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Chapter 3: 24E_2 (page 164)

Question :The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation鈥擡quipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense鈥擡quipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account鈥檚 adjusted balance.

Short Answer

Expert verified

Adjusting entries are as follows:

Journal entry

Transactions

Accounts and Explanation

Debit

Credit

(a)

Accounts Receivable

$700

Service Revenue

$700

To record service revenue accrued

(b)

Unearned Revenue

$100

Service Revenue

$100

To record service revenue earned

(c)

Supplies Expense

$400

Office Supplies

$400

To record office supplies used

(d)

Salaries Expense

$200

Salaries Payable

$200

To record accrued salaries expense

(e)

Insurance Expense

$560

Prepaid Rent

$560

To record insurance expense

(f)

Depreciation Expense鈥擡quipment

$120

Accumulated Depreciation鈥擡quipment

$120

To record depreciation on equipment

Step by step solution

01

Step-by-Step-SolutionStep1: Explanation on Adjusting Entries

Adjustries entries are used to record the accrued revenues and expenses at the end of the period.

02

Explanation on Adjusted Trial Balance

After the adjusting entries are recorded, it is posted into the ledger account, then the balance of these account is used to prepare adjusted trial balance.

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Most popular questions from this chapter

On October 1, Orlando Gold Exchange paid cash of $57,600 for computers that are expected to remain useful for three years. At the end of three years, the value of the computers is expected to be zero. Requirements 1. Calculate the amount of depreciation for the month of October using the straightline depreciation method. 2. Record the adjusting entry for depreciation on October 31. 3. Post the purchase of October 1 and the depreciation on October 31 to T-accounts for the following accounts: Computer Equipment, Accumulated Depreciation鈥� Computer Equipment, and Depreciation Expense鈥擟omputer Equipment. Show their balances at October 31. 4. What is the computer equipment鈥檚 book value on October 31?

Protection Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Protection Home has collected \(900 from cash-paying customers. Protection Home鈥檚 remaining customers owe the business \)1,300. How much service revenue would Protection Home have for the year under the a. cash basis? b. accrual basis?

Question :At the beginning of the year, Modish Advertising owed customers \(2,100 for unearned revenue collected in advance. During the year, Modish received advance cash receipts of \)6,100 and earned \(20,000 of service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for unearned revenue is \)3,100 and unadjusted service revenue is $20,000. Requirements 1. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a liability account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in the Unearned Revenue T-account. 2. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-account and the additional unearned revenue in the Service Revenue T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?

What are the two rules to remember about adjusting entries?

: Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)
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