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Chapter 4: Q15SE (page 220)

Ocean Breeze Associates accrued \(8,500 of Service Revenue at December 31. Ocean Breeze Associates received \)14,500 on January 15, including the accrued revenue recorded on December 31. Requirements 1. Record the adjusting entry to accrue Service Revenue. 2. Record the reversing entry. 3. Journalize the cash receipt.

Short Answer

Expert verified

Journal entries are as follows:

Requirements	Accounts and Explanation	Debit	Credit
1	Accounts Receivable	$8,500
	Service Revenue		$8,500
	To record the accrued service revenue

2	Service Revenue	$8,500
	Accounts Receivable		$8,500
	To record reversing entry

3	Cash	$14,500
	Service Revenue		$14,500
	To record receipt of service revenue

Step by step solution

01

Explanation on Adjusting Entry

Adjusting entry will be recorded by debiting accounts receivable and crediting service revenue by $8,500, respectively.

02

Explanation on Reversing Entry

Reversing entry will be recorded by debiting service revenue and crediting accounts receivable by $8,500, respectively.

03

Explanation on Cash Receipt Entry

Cash receipt will be recorded by debiting cash and crediting service revenue by $14,500, respectively.

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Most popular questions from this chapter

Refer to the Practice Set data provided in Chapters 2 and 3 for Crystal Clear Cleaning.

Requirements

1. Prepare a worksheet (optional) at November 30, 2018. Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.

2. Prepare an income statement and statement of retained earnings for the month ended November 30, 2018. Also prepare a classified balance sheet at November 30, 2018, using the report format. Assume the Notes Payable is long-term. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.

3. Prepare closing entries at November 30, 2018, and post to the accounts. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance in each account. Denote each closing amount as Clos. and each account balance as Balance.

4. Prepare a post-closing trial balance at November 30, 2018.

Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.

Cash \( 4,000 Common Stock \) 20,000

Accounts Receivable 3,200 Retained Earnings, January 1 15,700

Prepaid Rent 1,900 Dividends 2,100

Office Supplies 3,000 Service Revenue 1,600

Equipment 34,800 Depreciation Expense—Equipment 300

Accumulated Depreciation—Equipment 1,600 Salaries Expense 800

Accounts Payable 5,400 Rent Expense 500

Notes Payable (long-term) 7,000 Utilities Expense 600

Supplies Expense 100

14. Prepare the closing entries for Benson at December 31.

15. What is the balance of Retained Earnings after closing entries have been recorded? (Use a T-account to determine the balance.)

Mark’s Bowling Alley’s adjusted trial balance as of December 31, 2018, is presented below:

Requirements

1. Prepare the closing entries for Mark’s Bowling Alley.

2. Prepare a post-closing trial balance.

3. Compute the current ratio for Mark’s Bowling Alley

For each account listed, identify whether the account would appear in either the income statement section or the balance sheet section of the worksheet. Assuming normal balances, identify if the account would be recorded in the debit (DR) or credit (CR) column.

13. Accumulated Depreciation—Building

On December 1, Curt Wilson began an auto repair shop, Wilson’s Quality Automotive. The following transactions occurred during December: Dec. 1 Wilson contributed \(63,000 cash to the business in exchange for shares of common stock. 1 Purchased \)14,400 of equipment paying cash. 1 Paid \(3,600 for a twelve-month insurance policy starting on December 1. 9 Paid \)15,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, \(2,200. 19 Borrowed \)24,000 from the bank for business use. Wilson signed a notes payable to the bank in the name of the corporation. The note is due in five years. 22 Paid \(2,000 for advertising expenses. 26 Paid \)1,000 on account. 28 The business received a bill for utilities to be paid in January, \(260. 31 Revenues earned during the month included \)18,500 cash and \(3,800 on account. 31 Paid employees’ salaries \)3,900 and building rent \(800. Record as a compound entry. 31 The business received \)1,380 for auto screening services to be performed next month. 31 Paid cash dividends of \(5,000 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, \)600. b. Depreciation for the month, \(240. c. One month insurance has expired. d. Accrued Interest Expense, \)120. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance. 6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.

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