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Chapter 3 Homework
Chapter 3 Homework
1. Accounts Requiring Adjustment
Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting entry:
| a. Building | |
| b. Cash | |
| c. Wages Expense | |
| d. Miscellaneous Expense | |
| e. Common Stock | |
| f. Prepaid Insurance |
2. Type of Adjustment
Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense:
| a. Cash received for use of land next month | |
| b. Fees earned but not received | |
| c. Rent expense owed but not yet paid | |
| d. Supplies on hand |
3. Adjustment for Accrued Revenues
At the end of the current year, $17,555 of fees have been earned but have not been billed to clients.
Journalize the adjusting entry to record the accrued fees
| ______________ | $ ________________ | |
| ______________ | $ ___________________ |
4. Adjustment for Accrued Expense
Prospect Realty Co. pays weekly salaries of $27,600 on Monday for a six-day workweek ending the preceding Saturday.
Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Friday.
| ______________ | $ ________________ | |
| ______________ | $ ___________________ |
5. Adjustment for Unearned Revenue
On June 1, 2018, Herbal Co. received $18,900 for the rent of land for 12 months.
Journalize the adjusting entry required for unearned rent on December 31, 2018.
| ______________ | $ ________________ | |
| ______________ | $ ___________________ |
6. Adjustment for Prepaid Expense
The prepaid insurance account had a beginning balance of $4,500 and was debited for $16,600 of premiums paid during the year.
Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $5,600.
| ______________ | $ ________________ | |
| ______________ | $ ___________________ |
7. Adjustment for Depreciation
The estimated amount of depreciation on equipment for the current year is $7,700.
Journalize the adjusting entry to record the depreciation.
| ______________ | $ ________________ | |
| ______________ | $ ___________________ |
8. Classifying Types of Adjustments
Classify the following items as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense:
| a. A two-year premium paid on a fire insurance policy | |
| b. Fees earned but not yet received | |
| c. Fees received but not yet earned | |
| d. Salary owed but not yet paid | |
| e. Subcriptions received in advance by a magazine publisher | |
| f. Supplies on hand | |
| g. Taxes owed but payable in the following period | |
| h Utilities owed but not yet paid |
9. Determining Fixed Asset’s Book Value
The balance in the equipment account is $3,700,000, and the balance in the accumulated depreciation—equipment account is $1,887,000.
- What is the book value of the equipment? _______________
- Does the balance in the accumulated depreciation account mean that the equipment’s loss of value is $1,887,000?
_________ , because depreciation is an allocation of the _______________ of the equipment to the periods benefiting from its use.
10. Book Value of Fixed Assets
In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $27,804 million and Accumulated Depreciation of $14,793 million.
- What was the book value of the fixed assets? ________ million
- Would the book value of Microsoft’s fixed assets normally approximate their fair market values? ___________
11. Adjusting Entries
On May 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Oceanside Realty:
- Fees accrued but unbilled at May 31 are $19,750.
- The supplies account balance on May 31 is $12,300. The supplies on hand at May 31 are $4,150.
- Wages accrued but not paid at May 31 are $2,700.
- The unearned rent account balance at May 31 is $9,000, representing the receipt of an advance payment on May 1 of three months’ rent from tenants.Depreciationof office equipment is $3,200.
Required:
Journalize the adjusting entries required at May 31.
| ______________ | $ ____________ | |
| ____________________ | $ ______________ | |
What is the difference between adjusting entries and correcting entries?
- Both adjusting entries and correcting entries are a planned part of the accounting process.
- Adjusting entries are a planned part of the accounting process, correcting entries are not planned but arise when necessary to correct errors.
- Both adjusting entries and correcting entries are not a planned part of the accounting process.
- Correcting entries are a planned part of the accounting process, adjusting entries are not planned but arise when necessary to adjust errors.
12.
Rowland Company is a small editorial services company owned and operated by Marlene Rowland. On August 31, 2018, the end of the current year, Rowland Company’s accounting clerk prepared the following unadjusted trial balance:
Rowland Company
UNADJUSTED TRIAL BALANCE
August 31, 2018
|
ACCOUNT TITLE |
DEBIT |
CREDIT |
|
|
1 |
Cash |
7,500.00 |
|
|
2 |
Accounts Receivable |
38,400.00 |
|
|
3 |
Prepaid Insurance |
7,200.00 |
|
|
4 |
Supplies |
1,980.00 |
|
|
5 |
Land |
112,500.00 |
|
|
6 |
Building |
150,250.00 |
|
|
7 |
Accumulated Depreciation-Building |
|
87,550.00 |
|
8 |
Equipment |
135,300.00 |
|
|
9 |
Accumulated Depreciation-Equipment |
|
97,950.00 |
|
10 |
Accounts Payable |
|
12,150.00 |
|
11 |
Unearned Rent |
|
6,750.00 |
|
12 |
Common Stock |
|
75,000.00 |
|
13 |
Retained Earnings |
|
146,000.00 |
|
14 |
Dividends |
15,000.00 |
|
|
15 |
Fees Earned |
|
324,600.00 |
|
16 |
Salaries and Wages Expense |
193,370.00 |
|
|
17 |
Utilities Expense |
42,375.00 |
|
|
18 |
Advertising Expense |
22,800.00 |
|
|
19 |
Repairs Expense |
17,250.00 |
|
|
20 |
Miscellaneous Expense |
6,075.00 |
|
|
21 |
Totals |
750,000.00 |
750,000.00 |
The data needed to determine year-end adjustments are as follows:
|
a. |
Unexpired insurance at August 31, $6,000. |
|
|
b. |
Supplies on hand at August 31, $480. |
|
|
c. |
Depreciation of building for the year, $7,500. |
|
|
d. |
Depreciation of equipment for the year, $4,150. |
|
|
e. |
Rent unearned at August 31, $1,550. |
|
|
f. |
Accrued salaries and wages at August 31, $3,200. |
|
|
g. |
Fees earned but unbilled on August 31, $11,330. |
|
|
Required: |
||
|
1. |
Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles. |
|
|
2. |
Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. |
|