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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

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.

When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages subtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?

The accounts listed below appeared in the December 31 trial balance of the Savard Theater.

Debit

Credit

Equipment

\(192,000

Accumulated Depreciation—Equipment

\) 60,000

Notes Payable

90,000

Admissions Revenue

380,000

Advertising Expense

13,680

Salaries and Wages Expense

57,600

Interest Expense

1,400

Instructions

  1. From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
    1. The equipment has an estimated life of 16 years and a salvage value of \(24,000 at the end of that time. (Use straightline method.)
    2. The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.)
    3. In December, 2,000 coupon admission books were sold at \)30 each and recorded as Admissions Revenue. They could be used for admission any time after January 1.
    4. Advertising expense paid in advance and included in Advertising Expense \(1,100.
    5. Salaries and wages accrued but unpaid \)4,700.
  2. What amounts should be shown for each of the following on the income statement for the year?
    1. Interest expense.
    2. Admissions revenue.
    3. Advertising expense.
    4. Salaries and wages expense.

Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?

The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer.

YORKIS PEREZ, CONSULTING ENGINEER .
TRIAL BALANCE
DECEMBER 31, 2017

Debit

Credit

Cash

\( 29,500

Accounts Receivable

49,600

Allowance for Doubtful Accounts

\) 750

Supplies

1,960

Prepaid Insurance

1,100

Equipment

25,000

Accumulated Depreciation—Equipment

6,250

Notes Payable

7,200

Owner’s Capital

35,010

Service Revenue

100,000

Rent Expense

9,750

Salaries and Wages Expense

30,500

Utilities Expenses

1,080

Office Expense

720

\(149,210

\)149,210

  1. Fees received in advance from clients \(6,000, which were recorded as revenue.
  2. Services performed for clients that were not recorded by December 31, \)4,900.
  3. Bad debt expense for the year is \(1,430.
  4. Insurance expired during the year \)480.
  5. Equipment is being depreciated at 10% per year.
  6. Yorkis Perez gave the bank a 90-day, 10% note for \(7,200 on December 1, 2017.
  7. Rent of the building is \)750 per month. The rent for 2017 has been paid, as has that for January 2018, and recorded as Rent Expense.
  8. Office salaries and wages earned but unpaid December 31, 2017, \(2,510.

Instructions

  1. From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2017. (Omit explanations.)
  2. Prepare an income statement for 2017, a statement of owner’s equity, and a classified balance sheet. Yorkis Perez withdrew \)17,000 cash for personal use during the year.
See all solutions

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