

Short Answer

Expert verified

Worksheet are as follows:

JUST RIGHT HAIR STYLISTS

Worksheet

December 31, 2018

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Account Names

Debit

Credit

Debit

Credit

Debit

Credit

Cash

$300

$300

Office Supplies

900

$600

300

Equipment

20,600

20,600

Accumulated Depreciation鈥擡quipment

$700

700

$1400

Accounts Payable

500

500

Interest Payable

800

800

Note Payable

2,800

2,800

Common Stock

4,200

4,200

Service Revenue

17,500

17,500

Rent Expense

3,200

3,200

Supplies Expense

600

600

Depreciation Expense鈥擡quipment

700

700

Interest Expense

700

800

1,500

Total

$25,700

$25,700

$2,100

$2,100

$27,200

$27,200

Step by step solution

01

Step-by-Step-SolutionStep1: Explanation on  Worksheet

As per the worksheet, in adjustment section total debits and credits equals $2,100, and in adjusted trial balance equals total debits and credits equals $27,200.

02

Calculation of Office Supplies Expense

Office supplies expense is calculated as follows:

OfficeSuppliesUsed=OfficeSuppliesBalanceBeforeAdjustment-OfficeSuppliesonHand=$900-$300=$600

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Most popular questions from this chapter

XM, Ltd. was a small engineering firm that built high-tech robotic devices for electronics manufacturers. One very complex device was partially completed at the end of 2018. Barb McLauren, head engineer, knew the experimental technology was a failure and XM would not be able to complete the $20,000,000 contract next year. However, the corporation was getting ready to be sold in January. She told the controller that the device was 80% complete at year-end and on track for successful completion the following spring; the controller accrued 80% of the contract revenue at December 31, 2018. McLauren sold the company in January 2019 and retired. By mid-year, it became apparent that XM would not be able to complete the project successfully and the new owner would never recoup his investment.

Requirements

1. For complex, high-tech contracts, how does a company determine the percentage of completion and the amount of revenue to accrue?

2. What action do you think was taken by XM in 2019 with regard to the revenue that had been accrued the previous year?

Question :Consider the following situations for Betterton Welding Services: a. Depreciation for the current year includes equipment, \(2,100. b. Each Monday, Betterton pays employees for the previous week鈥檚 work. The amount of weekly payroll is \)1,400 for a seven-day workweek (Monday to Sunday). This year, December 31 falls on Thursday. Learning Objective 3 Learning Objective 3 Learning Objective 3 Learning Objective 3 Beginning Prepaid Rent Payments for Prepaid Rent during the year Total amount to account for Subtract: Ending Prepaid Rent Rent Expense Situation A B C D \(1,400 700 2,100 800 \) a \(1,000 1,600 700 \)900 b \( 200 1,800 \)1,900 c d \( 700 600 \)1,000 f e CHAPTER 3 164 chapter 3 c. The beginning balance of Office Supplies was \(2,300. During the year, Betterton purchased office supplies for \)3,000, and at December 31 the office supplies on hand totaled \(1,000. d. Betterton prepaid a two full years鈥� insurance on July 1 of the current year, \)6,000. Record insurance expense for the year ended December 31. e. Betterton had earned \(2,800 of unearned revenue. f. Betterton had incurred (but not recorded) \)200 of interest expense on a note payable. The interest will not be paid until February 28. g. Betterton billed customers $3,000 for welding services performed. Journalize the adjusting entry needed on December 31 for each situation. Use the letters to label the journal entries

Question :Chef 鈥檚 Catering completed the following selected transactions during May 2018: Learning Objectives 1, 2 Learning Objectives 1, 2 > Exercises May 1 Prepaid rent for three months, \(2,400. 5 Received and paid electricity bill, \)700. 9 Received cash for meals served to customers, \(2,600. 14 Paid cash for kitchen equipment, \)3,000. 23 Served a banquet on account, \(2,800. 31 Made the adjusting entry for rent (from May 1). 31 Accrued salary expense, \)1,600. 31 Recorded depreciation for May on kitchen equipment, \(50. Date May 1 \)(2,400) $0 Cash Basis Amount of Revenue (Expense) Accrual Basis Amount of Revenue (Expense) Amount of Revenue (Expense) for May Requirements 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the following table. (Expenses should be shown in parentheses.) Also, indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. 2. After completing the table, calculate the amount of net income or net loss for Chef 鈥檚 Catering under the accrual basis and cash basis accounting systems for May. 3. Considering your results from Requirement 2, which method gives the best picture of the true earnings of Chef 鈥檚 Catering? Why?

The net income of Steinbach & Sons, a landscaping company, decreased sharply during 2018. Mort Steinbach, owner and manager of the company, anticipates the need for a bank loan in 2019. Late in 2018, Steinbach instructs the company鈥檚 accountant to record \(2,000 service revenue for landscape services for the Steinbach family, even though the services will not be performed until January 2019. Steinbach also tells the accountant notto make the following December 31, 2018, adjusting entries:

Salaries owed to employees \) 900

Prepaid insurance that has expired 400

Requirements

1. Compute the overall effects of these transactions on the company鈥檚 reported net income for 2018.

2. Why is Steinbach taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by Steinbach鈥檚 action.

3. As a personal friend, what advice would you give the accountant?

Question :Austin Acoustics recorded the following transactions during October: a. Received \(2,500 cash from customer for three months of service beginning October 1 and ending December 31. The company recorded a \)2,500 debit to Cash and a \(2,500 credit to Unearned Revenue. b. Employees are paid \)3,000 on Monday following the five-day workweek. October 31 is on Friday. c. The company pays \(440 on October 1 for its six-month auto insurance policy. The company recorded a \)440 debit to Prepaid Insurance and a \(440 credit to Cash. d. The company purchased office furniture for \)8,300 on January 2. The company recorded a \(8,300 debit to Office Furniture and an \)8,300 credit to Accounts Payable. Annual depreciation for the furniture is \(1,000. e. The company began October with \)50 of office supplies on hand. On October 10, the company purchased office supplies on account of \(100. The company recorded a \)100 debit to Office Supplies and a \(100 credit to Accounts Payable. The company used \)120 of office supplies during October. f. The company received its electric bill on October 31 for \(325 but did not pay it until November 10. g. The company paid November鈥檚 rent of \)2,500 on October 30. On October 30, the company recorded an \(2,500 debit to Rent Expense and a \)2,500 credit to Cash. Indicate if an adjusting entry is needed for each item on October 31 for the month of October. Assuming the adjusting entry is not made, indicate which specific category or categories of accounts on the financial statements are misstated and if they are overstated or understated. Use the following table as a guide. Item a is completed as an example:used.
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