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|
- 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.
- Reconstruct the adjusting entry that must have been recorded for each account.
- Post these adjusting entries and agree ending balances in each T-account to the adjusted balances above.
- 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|
- Indicate in the "Adjustments" column the debit or credit difference between the unadjusted trial balance and the adjusted trial balance.
- 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:
|Income Taxes Payable||-0-|
- The prepaid rent consisted of a payment for three months' rent at $200 per month for December 2015, January 2016, and February 2016.
- Office supplies on hand at December 31, 2015 amounted to $300.
- The estimated income taxes for 2015 are $5,000.
- All but $500 in the Unearned Commissions account has been earned in 2015.
- Salaries for the last three days of December amounting to $300 have not yet been recorded.
- Prepare all necessary adjusting entries in general journal format.
- 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|
|Unearned Subscriptions||Commissions Expense|
|Acc. Dep'n – Equipment||5,000||Bal.||10,000||800|
|250||Dep'n Expense – Equipment|
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|
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|
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|
|Accounts Receivable||110||Share Capital||320||Salaries Expense||656|
|Prepaid Insurance||161||Repair Revenue||450||Telephone Expense||669|
- The prepaid insurance is for a one-year policy, effective July 1, 2015.
- A physical count indicated that $500 of supplies is still on hand.
- 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:
- Adjusting entry for revenue earned but not yet billed to the customer.
- Adjusting entry for cash received from a customer for revenue not yet earned.
- Adjusting entry for revenue earned that was originally received as cash in advance in the previous month.
- Adjusting entry for services received from a supplier, but not yet paid.
- Adjusting entry for cash paid to a supplier for repair services not yet received.
- Adjusting entry for repair services received that was originally paid as cash in advance to the supplier in the previous month.
- Adjusting entry for salaries earned by employees, but not yet paid.
- 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.
- Calculate the total weekly payroll cost and the salary adjustment at March 31, 2016.
- Prepare the adjusting entry at March 31, 2016.
- 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.
At October 31, 2016
|Unadjusted Trial Balance||Adjustments||Adjusted Trial Balance|
|Accrued salaries payable||5,000||9,500|
|Accumulated depreciation, equipment||1,500||2,500|
|Maintenance service expenses||1,000||1,000|
|Prepaid advertising expenses||15,000||16,300|
|Unearned service revenue||10,000||50,000|
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|
|Equipment||Salaries Payable||Advertising Expense|
|Acc. Dep'n – Equipment||Unearned Subscriptions||Commissions Expense|
|Dep'n Expense – Equipment|
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:
|Accrued salaries payable||8,700|
|Accumulated depreciation, building||200|
|Accumulated depreciation, equipment||3,200|
|Income tax expense||4,500|
|Income taxes payable||4,500|
|Prepaid insurance expense||12,790|
|Shop supplies expense||750|
|Unearned service revenue||37,500|
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.
|Accumulated Depreciation – Machinery||2,800|
|Accumulated Depreciation – Warehouse||8,000|
|Depreciation Expense – Machinery||900|
|Depreciation Expense – Warehouse||1,200|
Required: Prepare closing entries and a post-closing trial balance.