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Chapter 3: 3-21E (page 163)

Question :Consider the following situations: a. Business receives \(3,200 on January 1 for 10-month service contract for the period January 1 through October 31. b. Total salaries for all employees is \)3,600 per month. Employees are paid on the 1st and 15th of the month. c. Work performed but not yet billed to customers for the month is \(1,600. d. The company pays interest on its \)16,000, 4% note payable of $53 on the first day of each month. Assume the company records adjusting entries monthly. Journalize the adjusting entries needed as of January 31.

Short Answer

Expert verified

Adjusting entries are as follows :

Transactions

Accounts and Explanation

Debit

Credit

(a)

Unearned Revenue

$320

Service Revenue

$320

To record service revenue earned

(b)

Salaries Expense

$1,800

Salaries Payable

$1,800

To record accrued salaries expense

(c)

Accounts Receivable

$1,600

Service Revenue

$1,600

To record service revenue earned

(d)

Interest Expense

$53

Interest Payable

$53

To record accrued interest expense

Step by step solution

01

Calculation of Service RevenueService revenue is calculated as follows: 

ServiceRevenue=AmountReceived脳NumberofMonthsExpiredTotalMonthsofContract=$3,200脳110=$320

02

Calculation of Salaries Expense

Salaries expense is calculated as follows

SalariesExpense=TotalSalariesNumberofTimesPaidinMonth=$3,6002=$1,800

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Most popular questions from this chapter

Question :The unadjusted trial balance for All Mopped Up Company, a cleaning service, is as follows:ALL MOPPED UP COMPANY Unadjusted Trial Balance December 31, 2018 Account Title Prepaid Insurance Cash Debit Credit Office Supplies Equipment Accumulated Depreciation鈥擡quipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Supplies Expense Depreciation Expense鈥擡quipment Insurance Expense Total Balance \( 800 \) 45,400 \( 45,400 \) 2,000 15,300 25,000 2,000 600 30,000 2,400 700 5,000 7,000 A, During the 12 months ended December 31, 2018, All Mopped Up: a. used office supplies of \(1,700. b. used prepaid insurance of \)580. c. depreciated equipment, \(500. d. accrued salaries expense of \)310 that hasn鈥檛 been paid yet. e. earned $400 of unearned revenue. Requirements 1. Open a T-account for each account using the unadjusted balances. 2. Journalize the adjusting entries using the letter and December 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.

Question :Seacoast Magazine sells subscriptions for $36 for 18 issues. The company collects cash in advance and then mails out the magazines to subscribers each month. Apply the revenue recognition principle to determine a. when Seacoast Magazine should record revenue for this situation. b. the amount of revenue Seacoast Magazine should record for eight issues.

Question :What is a contra account?

What are the two rules to remember about adjusting entries?

Resort Travel borrowed \(33,000 on September 1, 2018, by signing a one-year note payable to State One Bank. Resort鈥檚 interest expense on the note payable for the remainder of the fiscal year (September through November) is \)355. Requirements 1. Record the adjusting entry to accrue interest expense at November 30, 2018. 2. Post the adjusting entry to the T-accounts of the two accounts affected by the adjustment.
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