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:

2.   Type of Adjustment

Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense:

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:

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.

1.  What is the book value of the equipment?  _______________
2.  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.

1.  What was the book value of the fixed assets? ________ million
2.  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:

1. Fees accrued but unbilled at May 31 are $19,750.
2. The supplies account balance on May 31 is $12,300. The supplies on hand at May 31 are $4,150.
3. Wages accrued but not paid at May 31 are $2,700.
4. 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?

1. Both adjusting entries and correcting entries are a planned part of the accounting process.
2. Adjusting entries are a planned part of the accounting process, correcting entries are not planned but arise when necessary to correct errors.
3. Both adjusting entries and correcting entries are not a planned part of the accounting process.
4. 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

The data needed to determine year-end adjustments are as follows: