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Chapter 3: Q 27QS_c (page 145)

On December 31, 2016, Yates Co. prepared an adjusting entry for \(12,000 of earned but unrecorded consulting
fees. On January 16, 2017, Yates received \)26,700 cash in consulting fees, which included the
accrued fees earned in 2016. (Assume the company uses reversing entries.)
a. Prepare the December 31, 2016, adjusting entry.
b. Prepare the January 1, 2017, reversing entry.
c. Prepare the January 16, 2017, cash receipt entry.

Short Answer

Expert verified

Answer:

The cash account is debited and consulting fess credited with $26,700.

Step by step solution

01

Step-by-Step Solution

Step 1: Definition of accrued revenue

When work is done but payment is not received, this amount is known as accrued revenue

02

Reversal Entry

	Journal entry
Date	Particular	Debit	Credit
January 16, 2017	Cash	$26,700
	Consulting Fees		$26,700
	(Entry for the receipt of accrued revenue)

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Most popular questions from this chapter

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

5. Machinery

If a company initially records prepaid expenses with debits to expense accounts, what type of account is debited in the adjusting entries for those prepaid expenses?

Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned

revenues are credited to revenue when cash is received. Given this company’s accounting practices,

which one of the following applies to the preparation of adjusting entries at the end of its first accounting

period?

a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit

to Consulting Fees Earned of \(500 and a credit to Unearned Consulting Fees of \)500.

b. Unpaid salaries of \(400 are recorded with a debit to Prepaid Salaries of \)400 and a credit to Salaries

Expense of \(400.

c. Office supplies purchased for the period were \)1,000. The cost of unused office supplies of \(650 is

recorded with a debit to Supplies Expense of \)650 and a credit to Office Supplies of \(650.

d. Earned but unbilled (and unrecorded) consulting fees for the period were \)1,200, which are recorded

with a debit to Unearned Consulting Fees of \(1,200 and a credit to Consulting Fees Earned

of \)1,200.

For each of the following separate cases, prepare adjusting entries required of financial statements for

the year ended (date of) December 31, 2017. (Entries can draw from the following partial chart of

accounts:

Cash; Interest Receivable; Supplies; Prepaid Insurance; Equipment; Accumulated

Depreciation—Equipment; Wages Payable; Interest Payable; Unearned Revenue; Interest Revenue;

Wages Expense; Supplies Expense; Insurance Expense; Interest Expense; Depreciation Expense—

Equipment.)

a. Wages of \(8,000 are earned by workers but not paid as of December 31, 2017.

b. Depreciation on the company’s equipment for 2017 is \)18,000.

c. The Office Supplies account had a \(240 debit balance on December 31, 2016. During 2017, \)5,200 of

office supplies are purchased. A physical count of supplies at December 31, 2017, shows \(440 of supplies

available.

d. The Prepaid Insurance account had a \)4,000 balance on December 31, 2016. An analysis of insurance

policies shows that \(1,200 of unexpired insurance benefits remain at December 31, 2017.

e. The company has earned (but not recorded) \)1,050 of interest from investments in CDs for the year

ended December 31, 2017. The interest revenue will be received on January 10, 2018.

f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the

year ended December 31, 2017. The company must pay the interest on January 2, 2018.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

12. Salaries payable

See all solutions

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