MGAC02H3 Chapter Notes - Chapter 4: Income Statement, Trial Balance, Retained Earnings

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17 Jul 2013

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Adjusting entries entries necessary at the end of the accounting period to identify and record all revenues and expenses of that period. Companies wait till the end of the accounting period to adjust the accounts because adjusting them daily would be costly and time consuming. Three steps: identify the type of adjustment; determine the amount; record the entry. Deferred revenues cash was received before the good or service was produced to the customer (unearned revenue) Accrued revenues good or service was produced the customer but cash was not yet paid. Deferred expenses cash was paid for before using the asset (prepaid expenses) Accrued expense cash is paid after the expense has incurred (wages payable) A contra account an account that is a reduction of the primary account. It has a balance on the opposite side of the t- account. The contra account of property, land & equipment is accumulated depreciation.

Related Questions

Reliable Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Reliable Repairs & Service

UNADJUSTED TRIAL BALANCE

April 30, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	10,350.00
2	Accounts Receivable	67,500.00
3	Supplies	16,200.00
4	Equipment	116,100.00
5	Accounts Payable		15,750.00
6	Unearned Fees		18,000.00
7	Karin Bickle, Capital		121,500.00
8	Karin Bickle, Drawing	13,500.00
9	Fees Earned		294,750.00
10	Wages Expense	94,500.00
11	Rent Expense	72,000.00
12	Utilities Expense	51,750.00
13	Miscellaneous Expense	8,100.00
14	Totals	450,000.00	450,000.00

For preparing the adjusting entries, the following data were assembled:

a.	Fees earned but unbilled on April 30 were $9,850.
b.	Supplies on hand on April 30 were $4,660.
c.	Depreciation of equipment was estimated to be $6,470 for the year.
d.	The balance in unearned fees represented the April 1 receipt in advance for services to be provided. During April, $15,000 of the services were provided.
e.	Unpaid Wages accrued on April 30 were $5,200.

	Required:
1.	Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.
2.	Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.
3.	Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.
4.	Determine the effect of the adjusting entries on Karin Bickle, Capital.

Chart of Accounts

CHART OF ACCOUNTS

Reliable Repairs & Service

General Ledger

	ASSETS
11	Cash
12	Accounts Receivable
13	Supplies
16	Equipment
17	Accumulated Depreciation-Equipment

	LIABILITIES
21	Accounts Payable
22	Wages Payable
23	Unearned Fees

	EQUITY
31	Karin Bickle, Capital
32	Karin Bickle, Drawing

	REVENUE
41	Fees Earned

	EXPENSES
51	Wages Expense
52	Rent Expense
53	Supplies Expense
54	Depreciation Expense
56	Utilities Expense
59	Miscellaneous Expense

Journal

1. Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11

Final Questions

2. Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.

Before Adjusting Entries

1	Revenues
2	Expenses
3	Net income

3. Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.

After Adjusting Entries

1	Revenues
2	Expenses
3	Net income

4. Determine the effect of the adjusting entries on Karin Bickle, Capital.

The capital account by

blushleopard138

On 4/10/17 I posted a question for accounting. I was able tolocate informatin for the first question not the second. I believethat I have the correct information I just like to cross referenceit. I have no faith in myself with accounting.

Thanks

Tremor Co had the following transactions in the last two monthsof its fiscal year ended May 31

Apr 1 Paid 2,450 cash to an accounting firm for futureconsulting services.

Apr 1 Paid 3,600 cash for 12 months of insurance through March31 of the next year

Apr 30 Received 8,500 cash for furture services to be providedto a customer

May 1 Paid 4,450 cash for future newspaper advertising

May 23 Received 10,450 cash for future services to be providedto a customer

May 31 Of the consulting services paid for on April 1, $2,000worth has been performed

May 31 A portion of the insurance paid for on April 1 hasexpired. No adjustment was made in April to Prepaid Insurance

May 31 Services worth 4,600 are not yet provided to the customerwho paid on April 30

May 31 Of the advertising paid for on May 31 2,050 worth is notyet used

May 31 The company has performed 5,500 of services that thecustomer paid for on May 23

1) Prepare entries for these transactions under the method thatrecords prepaid expenses and unearned revenues in the balance sheetaccounts. Also prepare adjusting entries at the end of theyear.

2) Prepare entries for these transactions under the method thatrecords prepaid expenses and unearned revenues in income statementaccounts. Also prepare adjusting entries at the end of theyear.

3) Explain why the alternative sets of entries in parts 1 and 2do not result in different financial statement amounts

Question 16

Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of$5,000 and advertising expense of $2,000. Which of the followingjournal entries correctly records these expenses?

