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Chapter 3: Q13SE (page 160)

Question:Seth鈥檚 Tax Services had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances.Cash Land Accounts Payable Utilities Payable Accumulated Depreciation鈥擡quipment Service Revenue Supplies Expense Dividends \( ? 26,000 150 3,700 1,800 75,000 1,100 14,000 Equipment Accounts Receivable Common Stock Office Supplies Utilities Expense Unearned Revenue Depreciation Expense鈥擡quipment Salaries Expense \) 11,000 4,950 700 22,600 1,650 900 1,900 5,600Prepare the adjusted trial balance for Seth鈥檚 Tax Services as of December 31, 2018.

Short Answer

Expert verified

Answer

The adjusted trial balance is shown as follows:

Seth鈥檚 Tax Services
Adjusted Trial Balance
December 31, 2018
Balance

Account Title

Debit

Credit

Cash

$37,250

Accounts Receivable

4,950

Office Supplies

700

Land

26,000

Equipment

11,000

Accumulated Depreciation鈥擡quipment

$1,800

Accounts Payable

3,700

Utilities Payable

150

Unearned Revenue

900

Common Stock

22,600

Dividends

14,000

Service Revenue

75,000

Salaries Expense

5,600

Depreciation Expense鈥擡quipment

1,900

Supplies Expense

1,100

Utilities Expense

1,650

_______

Total

$104,150

$104,150

Step by step solution

01

Explanation of Trial Balance

In the case of Seth鈥檚 Tax Services, the debit and credit balance equals $104,150 in the adjusted trial balance.

02

Calculation of Cash Balance

The cash balance is calculated as follows:

Cash=Totalcreadits-TotaldebitesexchangingCash=$104,150-$66,900=$37,250

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Most popular questions from this chapter

What is an accrued expense? Provide an example.

Question :A select list of transactions for Anuradha鈥檚 Goals follows:

April 1 Paid six months of rent, \(4,800.

10 Received \)1,200 from customer for six-month service contract that

began April 1.

15 Purchased a computer for \(1,000.

18 Purchased \)300 of office supplies on account.

30 Work performed but not yet billed to customer, \(500.

30 Employees earned \)600 in salaries that will be paid May 2

For each transaction, identify what type of adjusting entry would be needed. Select from the following four types of adjusting entries: deferred expense, deferred revenue, accrued expense, and accrued revenue.

Question :In recording adjusting entries, Reagan Financial Advisors failed to record the adjusting entries for the following situations: a. Office supplies on hand, \(100. b. Accrued revenues, \)5,000. c. Accrued interest expense, \(250. d. Depreciation, \)800. e. Unearned revenue that has been earned, $550. Determine the effects on the income statement and balance sheet by identifying whether assets, liabilities, equity, revenue, and expenses are either overstated or understated. Use the following table. Adjustment a has been provided as an example.Adjustment Not Recorded (a) Overstated Overstated Understated Assets Liabilities Equity Revenue Expenses Balance Sheet Income Statement

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?

What are the two basic categories of adjusting entries? Provide two examples of each.
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