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Chapter 3: Question 9BE (page 128)

BE3-9 (L03) Prepare the following adjusting entries at August 31 for Walgreens. (a) Interest on notes payable of \(300 is accrued. (b) Services performed but unbilled total \)1,400. (c) Salaries and wages earned by employees of \(700 have not been recorded. (d) Bad debt expense for year is \)900. Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense.

Short Answer

Expert verified

The amount of salaries and wages expenses is $700.

Step by step solution

01

Meaning of Adjusting Entries

Journal entries posted at year-end so that financial statements have effects of the transaction related to the current year are called adjusting entries. These entries help in fair presentation.

02

Journal Entries

Date

Accounts and Explanation

Debit $

Credit $

August, 31

Interest expenses

$300

Interest Payable

$300

August, 31

Accounts Receivable

$1,400

Service revenue

$1,400

August, 31

Salaries and Wages expenses

$700

Salaries and Wages payable

$700

August, 31

Bad debt expenses

$900

Allowance for doubtful accounts

$900

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Most popular questions from this chapter

The following trial balance of Watteau Co. does not balance:

WATTEAU CO.

TRIAL BALANCE

JUNE 30, 2017

Debit \(

Credit \)

Cash

\(2,870

Accounts receivable

\)3,231

Supplies

800

Equipment

3,800

Account payable

2,666

Unearned service revenue

1,200

Common stock

6,000

Retained earnings

3,000

Service revenue

2,380

Salaries and wages expenses

3,400

Office expenses

940

\(13,371

\)16,916

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

  1. Cash received from the customer on account was debited for \(570, and accounts receivable was credited for the same amount. The actual collection was for \)750.
  2. The purchase of a computer printer on account for \(500 was recorded as a debit to Supplies for \)500 and a credit to Accounts Payable for \(500.
  3. Services were performed on account for a client for \)890. Accounts receivable was debited for \(890 and service revenue was credited for \)89.
  4. A payment of \(65 for telephone charges was recorded as a debit to Office Expense for \)65 and a debit to Cash for \(65.
  5. When the unearned service revenue account was reviewed, it was found that service revenue amounting to \)325 was performed prior to June 30 (related to unearned service revenue).
  6. A debit posting to salaries and wages expenses of \(670 was omitted.
  7. A payment on account for \)206 was credited to cash for \(206 and credit to account payable for \)260.
  8. A dividend of \(575 was debited to salaries and wages expenses for \)575 and credit to cash for $575.

Instruction

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

When converting to IFRS, a company must:

(a) recast previously issued financial statements in accordance with IFRS.

(b) use GAAP in the reporting period but subsequently use IFRS.

(c) prepare at least three years of comparative statements.

(d) use GAAP in the transition year but IFRS in the reporting year.

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.

The adjusted trial balance of Anderson Cooper Co. as of December 31, 2017, contains the following.

ANDERSON COOPER CO.

ADJUSTED TRIAL BALANCE

DECEMBER 31, 2017

Dr.

Cr

Cash

\(19,472

Accounts Receivable

6,920

Prepaid Rent

2,280

Equipment

18,050

Accumulated Depreciation鈥擡quipment

\) 4,895

Notes Payable

5,700

Accounts Payable

5,472

Common Stock

20,000

Retained Earnings

11,310

Dividend

3,000

Service Revenue

11,590

Salaries and Wages Expense

6,840

Rent Expense

2,260

Depreciation Expense

145

Interest Expense

83

Interest Payable

83

\(59,050

\)59,050

Instructions

(a) Prepare an income statement.

(b) Prepare a statement of retained earnings.

(c) Prepare a classified balance sheet.

The financial statements of (M&S) are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to M&S鈥檚 financial statements and the accompanying notes to answer the following questions.

(a) What were M&S鈥檚 total assets at 28 March 2015? At 29 March 2014?

(b) How much cash (and cash equivalents) did M&S have on 28 March 2015?

(c) What were M&S鈥檚 selling and marketing expenses in 2015? In 2014?

(d) What were M&S鈥檚 revenues in 2015? In 2014?

(e) Using M&S鈥檚 fi nancial statements and related notes, identify items that may result in adjusting entries for prepaymentsand accruals.

(f) What were the amounts of M&S鈥檚 depreciation and amortization expense in 2014 and 2015?
See all solutions

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