		Debit: Cash $7,000 Credit: Salaries/Wages Expense$5,000 Credit: Advertising Expense $2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$7,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Salaries/Wages Payable$5,000 Credit: Accounts Payable$2,000
		Debit: Salaries/Wages Expense$5,000 Debit: Advertising Expense $2,000 Credit: Cash$8,000

3 points

Question 17

Corresponds to CLO 4(a) Which of the following statements iscorrect regarding accrued revenues and unearned revenues, beforeadjusting entries have been made?

		Accrued revenues have not been earned and unearned revenues havebeen earned.
		Accrued revenues have been paid and unearned revenues havenot.
		Accrued revenues have not been recorded and unearned revenueshave been recorded.
		Accrued revenues have been recorded and unearned revenues havebeen recorded.

3 points

Question 18

Corresponds to CLO 4(b) Hudson Law Corporation received $5,500cash for legal services to be rendered in the future. The fullamount was credited to the liability account Unearned ServiceRevenue. At the end of the period, Hudson determines that $3,000 ofthe legal services have been rendered. The appropriate adjustingjournal entry to be made at the end of the period is:

		debit Unearned Service Revenue, $3,000; credit Cash, $3,000.
		debit Unearned Service Revenue, $3,000; credit Service Revenue,$3,000.
		debit Unearned Service Revenue, $2,500; credit Service Revenue,$2,500.
		debit Service Revenue, $2,500; credit Unearned Service Revenue,$2,500.

3 points

Question 19

Corresponds to CLO 4(c) Ace Corporation purchased officesupplies costing $13,000 and debited Office Supplies for the fullamount. At the end of the accounting period, a physical count ofoffice supplies revealed $2,700 still on hand. The appropriateadjusting journal entry to be made at the end of the period is:

		debit Office Supplies Expense, $10,300; credit Office Supplies,$10,300.
		debit Office Supplies, $10,300; credit Office Supplies Expense,$10,300.
		debit Office Supplies Expense, $2,700; credit Office Supplies,$2,700.
		debit Office Supplies, $2,700; credit Office Supplies Expense,$2,700.

3 points

Question 20

Corresponds to CLO 4(d) On September 1, Northgate paid $18,000to Evans Management Company for 12 months of rent beginning onSeptember 1. The appropriate journal entry was made to record thistransaction. If financial statements are prepared for the 9 monthsended September 30, the adjusting entry to be made by Northgateis:

		debit Rent Expense, $13,500; credit Prepaid Rent, $13,500.
		debit Prepaid Rent, $1,500; credit Rent Revenue, $1,500.
		debit Prepaid Rent, $1,500; credit Rent Expense, $1,500.
		debit Rent Expense, $1,500; credit Prepaid Rent, $1,500.

3 points

Question 21

Corresponds to CLO 5(a) Lennox Corporation purchased a newdelivery truck for 35,000. The sales taxes are $2,700. The logo ispainted on the side of the truck for $800. The truck's annuallicense is $200. Annual insurance on the truck is $1,300. Whatshould Lennox record as the cost of the new truck?

		$40,000
		$38,500
		$37,700
		$35,000

3 points

Question 22

Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporationpurchased equipment for $65,000. It is estimated that the equipmentwill have a $5,000 salvage value at the end of its 5 year usefullife. If Ballard uses the straight-line method of depreciation,what is the accumulated depreciation at December 31, 2013?

		$13,000
		$12,000
		$9,750
		$9,000

3 points

Question 23

Corresponds to CLO 5(c) Tyree Company purchased equipment with acost of $90,000 and an estimated salvage value of $18,000. Theequipment is expected to produce 150,000 units over its estimateduseful life of 10 years. If Tyree uses the units-of-activitymethod, what is the depreciation cost per unit to be used incalculating depreciation?

		$1.67
		$0.48
		$2.08
		$0.60

3 points

Question 24

Corresponds to CLO 5(d) Kerns Company purchased equipment with acost of $200,000 and an estimated salvage value of $10,000. Theequipment has an estimated useful life of 10 years. If Kerns usesthe double-declining balance method, what is the annualdepreciation rate to be used in calculating depreciation?

		5%
		10%
		20%
		40%

3 points

Question 25

Corresponds to CLO 6(a) Marshall Machinery made a sale for$150,000 on March 31. The customer is sent a statement on April 6and payment is received on April 15. Marshall prepares March'smonthly internal financial statements on April 20. Marshall followsGAAP and applies the revenue recognition principle. When is the$150,000 considered to be earned?

		March 31
		April 6
		April 15
		April 20

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MGAC02H3 Chapter Notes - Chapter 4: Income Statement, Trial Balance, Retained Earnings

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