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Chapter 3: Q20E (page 136)

When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

  1. The prepaid insurance account shows a debit of \(5,280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.
  2. On November 1, Rent Revenue was credited for \)1,800, representing revenue from a subrental for a 3-month period beginning on that date.
  3. Purchase of advertising materials for \(800 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of \)290 are on hand.
  4. Interest of $770 has accrued on notes payable.

Instructions

Prepare the following in general journal form.

  1. The adjusting entry for each item.
  2. The reversing entry for each item where appropriate.

Short Answer

Expert verified
  1. The total debit and credit side of the journal is $2,760
  2. The total debit and credit side of the journal is $1,660

Step by step solution

01

Meaning of Journal Entry

A journal entry is a record of financial transactions kept in the books of accounts of an organization. There are debit and credit columns in addition to each transaction.

02

(a) Preparing journal entry

Adjusting entries

Date

Particulars

Debit ($)

Credit ($)

31 Dec.

Insurance expense

1,100

Prepaid Insurance

1,100

31 Dec.

Rent Revenue

600

Unearned Rent Revenue

600

31 Dec.

Supplies

290

Advertising Expense

290

31 Dec.

Interest Expense

770

Interest payable

770

$2,760

$2,760

03

(b) Preparing the reverse entry

Reversing Entries

Date

Particulars

Debit ($)

Credit ($)

1

No reverse entry required

2

Unearned rent revenue

600

Rent Revenue

600

3

Advertising Expense

290

Supplies

290

4

Interest payable

770

Interest expense

770

$1,660

$1,660

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Most popular questions from this chapter

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.

Do the following events represent business transactions?

Explain your answer in each case

  1. A computer is purchased on account.
  2. A customer returns merchandise and is given credit on account.
  3. A prospective employee is interviewed
  4. The owner of the business withdraws cash from the business for personal use.
  5. Merchandise is ordered for delivery next month.

E3-7 (L03) (Analyze Adjusted Data) A partial adjusted trial balance of Piper Company at January 31, 2017, shows the following.

PIPER COMPANY

ADJUSTED TRIAL BALANCEJANUARY 31, 2017

Debit (\() Credit(\))Supplies \( 700Prepaid Insurance 2,400Salaries and Wages Payable \) 800UnearnedService Revenue 750Supplies Expense 950Insurance Expense 400Salaries and Wages Expense 1,800Service Revenue 2,000

InstructionsAnswer the following questions, assuming the year begins January 1.(a) If the amount in Supplies Expense is the January 31 adjusting entry, and \(850 of supplies was purchased in January,what was the balance in Supplies on January 1?(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for oneyear, what was the total premium and when was the policy purchased?(c) If \)2,500 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2016?(d) If $1,600 was received in January for services performed in January, what was the balance in Unearned Service Revenueat December 31, 2016?

Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

COOKE COMPANY

Worksheet

For The Month Ended September 30, 2017


Trial Balance
Adjusted Trial Balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Cash

37,400

37,400

Supplies

18,600

4,200

Prepaid Insurance

31,900

3,900

Land

80,000

80,000

Equipment

120,000

120,000

Accumulated Depreciation鈥擡quipment

36,200

42,000

Accounts Payable

14,600

14,600

Unearned Service Revenue

2,700

700

Mortgage Payable

50,000

50,000

Common Stock

107,700

107,700

Retained Earnings, Sept. 1, 2017

2,000

2,000

Dividends

14,000

14,000

Service Revenue

278,500

280,500

Salaries and Wages Expense

109,000

109,000

Maintenance and Repairs Expense

30,500

30,500

Advertising Expense

9,400

9,400

Utilities Expenses

16,900

16,900

Property Tax Expense

18,000

21,000

Interest Expense

6,000

12,000

Totals

491,700

491,700

Insurance Expense

28,000

Supplies Expense

14,400

Interest Payable

6,000

Depreciation Expense

5,800

Property Taxes Payable

3,000

Totals

506,500

506,500

Instructions

(a) Prepare a complete worksheet.

(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is due for payment in the next fiscal year.)

(c) Journalize the adjusting entries using the worksheet as a basis.

d) Journalize the closing entries using the worksheet as a basis.

(e) Prepare a post-closing trial balance.

On January 1, 2017, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing \(90,000 cash. The new company, Arkansas Sales and Service, has the following transactions during January.

1. Pays \)6,000 in advance for 3 months鈥� rent of office, showroom, and repair space.

2. Purchases 40 personal computers at a cost of \(1,500 each, 6 graphics computers at a cost of \)2,500 each, and 25 printers at a cost of \(300 each, paying cash upon delivery

3. Sales, repair, and office employees earn \)12,600 in salaries and wages during January, of which \(3,000 was still payable at the end of January.

4. Sells 30 personal computers at \)2,550 each, 4 graphics computers for \(3,600 each, and 15 printers for \)500 each; \(75,000 is received in cash in January, and \)23,400 is sold on a deferred payment basis.

5. Other operating expenses of \(8,400 are incurred and paid for during January; \)2,000 of incurred expenses are payable at January 31.

Instructions

  1. Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January.
  2. Using the transaction data above, prepare (1) a cash-basis balance sheet and (2) an accrual-basis balance sheet as of January 31, 2017.
  3. Identify the items in the cash-basis financial statements that make cash-basis accounting inconsistent with the theory underlying the elements of financial statements.
See all solutions

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