3.10: Exercises

EXERCISE 3–1 (LO1,2) Adjusting Entries

The following are account balances of Graham Corporation:

Account Title	Amount in Unadjusted Trial Balance	Balance after Adjustment
Interest Receivable	$ -0-	$110
Prepaid Insurance	1,800	600
Interest Payable	-0-	90
Salaries Payable	-0-	450
Unearned Rent	700	200

Required:

1. Enter the unadjusted balance for each account in the following T-accounts: Interest Receivable, Prepaid Insurance, Interest Payable, Salaries Payable, Unearned Rent, Interest Earned, Rent Earned, Insurance Expense, Interest Expense, and Salaries Expense.
2. Reconstruct the adjusting entry that must have been recorded for each account.
3. Post these adjusting entries and agree ending balances in each T-account to the adjusted balances above.
4. List revenue and expense amounts for the period.

EXERCISE 3–2 (LO1,2) Adjusting Entries

The trial balance of Lauer Corporation at December 31, 2015 follows, before and after the posting of adjusting entries.

	Trial Balance		Adjustments		Adjusted Trial Balance
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Cash	$4,000				$4,000
Accounts Receivable	5,000				5,000
Prepaid Insurance	3,600				3,300
Prepaid Rent	1,000				500
Truck	6,000				6,000
Accumulated Depreciation		$-0-				$1,500
Accounts Payable		7,000				7,400
Salaries Payable						1,000
Unearned Rent		1,200				600
Share Capital		2,700				2,700
Revenue		25,000				25,000
Rent Earned						600
Advertising Expense	700				700
Commissions Expense	2,000				2,000
Depreciation Expense					1,500
Insurance Expense					300
Interest Expense	100				500
Rent Expense	5,500				6,000
Salaries Expense	8,000				9,000
Totals	$35,900	$35,900			$38,800	$38,800

Required:

1. Indicate in the "Adjustments" column the debit or credit difference between the unadjusted trial balance and the adjusted trial balance.
2. Prepare in general journal format the adjusting entries that have been recorded. Include descriptions.

EXERCISE 3–3 (LO1,2) Adjusting Entries

The following data are taken from an unadjusted trial balance at December 31, 2015:

Prepaid Rent	$600
Office Supplies	700
Income Taxes Payable	-0-
Unearned Commissions	1,500
Salaries Expense	5,000

Additional Information:

1. The prepaid rent consisted of a payment for three months' rent at $200 per month for December 2015, January 2016, and February 2016.
2. Office supplies on hand at December 31, 2015 amounted to $300.
3. The estimated income taxes for 2015 are $5,000.
4. All but $500 in the Unearned Commissions account has been earned in 2015.
5. Salaries for the last three days of December amounting to $300 have not yet been recorded.

Required:

1. Prepare all necessary adjusting entries in general journal format.
2. Calculate the cumulative financial impact on assets, liabilities, equity, revenue and expense if these adjusting entries are not made.

EXERCISE 3–4 (LO1,2) Adjusting Entries

The following are general ledger accounts extracted from the records of Bernard Inc. at December 31, 2015, its year-end ('Bal' = unadjusted balance):

Prepaid Advertising				Accounts Payable				Share Capital
Bal.	1,000		500			Bal.	15,000			Bal.	8,000
							200
							100	Subscription Revenue
Unused Supplies							400				5,000
Bal.	750		400				800
								Advertising Expense
				Salaries Payable					500
Equipment							700
Bal.	21,750
				Unearned Subscriptions				Commissions Expense
Acc. Dep'n – Equipment					5,000	Bal.	10,000		800
		Bal.	1,500
			250					Dep'n Expense – Equipment
									250
								Maintenance Expense
									200
								Salaries Expense
								Bal.	9,500
									700
								Supplies Expense
								Bal.	2,500
									400
								Telephone Expense
									100
								Utilities Expense
									400

Required: Prepare in general journal format the adjusting entries that were posted. Include plausible descriptions/narratives for each adjustment.

EXERCISE 3–5 (LO1,2) Adjusting Entries

The following unadjusted accounts are extracted from the general ledger of A Corp. at December 31, 2015:

Truck		Depreciation Expense – Truck		Acc. Dep'n – Truck
10,000		1,300			1,300

Additional Information: The truck was purchased January 1, 2015. It has an estimated useful life of 4 years.

Required: Prepare the needed adjusting entry at December 31, 2015.

EXERCISE 3–6 (LO1,2) Adjusting Entries

The following unadjusted accounts are taken from the records of B Corp. at December 31, 2015:

Bank Loan		Interest Expense		Interest Payable
	12,000	1,100			100

Additional Information: The bank loan was received on January 1, 2015. It bears interest at 10 per cent.

Required: Prepare the adjusting entry at December 31, 2015.

EXERCISE 3–7 (LO1,2) Adjusting Entries

The following general ledger accounts and additional information are taken from the records of Wolfe Corporation at the end of its fiscal year, December 31, 2015.

Cash			101	Unused Supplies			173	Advertising Exp.			610
Bal.	2,700			Bal.	700			Bal.	200
Accounts Receivable			110	Share Capital			320	Salaries Expense			656
Bal.	2,000					Bal.	3,800	Bal.	4,500
Prepaid Insurance			161	Repair Revenue			450	Telephone Expense			669
Bal.	1,200					Bal.	7,750	Bal.	250

Additional Information:

1. The prepaid insurance is for a one-year policy, effective July 1, 2015.
2. A physical count indicated that $500 of supplies is still on hand.
3. A $50 December telephone bill has been received but not yet recorded.

