Transcript Ch03 - Accounting

Chapter 3
Exercises
Adjusting Accounts and
Preparing Statements
Adjusting Entries
•
In-Class Exercises:
Exercise No.
3- 2
Page
120 Adjusting Entries
Adjusting Entries
For each of the following cases, prepare adjusting entries required for financial statements for
the year ended December 31, 2011. (Assume that prepaid expenses are initially recorded in
asset accounts and that fees collected in advance of work are initially recorded as liabilities.)
a. One-third of the work related to $30,000 cash, received in advance, is performed this period.
b. Wages of $9,000 are earned by workers but not paid as of December 31, 2011.
c. Depreciation on the company’s equipment for 2011 is $19,127.
d. The Office Supplies account had a $480 debit balance on December 31, 2010. During 2011,
$5,349 of office supplies are purchased. A physical count of supplies at December 31,
2011, shows $587 of supplies available.
e. The Prepaid Insurance account had a $5,000 balance on December 31, 2010. An analysis of
insurance policies shows that $2,200 of unexpired insurance benefits remain at December
31, 2011.
f. The company has earned (but not recorded) $750 of interest from investments in CDs for
the year ended December 31, 2011. The interest revenue will be received on Jan. 10, 2012.
g. The company has a bank loan and has incurred (but not recorded) interest expense of
$3,500 for the year ended December 31, 2011. The company must pay the interest on
January 2, 2012.
Adjusting Entries
Adjusting Entries
Beginning balance………….$ 480
Purchases…………………… 5,349
Total available…………….…$ 5,829
Less: Ending inventory…… (587)
Supplies consumed………...$ 5,242
Adjusting Entries
Beginning balance……………...$ 5,000
Less: Unexpired insurance…… (2,200)
Insurance expired……………….$ 2,800
Adjusting Entries
Adjusting Entries
•
In-Class Exercise:
Exercise No.
3- 6
Page
121 Adjusting & paying accrued wages
Adjusting Entries
Pablo Management has five part-time employees, each of whom earns
$100 per day. They are normally paid on Fridays for work completed
Monday through Friday of the same week. They were paid in full on
Friday, December 28, 2011. The next week, the five employees worked
only four days because New Year’s Day was an unpaid holiday.
(a) Prepare the adjusting entry that would be recorded on Monday,
December 31, 2011.
(b) Prepare the journal entry that would be made to record payment of
the employees’ wages on Friday, January 4, 2012
Adjusting Entries
5 workers x $100 x 1 day = $500
Adjusting Entries
Last Payday
S
23
30
M T
24 25
31 1
End of year
W
26
2
T
F
27 28
3 4
S.
29
5
New Year’s Holiday
Adjusting Entries
5 employees x $100 x 3 days = $1,500
Adjusting Entries