Chapter 3: Q8E (page 78)

E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees $1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the billwould be approximately $600.3. On August 1, Roddick borrowed $30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of $117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.

Expert verified

Journal entries are shown in step 2.

Step by step solution

The adjusting journal entry means the unrecognized transactions are recorded in the books of accounts at the end of the accounting period.

Ace Computer Services
Adjusting Journal entries on August 31, 2017
Date	Account and explanation	Debit $	Credit $
August 31	Wages expense	1900
	Wages payable		1900
	(To wages payable recorded)

August 31	Utilities expenses	600
	Accounts payable		600
	(To utility expenses recorded )

August 31	Interest expenses (refer working note)	200
	Interest paayble		200
	(To interest is paid on the borrowed money from the bank)

August 31	Telephone expenses	117
	telephone payable		117
	(To telephone expenses payable recorded)

Working note:

Calculation of interest amount per month

\begin{matrix} Interest amount permonth = $ 30, 000 \times \frac{8}{100} \\ = \frac{$ 2, 400 peryear}{12} \\ = $ 200 \end{matrix}

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ANDERSON COOPER CO. ADJUSTED TRIAL BALANCE DECEMBER 31, 2017
	Dr.	Cr
Cash	\(19,472
Accounts Receivable	6,920
Prepaid Rent	2,280
Equipment	18,050
Accumulated Depreciation—Equipment		\) 4,895
Notes Payable		5,700
Accounts Payable		5,472
Common Stock		20,000
Retained Earnings		11,310
Dividend	3,000
Service Revenue		11,590
Salaries and Wages Expense	6,840
Rent Expense	2,260
Depreciation Expense	145
Interest Expense	83
Interest Payable		83
	\(59,050	\)59,050

COOKE COMPANY Worksheet For The Month Ended September 30, 2017
	Trial Balance		Adjusted Trial Balance
Account Titles	Dr.	Cr.	Dr.	Cr.
Cash	37,400		37,400
Supplies	18,600		4,200
Prepaid Insurance	31,900		3,900
Land	80,000		80,000
Equipment	120,000		120,000
Accumulated Depreciation—Equipment		36,200		42,000
Accounts Payable		14,600		14,600
Unearned Service Revenue		2,700		700
Mortgage Payable		50,000		50,000
Common Stock		107,700		107,700
Retained Earnings, Sept. 1, 2017		2,000		2,000
Dividends	14,000		14,000
Service Revenue		278,500		280,500
Salaries and Wages Expense	109,000		109,000
Maintenance and Repairs Expense	30,500		30,500
Advertising Expense	9,400		9,400
Utilities Expenses	16,900		16,900
Property Tax Expense	18,000		21,000
Interest Expense	6,000		12,000
Totals	491,700	491,700
Insurance Expense			28,000
Supplies Expense			14,400
Interest Payable				6,000
Depreciation Expense			5,800
Property Taxes Payable				3,000
Totals			506,500	506,500