Chapter 3: Adjusting Accounts for Financial Statements

What are the steps in recording closing entries?

Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

Question: Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

A a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

Question: Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

A a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

The following data are taken from the unadjusted trial balance of the Westcott Company at December 31,

2017. Each account carries a normal balance.

Accounts Payable \( 6 Prepaid Insurance \)18 Retained Earnings \(32

Accounts Receivable . 12 Revenue 75 Dividends 6

Accumulated Depreciation—Equip. . 15 Salaries Expense 18 Unearned Revenue 12

Cash . 21 Supplies 24 Utilities Expense . 12

Equipment . 39 Common Stock . 10

1. Use the data above to prepare a work sheet. Enter the accounts in proper order and enter their balancesin the correct Debit or Credit column.

2. Use the following adjustment information to complete the work sheet.

a. Depreciation on equipment, \)3

b. Accrued salaries, \(6

c. The \)12 of unearned revenue has been earned

d. Supplies available at December 31, 2017, \(15

e. Expired insurance, \)15

The following two events occurred for Trey Co. on October 31, 2017, the end of its fiscal year.

a. Trey rents a building from its owner for \(2,800 per month. By a prearrangement, the company delayedpaying October’s rent until November 5. On this date, the company paid the rent for both Octoberand November.

b. Trey rents space in a building it owns to a tenant for \)850 per month. By prearrangement, the tenantdelayed paying the October rent until November 8. On this date, the tenant paid the rent for bothOctober and November.

Required

1. Prepare adjusting entries that the company must record for these events as of October 31.

2. Assuming Trey does notuse reversing entries, prepare journal entries to record Trey’s payment of renton November 5 and the collection of the tenant’s rent on November 8.

3. Assuming that the company uses reversing entries, prepare reversing entries on November 1 and thejournal entries to record Trey’s payment of rent on November 5 and the collection of the tenant’s renton November 8.

The following two events occurred for Trey Co. on October 31, 2017, the end of its fiscal year.

a. Trey rents a building from its owner for \(2,800 per month. By a prearrangement, the company delayedpaying October’s rent until November 5. On this date, the company paid the rent for both Octoberand November.

b. Trey rents space in a building it owns to a tenant for \)850 per month. By prearrangement, the tenantdelayed paying the October rent until November 8. On this date, the tenant paid the rent for bothOctober and November.

Required

1. Prepare adjusting entries that the company must record for these events as of October 31.

2. Assuming Trey does notuse reversing entries, prepare journal entries to record Trey’s payment of renton November 5 and the collection of the tenant’s rent on November 8.

3. Assuming that the company uses reversing entries, prepare reversing entries on November 1 and thejournal entries to record Trey’s payment of rent on November 5 and the collection of the tenant’s renton November 8.

The following two events occurred for Trey Co. on October 31, 2017, the end of its fiscal year.

a. Trey rents a building from its owner for \(2,800 per month. By a prearrangement, the company delayedpaying October’s rent until November 5. On this date, the company paid the rent for both Octoberand November.

b. Trey rents space in a building it owns to a tenant for \)850 per month. By prearrangement, the tenantdelayed paying the October rent until November 8. On this date, the tenant paid the rent for bothOctober and November.

Required

1. Prepare adjusting entries that the company must record for these events as of October 31.

2. Assuming Trey does notuse reversing entries, prepare journal entries to record Trey’s payment of renton November 5 and the collection of the tenant’s rent on November 8.

3. Assuming that the company uses reversing entries, prepare reversing entries on November 1 and thejournal entries to record Trey’s payment of rent on November 5 and the collection of the tenant’s renton November 8.