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Chapter 4: Q34PSA (page 235)

The unadjusted trial balance and adjustment data of Martha’s Motors at December 31, 2018, follow: Adjustment data at December 31, 2018: a. Depreciation on equipment, \(2,100. b. Accrued Wages Expense, \)1,100. c. Office Supplies on hand, \(500. d. Prepaid Insurance expired during December, \)600. e. Unearned Revenue earned during December, \(4,800. f. Accrued Service Revenue, \)1,300. 2019 transactions: a. On January 4, Martha’s Motors paid wages of \(1,900. Of this, \)1,100 related to the accrued wages recorded on December 31. b. On January 10, Martha’s Motors received \(1,500 for Service Revenue. Of this, \)1,300 is related to the accrued Service Revenue recorded on December 31. Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Unearned Revenue Common Stock Dividends Service Revenue Depreciation Expense—Equipment Wages Expense Insurance Expense Utilities Expense Balance \( 4,200 \) 93,200 \( 93,200 15,000 \) 34,600 52,400 7,900 3,100 18,500 17,200 1,600 27,200 1,000 2,400 1,300 Supplies Expense Total Requirements 1. Journalize adjusting entries. 2. Journalize reversing entries for the appropriate adjusting entries. 3. Refer to the 2019 data. Journalize the cash payment and the cash receipt that occurred in 2019.

Short Answer

Expert verified

(1) Adjusting entries are mentioned in Step 1.

(2) Reversing entries are mentioned in Step 2.

(3) Journal entries are mentioned in Step 3.

Step by step solution

01

Step-by-Step-SolutionStep 1: Adjusting entries

Adjusting entries are as follows:

Date

Accounts and Explanation

Debit

Credit

(a)

Dec. 31, 2018

Depreciation Expense-Equipment

$2,100

Accumulated Depreciation—Equipment

$2,100

To record depreciation on equipment

(b)

Dec. 31, 2018

Wages Expense

$1,100

Wages Payable

$1,100

To record accrued wages expense

(c)

Dec. 31, 2018

Supplies Expense

$500

Office Supplies

$500

To record supplies expense

($1,000-$500)

(d)

Dec. 31, 2018

Insurance Expense

$600

Prepaid Insurance

$600

To record expired insurance expense

(e)

Dec. 31, 2018

Unearned Revenue

$4,800

Service Revenue

$4,800

To record earned service revenue

(f)

Dec. 31, 2018

Accounts Receivable

$1,300

Service Revenue

$1,300

To record accrued service revenue

02

Reversing entries

Reversing entries are as follows:

Date

Accounts and Explanation

Debit

Credit

(a)

Jan. 1, 2019

Wages Payable

$1,100

Wages Expense

$1,100

To reverse the wages adjusting entry.

(b)

Jan. 1, 2019

Service Revenue

$1,300

Accounts Receivable

$1,300

To reverse the accrued revenue adjusting entry.

03

Journal entries

Journal entries are as follows:

Date

Accounts and Explanation

Debit

Credit

(a)

Jan. 4, 2019

Wages Expense

$1,900

Cash

$1,900

To record payment of wages.

(b)

Jan. 10, 2019

Cash

$1,500

Service Revenue

$1,500

To record receipt of service revenue

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Most popular questions from this chapter

What document are financial statements prepared from?

What does the balance sheet report?

For each account listed, identify whether the account would appear in either the income statement section or the balance sheet section of the worksheet. Assuming normal balances, identify if the account would be recorded in the debit (DR) or credit (CR)

column.

10. Cash

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.

Murphy Delivery Service completed the following transactions during December 2018: Dec. 1 Murphy Delivery Service began operations by receiving \(13,000 cash and a truck with a fair value of \)9,000 from Russ Murphy. The business issued Murphy shares of common stock in exchange for this contribution. 1 Paid \(600 cash for a six-month insurance policy. The policy begins December 1. 4 Paid \)750 cash for office supplies. 12 Performed delivery services for a customer and received \(2,200 cash. 15 Completed a large delivery job, billed the customer, \)3,300, and received a promise to collect the \(3,300 within one week. 18 Paid employee salary, \)800. 20 Received \(7,000 cash for performing delivery services. 22 Collected \)2,200 in advance for delivery service to be performed later. 25 Collected \(3,300 cash from customer on account. 27 Purchased fuel for the truck, paying \)150 on account. (Credit Accounts Payable) 28 Performed delivery services on account, \(1,400. 29 Paid office rent, \)1,400, for the month of December. 30 Paid \(150 on account. 31 Cash dividends of \)2,500 were paid to stockholders. Requirements

1. Record each transaction in the journal using the following chart of accounts. Explanations are not required. Cash Retained Earnings Accounts Receivable Dividends Office Supplies Income Summary Prepaid Insurance Service Revenue Truck Salaries Expense Accumulated Depreciation—Truck Depreciation Expense—Truck Accounts Payable Insurance Expense Salaries Payable Fuel Expense Unearned Revenue Rent Expense Common Stock Supplies Expense

2. Post the transactions in the T-accounts.

3. Prepare an unadjusted trial balance as of December 31, 2018.

4. Prepare a worksheet as of December 31, 2018 (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 Completing the Accounting Cycle 245 Adjustment data: a. Accrued Salaries Expense, \(800. b. Depreciation was recorded on the truck using the straight-line method. Assume a useful life of five years and a salvage value of \)3,000. c. Prepaid Insurance for the month has expired. d. Office Supplies on hand, \(450. e. Unearned Revenue earned during the month, \)700. f. Accrued Service Revenue, $450.

6. Prepare an adjusted trial balance as of December 31, 2018.

7. Prepare Murphy Delivery Service’s income statement and statement of retained earnings for the month ended December 31, 2018, 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. Journalize the closing entries, and post to the T-accounts.

9. Prepare a post-closing trial balance as of December 31, 2018.
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