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Chapter 4: Q15SE (page 220)

Ocean Breeze Associates accrued \(8,500 of Service Revenue at December 31. Ocean Breeze Associates received \)14,500 on January 15, including the accrued revenue recorded on December 31. Requirements 1. Record the adjusting entry to accrue Service Revenue. 2. Record the reversing entry. 3. Journalize the cash receipt.

Short Answer

Expert verified

Journal entries are as follows:

Requirements

Accounts and Explanation

Debit

Credit

1

Accounts Receivable

$8,500

Service Revenue

$8,500

To record the accrued service revenue

2

Service Revenue

$8,500

Accounts Receivable

$8,500

To record reversing entry

3

Cash

$14,500

Service Revenue

$14,500

To record receipt of service revenue

Step by step solution

01

Explanation on Adjusting Entry

Adjusting entry will be recorded by debiting accounts receivable and crediting service revenue by $8,500, respectively.

02

Explanation on Reversing Entry

Reversing entry will be recorded by debiting service revenue and crediting accounts receivable by $8,500, respectively.

03

Explanation on Cash Receipt Entry

Cash receipt will be recorded by debiting cash and crediting service revenue by $14,500, respectively.

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Most popular questions from this chapter

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On December 1, Curt Wilson began an auto repair shop, Wilson’s Quality Automotive. The following transactions occurred during December: Dec. 1 Wilson contributed \(63,000 cash to the business in exchange for shares of common stock. 1 Purchased \)14,400 of equipment paying cash. 1 Paid \(3,600 for a twelve-month insurance policy starting on December 1. 9 Paid \)15,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, \(2,200. 19 Borrowed \)24,000 from the bank for business use. Wilson signed a notes payable to the bank in the name of the corporation. The note is due in five years. 22 Paid \(2,000 for advertising expenses. 26 Paid \)1,000 on account. 28 The business received a bill for utilities to be paid in January, \(260. 31 Revenues earned during the month included \)18,500 cash and \(3,800 on account. 31 Paid employees’ salaries \)3,900 and building rent \(800. Record as a compound entry. 31 The business received \)1,380 for auto screening services to be performed next month. 31 Paid cash dividends of \(5,000 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, \)600. b. Depreciation for the month, \(240. c. One month insurance has expired. d. Accrued Interest Expense, \)120. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance. 6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.

This comprehensive problem is a continuation of Comprehensive Problem 1. Murphy Delivery Service has completed closing entries and the accounting cycle for 2018. The business is now ready to record January 2019 transactions. Jan. 3 Collected \(200 cash from customer on account. 5 Purchased office supplies on account, \)1,000. 12 Performed delivery services for a customer and received \(3,000 cash. 15 Paid employee salary, including the amount owed on December 31, \)4,100. 18 Performed delivery services on account, \(1,350. 20 Paid \)300 on account. 24 Purchased fuel for the truck, paying \(200 cash. 27 Completed the remaining work due for Unearned Revenue. 28 Paid office rent, \)2,200, for the month of January. 30 Collected \(3,000 in advance for delivery service to be performed later. 31 Cash dividends of \)1,500 were paid to stockholders. Requirements 1. Record each January transaction in the journal. Explanations are not required. 2. Post the transactions in the T-accounts. Don’t forget to use the December 31, 2018, ending balances as appropriate. 3. Prepare an unadjusted trial balance as of January 31, 2019. 4. Prepare a worksheet as of January 31, 2019 (optional). 5. Journalize the adjusting entries using the following adjustment data and also by reviewing the journal entries prepared in Requirement 1. Post adjusting entries to the T-accounts. CHAPTER 4 246 chapter 4 Adjustment data: a. Office Supplies on hand, \(600. b. Accrued Service Revenue, \)1,800. c. Accrued Salaries Expense, $500. d. Prepaid Insurance for the month has expired. e. Depreciation was recorded on the truck for the month. 6. Prepare an adjusted trial balance as of January 31, 2019. 7. Prepare Murphy Delivery Service’s income statement and statement of retained earnings for the month ended January 31, 2019, and the classified balance sheet on that date. On the income statement, list expenses in decreasing order by amount—that is, the largest expense first, the smallest expense last. 8. Calculate the following ratios as of January 31, 2019, for Murphy Delivery Service: return on assets, debt ratio, and current ratio.
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