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Chapter 3: Q 36PGA-2 (page 172)

The unadjusted trial balance of Guthrie Inn Company at December 31, 2018, and the data needed for the adjustments follow. Adjustment data at December 31 follow: GUTHRIE INN COMPANY Unadjusted Trial Balance December 31, 2018 Account Title Prepaid Insurance Cash Debit Credit Accounts Receivable Office Supplies Building Accumulated Depreciation—Building Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Insurance Expense Depreciation Expense—Building Advertising Expense Supplies Expense Total Balance \( 13,500 \) 569,760 \( 569,760 530,000 288,950 3,600 15,500 15,100 4,600 800 \) 260,000 1,710 2,340 2,800 620 G a. As of December 31, Guthrie had \(700 of Prepaid Insurance remaining. b. At the end of the month, Guthrie had \)500 of office supplies remaining. c. Depreciation on the building is \(1,200. d. Guthrie pays its employees weekly on Friday. Its employees earn \)1,800 for a five-day workweek. December 31 falls on Wednesday this year. e. On November 20, Guthrie contracted to perform services for a client receiving \(3,600 in advance. Guthrie recorded this receipt of cash as Unearned Revenue. As of December 31, Guthrie has \)1,600 still unearned. Requirements 1. Journalize the adjusting entries on December 31. 2. Using the unadjusted trial balance, open the accounts (use a four-column ledger) with the unadjusted balances. Post the adjusting entries to the ledger accounts. 3. Prepare the adjusted trial balance. 4. Assuming the adjusted trial balance has total debits equal to total credits, does this mean that the adjusting entries have been recorded correctly? Explain

Short Answer

Expert verified

T accounts are as follows:

Cash

$13,500

Bal.

$13,500

Accounts Receivable

$15,100

Bal.

$15,100

Office Supplies

$800

$300

(b)

Bal.

$500

Prepaid Insurance

$4,600

$3,900

(a)

Bal.

$700

Building

$530,000

Bal.

$530,000

Accumulated Depreciation- Equipment

$260,000

$1,200

(c)

$261,200

Bal.

Accounts Payable

$1,710

$1,710

Bal.

Salaries Payable

$1,080

(d)

$1,080

Bal.

Unearned Revenue

(e)

$2,000

$3,600

$1,600

Bal.

Common Stock

$288,950

$288,950

Bal.

Dividends

$2,340

Bal.

$2,340

Service Revenue

$15,500

$2,000

(e)

$17,500

Bal.

Salaries Expense

$2,800

(d)

$1,080

Bal.

$3,880

Insurance Expense

(a)

$3,900

Bal.

$3,900

Depreciation Expense-Building

(c)

$1,200

Bal.

$1,200

Advertising Expense

$620

Bal.

$620

Supplies Expense

(b)

$300

Bal,

$300

Step by step solution

01

Step-by-Step-SolutionStep 1: Explanation on T account

T account is prepared in the T style fortmat, which records the changes in the accounts.

02

Explanation on Adjusting Entries

Adjusting entries are the year end entries, which are recorded to record the accrued revenues and expenses for the period.

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Most popular questions from this chapter

Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)

The Pink Peonies Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,000 for 10 months of advertising. How much advertising expense should Pink Peonies Law Firm record for the two months ending February 28 under the a. cash basis? b. accrual basis?

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?

Refer to the data in Exercise E3-25, and prepare an adjusted trial balance.

Question :What is a deferred expense? Provide an example.
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