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3.10: Exercises

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    30386
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    • Contributed by Henry Dauderis and David Annand
    • Athabasca University
    • Sourced from Lyryx Learning

    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.

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