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Chapter 3: 24E_2 (page 164)

Question :The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation—Equipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense—Equipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.

Short Answer

Expert verified

Adjusting entries are as follows:

Journal entry

Transactions

Accounts and Explanation

Debit

Credit

(a)

Accounts Receivable

$700

Service Revenue

$700

To record service revenue accrued

(b)

Unearned Revenue

$100

Service Revenue

$100

To record service revenue earned

(c)

Supplies Expense

$400

Office Supplies

$400

To record office supplies used

(d)

Salaries Expense

$200

Salaries Payable

$200

To record accrued salaries expense

(e)

Insurance Expense

$560

Prepaid Rent

$560

To record insurance expense

(f)

Depreciation Expense—Equipment

$120

Accumulated Depreciation—Equipment

$120

To record depreciation on equipment

Step by step solution

01

Step-by-Step-SolutionStep1: Explanation on Adjusting Entries

Adjustries entries are used to record the accrued revenues and expenses at the end of the period.

02

Explanation on Adjusted Trial Balance

After the adjusting entries are recorded, it is posted into the ledger account, then the balance of these account is used to prepare adjusted trial balance.

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Most popular questions from this chapter

Question :At the end of June, Gerber Dental had performed $9,000 of dental services but has not yet billed customers. Record the adjusting entry for accrued revenue.

Question:Seth’s Tax Services had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances.Cash Land Accounts Payable Utilities Payable Accumulated Depreciation—Equipment Service Revenue Supplies Expense Dividends \( ? 26,000 150 3,700 1,800 75,000 1,100 14,000 Equipment Accounts Receivable Common Stock Office Supplies Utilities Expense Unearned Revenue Depreciation Expense—Equipment Salaries Expense \) 11,000 4,950 700 22,600 1,650 900 1,900 5,600Prepare the adjusted trial balance for Seth’s Tax Services as of December 31, 2018.

What are the two rules to remember about adjusting entries?

Question :Chef ’s Catering completed the following selected transactions during May 2018: Learning Objectives 1, 2 Learning Objectives 1, 2 > Exercises May 1 Prepaid rent for three months, \(2,400. 5 Received and paid electricity bill, \)700. 9 Received cash for meals served to customers, \(2,600. 14 Paid cash for kitchen equipment, \)3,000. 23 Served a banquet on account, \(2,800. 31 Made the adjusting entry for rent (from May 1). 31 Accrued salary expense, \)1,600. 31 Recorded depreciation for May on kitchen equipment, \(50. Date May 1 \)(2,400) $0 Cash Basis Amount of Revenue (Expense) Accrual Basis Amount of Revenue (Expense) Amount of Revenue (Expense) for May Requirements 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the following table. (Expenses should be shown in parentheses.) Also, indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. 2. After completing the table, calculate the amount of net income or net loss for Chef ’s Catering under the accrual basis and cash basis accounting systems for May. 3. Considering your results from Requirement 2, which method gives the best picture of the true earnings of Chef ’s Catering? Why?

When are adjusting entries completed, and what is their purpose?

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