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Chapter 3: Q7E (page 132)

E3-7 (L03) (Analyze Adjusted Data) A partial adjusted trial balance of Piper Company at January 31, 2017, shows the following.

PIPER COMPANY

ADJUSTED TRIAL BALANCEJANUARY 31, 2017

Debit (\() Credit(\))Supplies \( 700Prepaid Insurance 2,400Salaries and Wages Payable \) 800UnearnedService Revenue 750Supplies Expense 950Insurance Expense 400Salaries and Wages Expense 1,800Service Revenue 2,000

InstructionsAnswer the following questions, assuming the year begins January 1.(a) If the amount in Supplies Expense is the January 31 adjusting entry, and \(850 of supplies was purchased in January,what was the balance in Supplies on January 1?(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for oneyear, what was the total premium and when was the policy purchased?(c) If \)2,500 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2016?(d) If $1,600 was received in January for services performed in January, what was the balance in Unearned Service Revenueat December 31, 2016?

Short Answer

Expert verified

(a)Supplies on January 1 are $800

(b) Purchased the premium policy in August 2016.

(c) Salaries and wages payable on December 31, 2016, are $100

(d) Unearned service revenue on December 31 2016, was $350

Step by step solution

01

Meaning of Trial balance

A trial balance means a worksheet that lists all the ending balances of the ledger accounts on their respective debit or credit side.

02

Calculation of Supply balance on January 1

Supply balance January 1 =Supply balance January 31 +Supplies Expenses −Purchases  =$700+$950−$850=$1650−$850=$800

The supply balance on January 1 is$800

03

Calculation of total insurance purchase

Calculation of insurance expense per year

Insurance Expense per year (Total premium)=Insurance Expense per month×12=$400×12=$4800

Calculation of prepaid insurance balance at the beginning of the year

Prepaid insurance balance (beginning)=Prepaid insurance+Insurance premium=$2,400+$400=$2,800

Calculation of Insurance purchased

Insurance purchased monthly= Insurance expense per year−prepaidinsurance(beginning)Insurance expense per month=$4,800−$2,800$400=5 months

Premium purchased for (Total premium) $4800

Premium purchased month is August 2016 (5 months before January which means August, September, October, November and December)

04

Calculation of salaries and wages payable on December 31, 2016

Salaries and wages payable at December 31, 2016=Salaries expenses +Wages payable−Salaries paid=$1800+$800−$2500=$2600−$2500=$100

Salaries and wages payable on December 31, 2016, are$100

05

Calculation of unearned service revenue on December 31 2016

Unearned service revenue at Dec31,2016=Cash received −Service revenue+Unearned service revenueon Jan 31=$1600−$2000+$750=−$400+$750=$350

Unearned service revenue on December 31 2016, was$350

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Most popular questions from this chapter

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’s first IFRS financial statements?

BE3-9 (L03) Prepare the following adjusting entries at August 31 for Walgreens. (a) Interest on notes payable of \(300 is accrued. (b) Services performed but unbilled total \)1,400. (c) Salaries and wages earned by employees of \(700 have not been recorded. (d) Bad debt expense for year is \)900. Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense.

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.

E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees \(1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the billwould be approximately \)600.3. On August 1, Roddick borrowed \(30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of \)117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.

The purpose of presenting comparative information in the

transition to IFRS is:

(a) to ensure that the information is a faithful representation.

(b) to be in accordance with the Sarbanes-Oxley Act.

(c) to provide users of the financial statements with information on GAAP in one period and IFRS in theother period.

(d) to provide users of the financial statements withinformation on IFRS for at least two periods.
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