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Chapter 3: Q34PGA_2 (page 170)

Griffin Fishing Charters has collected the following data for the December 31 adjusting entries: a. The company received its electric bill on December 31 for \(375 but will not pay it until January 5. (Use the Utilities Payable account.) b. Griffin purchased a three-month boat insurance policy on November 1 for \)1,200. Griffin recorded a debit to Prepaid Insurance. c. As of December 31, Griffin had earned \(3,000 of charter revenue that has not been recorded or received. d. Griffin鈥檚 fishing boat was purchased on January 1 at a cost of \)33,500. Griffin expects to use the boat for 10 years and that it will have a residual value of \(3,500. Determine annual depreciation assuming the straight-line depreciation method is used. e. On October 1, Griffin received \)9,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Griffin has completed the charter. Requirements 1. Journalize the adjusting entries needed on December 31 for Griffin Fishing Charters. Assume Griffin records adjusting entries only at the end of the year. 2. If Griffin had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide.

Short Answer

Expert verified

Adjusting entry is year end entries, which is recorded to record accrued revenues and expenses for the period.

Step by step solution

01

Explanation on Adjusting Entry

Adjusting entry is year end entries, which is recorded to record accrued revenues and expenses for the period.

02

Effect of Ommission of Adjusting Entries

In case adjusting entry of accrued expense is not recorded, then it results in understatement of expenses and results in overstatement of net income. In balance sheet, equity will be overstated and liabilities will be understated.

In case adjusting entry of accrued revenue is not recorded, then it results in understatement of revenues and results in understatement of net income. In balance sheet, equity will be understated and assets will be understated.

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Most popular questions from this chapter

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?

Question: Hooten Carpentry had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances. Prepare the adjusted trial balance for Hooten Carpentry as of December 31, 2018. Cash \( 4,025 Common Stock \) ? Land 5,000 Accounts Receivable 660 Utilities Expense 400 Office Supplies 120 Accounts Payable 225 Utilities Payable 210 Accumulated Depreciation鈥擡quipment 1,000 Service Revenue 12,000 Salaries Expense 550 Unearned Revenue 300 Supplies Expense 80 Depreciation Expense鈥擡quipment 800 Equipment 10,000 Dividends 500.

Question :Birch Park Senior Center has a weekly payroll of \(12,500. December 31 falls on Wednesday, and Birch Park Senior Center will pay its employees the following Monday (January 5) for the previous full week. Assume Birch Park Senior Center has a five-day workweek and has an unadjusted balance in Salaries Expense of \)620,000. Requirements 1. Record the adjusting entry for accrued salaries on December 31. 2. Post the adjusting entry to the accounts involved, and show their balances after adjustments. 3. Record the journal entry for payment of salaries made on January 5

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.

Identify the impact on the income statement and balance sheet if adjusting entries for the following situations were not recorded. a. Office Supplies used, \(800. b. Accrued service revenue, \)4,000. c. Depreciation on building, \(3,500. d. Prepaid Insurance expired, \)650. e. Accrued salaries expense, \(2,750. f. Service revenue that was collected in advance has now been earned, \)130
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