Chapter 3: Q3-8DQ (page 139)
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?
The expense account will be debited.
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Refer to the most recent balance sheet for Apple in Appendix A. What five main noncurrent asset categories are used on its classified balance sheet?
What contra account is used when recording and reporting the effects of depreciation? Why is it used?
Question:Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the
following separate cases. (Entries can draw from the following partial chart of accounts: Cash; Accounts
Receivable; Interest Receivable; Equipment; Wages Payable; Salary Payable; Interest Payable; Lawn
Services Payable; Unearned Revenue; Revenue; Interest Revenue; Wages Expense; Salary Expense;
Supplies Expense; Lawn Services Expense; Interest Expense.)
a. M&R Company provided \(2,000 in services to customers that are expected to pay the company sometime
in January following the company’s year-end.
b. Wage expenses of \)1,000 have been incurred but are not paid as of December 31.
c. M&R Company has a \(5,000 bank loan and has incurred (but not recorded) 8% interest expense of
\)400 for the year ended December 31. The company will pay the \(400 interest in cash on January 2
following the company’s year-end.
d. M&R Company hired a firm to provide lawn services at a monthly fee of \)500 with payment occurring
on the 15th of the following month. Payment for December services will occur on January 15
following the company’s year-end.
e. M&R Company has earned \(200 in interest revenue from investments for the year ended December
31. The interest revenue will be received on January 15 following the company’s year-end.
f. Salary expenses of \)900 have been earned by supervisors but not paid as of December 31.
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
19. Office supplies
Garcia Company had the following selected transactions during the year. (A partial chart of accounts follows:
Cash; Accounts Receivable; Prepaid Insurance; Wages Payable; Unearned Revenue; Revenue;
Wages Expense; Insurance Expense; Depreciation Expense.)
Jan. 1 The company paid \(6,000 cash for 12 months of insurance coverage beginning immediately for
the calendar year.
Aug. 1 The company received \)2,400 cash in advance for 6 months of contracted services beginning
on August 1 and ending on January 31.
Dec. 31 The company prepared any necessary year-end adjusting entries related to insurance coverage
and services rendered.
a. Record journal entries for these transactions assuming Garcia follows the usual practice of recording a
prepayment of an expense in an asset account andrecording a prepayment of revenue received in a
liability account.
b. Record journal entries for these transactions assuming Garcia follows the alternative practice of recording
a prepayment of an expense in an expense account andrecording a prepayment of revenue
received in a revenue account.
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