Chapter 3: Q3-5DQ (page 139)
Question: What type of assets requires adjusting entries to record depreciation?
Building and machineryrequire adjusting entry.
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Damita Company reported net income of \(48,025 and net sales of \)425,000 for the current year. Calculate
the company’s profit margin and interpret the result. Assume that its competitors earn an average profit
margin of 15%.
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
20. Depreciation expense—Trucks
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
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity
20. Current portion of long-term note payable
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
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity
14. Buildings
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.
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