Required: Record all necessary adjusting entries in general journal format.

EXERCISE 3–8 (LO2) Adjusting Entries

Below are descriptions of various monthly adjusting entries:

1. Adjusting entry for revenue earned but not yet billed to the customer.
2. Adjusting entry for cash received from a customer for revenue not yet earned.
3. Adjusting entry for revenue earned that was originally received as cash in advance in the previous month.
4. Adjusting entry for services received from a supplier, but not yet paid.
5. Adjusting entry for cash paid to a supplier for repair services not yet received.
6. Adjusting entry for repair services received that was originally paid as cash in advance to the supplier in the previous month.
7. Adjusting entry for salaries earned by employees, but not yet paid.
8. Adjusting entry for annual depreciation expense for equipment.

Required: For each description above, identify the likely journal entry debit and credit account.

EXERCISE 3–9 (LO2) Adjusting Entries

Turner Empire Co. employs 65 employees. The employees are paid every Monday for work done from the previous Monday to the end-of-business on Friday, or a 5-day work week. Each employee earns $80 per day.

Required:

1. Calculate the total weekly payroll cost and the salary adjustment at March 31, 2016.
2. Prepare the adjusting entry at March 31, 2016.
3. Prepare the subsequent cash entry on April 4, 2016.

EXERCISE 3–10 (LO1,2,3) Adjusting Entries

Below is a trial balance for Quertin Quick Fix Ltd. at October 31, 2016 with three sets of debit/credit columns. The first set is before the October month-end adjusting entries, and the third column is after the October month-end adjusting entries.

Quertin Quick Fix Ltd. Trial Balance At October 31, 2016
	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance
	Debit	Credit	Debit	Credit	Debit	Credit
Accounts payable		$225,000				$225,500
Accounts receivable	$325,000				$395,000
Accrued salaries payable		5,000				9,500
Accumulated depreciation, equipment	1,500					2,500
Advertising expense	1,500				1,500
Cash	80,000				118,700
Depreciation expense	800				1,800
Equipment	150,000				150,000
Land	150,000				150,000
Maintenance service expenses	1,000				1,000
Notes payable		210,000				210,000
Office supplies	5,000				5,000
Prepaid advertising expenses	15,000				16,300
Rent expense	14,000				14,000
Retained earnings		37,800				37,800
Salaries expense	45,000				49,500
Service revenue		300,000				370,000
Share capital		10,000				10,000
Unearned service revenue		10,000				50,000
Utilities expense	12,000				12,500
	$799,300	$799,300			$915,300	$915,300

Required: Determine the differences for all the account balances and identify the most likely adjusting entries that would have been recorded in October to correspond to these differences.

EXERCISE 3–11 (LO3) Prepare an Adjusted Trial Balance

After Bernard Inc. completed its first year of operations on December 31, 2015, the following adjusted account balances appeared in the general ledger.

Prepaid Advertising		Accounts Payable		Share Capital
1,000			13,250		8,000
Supplies				Subscription Revenue
750					5,000
Equipment		Salaries Payable		Advertising Expense
21,750			700	500
Acc. Dep'n – Equipment		Unearned Subscriptions		Commissions Expense
	1,500		10,000	800
				Dep'n Expense – Equipment
				250
				Maintenance Expense
				200
				Salaries Expense
				10,200
				Supplies Expense
				2,500
				Telephone Expense
				100
				Utilities Expense
				400

Required:Prepare an adjusted trial balance at December 31, 2015.

EXERCISE 3–12 (LO6) Closing Entries

Below is the adjusted trial balance for Quefort Ltd. as at September 30, 2016:

	Debit	Credit
Accounts payable		$23,250
Accounts receivable	$106,800
Accrued salaries payable		8,700
Accumulated depreciation, building		200
Accumulated depreciation, equipment		3,200
Advertising expense	4,050
Building	111,000
Cash	87,300
Cash dividends	5,000
Depreciation expense	2,380
Equipment	15,000
Income tax expense	4,500
Income taxes payable		4,500
Insurance expense	3,700
Interest expense	150
Interest payable		150
Repair expense	7,800
Notes payable		30,000
Office supplies	1,800
Prepaid insurance expense	12,790
Rent expense	22,500
Retained earnings		65,470
Salaries expense	41,700
Service revenue		276,000
Share capital		1,500
Shop supplies expense	750
Unearned service revenue		37,500
Utilities expense	23,250
	$450,470	$450,470

Required: Prepare the closing entries.

EXERCISE 3–13 (LO6) Prepare Closing Entries and a Post-Closing Trial Balance

The following alphabetized adjusted trial balance information is available for Willis Inc. at December 31, 2015. Assume all accounts have normal balances.

Accounts Payable	$4,400
Accounts Receivable	3,600
Accumulated Depreciation – Machinery	2,800
Accumulated Depreciation – Warehouse	8,000
Bank Loan	47,600
Cash	12,000
Commissions Earned	20,000
Depreciation Expense – Machinery	900
Depreciation Expense – Warehouse	1,200
Dividends	14,000
Insurance Expense	1,800
Interest Expense	2,365
Interest Payable	1,200
Land	15,000
Machinery	20,000
Retained Earnings	36,000
Salaries Expense	33,475
Salaries Payable	1,970
Share Capital	52,100
Subscriptions Revenue	17,630
Supplies	2,500
Supplies Expense	15,800
Unearned Fees	800
Utilities Expense	2,860
Warehouse	67,000

Required: Prepare closing entries and a post-closing trial balance.