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Chapter 3: 5E (page 131)

EXCEL (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.

Debit Credit

Prepaid Insurance \(3,600

Supplies \)2,800

Equipment \(25,000

Accumulated Depreciation- Equipment \)8,400

Notes Payable \(20,000

Unearned Rent Revenue \)9,300

Rent Revenue \(60,000

Interest Expenses -0-

Salaries and Wages Expenses \)14,000

An analysis of accounts shows the following.

  1. The equipment depreciates \(250 per month.

  2. One-third of the unearned rent was recognized as revenue during the quarter.

  3. Interest of \)500 is accrued on the notes payable.

  4. Supplies on hand total \(850

  5. Insurance expires at the rate of \)300 per month.

Instructions

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expenses, Insurance Expenses, Interest Payable, and Supplies expenses. (Omit Explanations)

Short Answer

Expert verified

The amount of accumulated depreciation calculated is $750.

Step by step solution

01

Meaning of Adjusting Entries

Adjusting entries are those journal entries that are made on the last day of an accounting period. Adjusting entries helps a company calculate exact revenue and expenses and it also helps to update the financial statements and fix an error.

02

Adjusting entries on March 31

Date

Accounts Titles and Explanations

Debit

Credit

Mar 31

Depreciation Expenses

$750



Accumulated Depreciation- Equipment


$750


(Adjusting entries for quarterly depreciation on equipment)







Mar 31

Unearned Rent Revenue

$3100



Rent Revenue


$3100


(Adjusting entries for rent revenue earned)







Mar 31

Interest expenses

$500



Interest payable


$500


(Adjusting entries for accrued interest expenses)







Mar 31

Supplies Expenses

$1950



Supplies


$1950


(Adjusting entries for supplies consumed)







Mar 31

Insurance Expenses

$900



Prepaid Insurance


$900


(Adjusting entries for expired insurance for the quarter)



03

Explanations:

  1. Depreciation Expenses = ($250 × 3) =$750

*[quarterly depreciation = 3 months]

  1. Unearned rent revenue = ($9300 × 1/3) = $3100

  2. Insurance expenses = $500 (Given)

  3. Supplies expenses (Supplies used in production) = ($2800 - $850) = $1950

  4. Insurance expenses = ($300 × 3months) = $900

*[quarterly insurance = 3months]

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Most popular questions from this chapter

Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

COOKE COMPANY

Worksheet

For The Month Ended September 30, 2017


Trial Balance
Adjusted Trial Balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Cash

37,400

37,400

Supplies

18,600

4,200

Prepaid Insurance

31,900

3,900

Land

80,000

80,000

Equipment

120,000

120,000

Accumulated Depreciation—Equipment

36,200

42,000

Accounts Payable

14,600

14,600

Unearned Service Revenue

2,700

700

Mortgage Payable

50,000

50,000

Common Stock

107,700

107,700

Retained Earnings, Sept. 1, 2017

2,000

2,000

Dividends

14,000

14,000

Service Revenue

278,500

280,500

Salaries and Wages Expense

109,000

109,000

Maintenance and Repairs Expense

30,500

30,500

Advertising Expense

9,400

9,400

Utilities Expenses

16,900

16,900

Property Tax Expense

18,000

21,000

Interest Expense

6,000

12,000

Totals

491,700

491,700

Insurance Expense

28,000

Supplies Expense

14,400

Interest Payable

6,000

Depreciation Expense

5,800

Property Taxes Payable

3,000

Totals

506,500

506,500

Instructions

(a) Prepare a complete worksheet.

(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is due for payment in the next fiscal year.)

(c) Journalize the adjusting entries using the worksheet as a basis.

d) Journalize the closing entries using the worksheet as a basis.

(e) Prepare a post-closing trial balance.

E3-17 (L02) (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and DrivingRange Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested \(50,000 cash in the business in exchange for common stock.3 Purchased Michelle Wie’s Golf Land for \)38,000 cash. The price consists of land \(10,000, building \)22,000, and equipment\(6,000. (Make one compound entry.)5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of \)1,600.6 Paid cash \(1,480 for a one-year insurance policy.10 Purchased golf equipment for \)2,500 from Singh Company, payable in 30 days.18 Received golf fees of \(1,200 in cash.25 Declared and paid a \)500 cash dividend.30 Paid wages of \(900.30 Paid Singh Company in full.31 Received \)750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock,Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.InstructionsJournalize the March transactions. (Provide explanations for the journal entries.)

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sep. 1

Kawabata begins practice as a dentist and invests \(20,000 cash

2

Purchases dental equipment on account from Green Jacket Co. for \)17,280

4

Pays rent for office space, \(680 for the month.

4

Employs a receptionist, Michael Bradley

5

Purchases dental supplies for cash, \)942

8

Receives cash of \(1,690 from patients for services performed

10

Pays miscellaneous office expenses, \)430.

14

Bills patients \(5,820 for services performed.

18

Pays Green Jacket Co. on account, \)3,600.

19

Withdraws \(3,000 cash from the business for personal use.

20

Receives \)980 from patients on account

25

Bills patients \(2,110 for services performed

30

Pays the following expenses in cash: salaries and wages \)1,800; miscellaneous office expenses \(85.

30

Dental supplies used during September, \)330.

Instructions

  1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Owner’s Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account.
  2. Prepare a trial balance
  3. Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet.
  4. Close the ledger
  5. Prepare a post-closing trial balance.

Employees are paid every Saturday for the preceding work week. If a balance sheet is prepared on Wednesday, December 31, what does the amount of wages earned during the first three days of the week (12/29, 12/30, 12/31) represent? Explain.
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