Chapter 03 Saddleback College Homework
Exercise 3-1 Preparing adjusting entries LO P1
| a. | Depreciation on the company’s equipment for 2013 is computed to be $18,000. |
| b. | The Prepaid Insurance account had a $6,000 debit balance at December 31, 2013, before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,100 of unexpired insurance coverage remains. |
| c. | The Office Supplies account had a $700 debit balance on December 31, 2012; and $3,480 of office supplies were purchased during the year. The December 31, 2013, physical count showed $298 of supplies available. |
| d. | Two-thirds of the work related to $15,000 of cash received in advance was performed this period. |
| e. | The Prepaid Insurance account had a $6,800 debit balance at December 31, 2013, before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $5,800 of coverage had expired. |
| f. | Wage expenses of $3,200 have been incurred but are not paid as of December 31, 2013. |
| Prepare adjusting journal entries for the year ended (date of) December 31, 2013, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities. |
Exercise 3-3 Adjusting and paying accrued wages LO C1, P1
| Pablo Management has five part-time employees, each of whom earns $250 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, 2013. 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, 2013. |
| b. | Prepare the journal entry that would be made to record payment of the employees’ wages on Friday, January 4, 2014. |
Exercise 3-4 Adjusting and paying accrued expenses LO A1
| a. | On April 1, the company retained an attorney for a flat monthly fee of $3,500. Payment for April legal services was made by the company on May 12. |
| b. | A $1,080,000 note payable requires 10% annual interest, or $9,000 to be paid at the 20th day of each month. The interest was last paid on April 20 and the next payment is due on May 20. As of April 30, $3,000 of interest expense has accrued. |
| c. | Total weekly salaries expense for all employees is $10,000. This amount is paid at the end of the day on Friday of each five-day workweek. April 30 falls on Tuesday of this year, which means that the employees had worked two days since the last payday. The next payday is May 3. |
| The above three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses. (Use 360 days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount.) |
| Problem 3-1A Identifying adjusting entries with explanations LO P1For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.) A. To record receipt of unearned revenue.B. To record this period’s earning of prior unearned revenue.C. To record payment of an accrued expense.D. To record receipt of an accrued revenue.E. To record an accrued expense.F. To record an accrued revenue.G. To record this period’s use of a prepaid expense.H. To record payment of a prepaid expense.I. To record this period’s depreciation expense.Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3[The following information applies to the questions displayed below.] Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2013, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2013, follow. Additional Information Items a.An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired.b.An inventory count shows that teaching supplies costing $2,800 are available at year-end 2013.c.Annual depreciation on the equipment is $13,200.d.Annual depreciation on the professional library is $7,200.e.On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,500, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2014.f.On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI’s accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)g.WTI’s two employees are paid weekly. As of the end of the year, two days’ salaries have accrued at the rate of $100 per day for each employee.h.The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2013 Debit Credit Cash$34,000 Accounts receivable 0 Teaching supplies 8,000 Prepaid insurance 12,000 Prepaid rent 3,000 Professional library 35,000 Accumulated depreciation—Professional library $10,000 Equipment 80,000 Accumulated depreciation—Equipment 15,000 Accounts payable 26,000 Salaries payable 0 Unearned training fees 12,500 Common stock 10,000 Retained earnings 80,000 Dividends 50,000 Tuition fees earned 123,900 Training fees earned 40,000 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 50,000 Insurance expense 0 Rent expense 33,000 Teaching supplies expense 0 Advertising expense 6,000 Utilities expense 6,400 Totals$317,400 $317,400 Problem 3-3A Part 11.Prepare the necessary adjusting journal entries for items a through h.Problem 3-3A Part 22.1Post the balance from the unadjusted trial balance and the adjusting entries to the T-accounts 2.2Prepare an adjusted trial balance.Problem 3-3A Part 33.1Prepare Wells Technical Institute’s income statement for the year 2013. Problem 3-8A Preparing closing entries, financial statements, and ratios C4 A2 A3 P3 P4The adjusted trial balance for Tybalt Construction as of December 31, 2013, follows. TYBALT CONSTRUCTION Adjusted Trial Balance December 31, 2013 No.Account TitleDebitCredit101 Cash $5,000 104 Short-term investments 23,000 126 Supplies 8,100 128 Prepaid insurance 7,000 167 Equipment 40,000 168 Accumulated depreciation—Equipment $20,000 173 Building 150,000 174 Accumulated depreciation—Building 50,000 183 Land 55,000 201 Accounts payable 16,500 203 Interest payable 2,500 208 Rent payable 3,500 210 Wages payable 2,500 213 Property taxes payable 900 233 Unearned professional fees 7,500 251 Long-term notes payable 67,000 307 Common stock 5,000 318 Retained earnings 121,400 319 Dividends 13,000 401 Professional fees earned 97,000 406 Rent earned 14,000 407 Dividends earned 2,000 409 Interest earned 2,100 606 Depreciation expense—Building 11,000 612 Depreciation expense—Equipment 6,000 623 Wages expense 32,000 633 Interest expense 5,100 637 Insurance expense 10,000 640 Rent expense 13,400 652 Supplies expense 7,400 682 Postage expense 4,200 683 Property taxes expense 5,000 684 Repairs expense 8,900 688 Telephone expense 3,200 690 Utilities expense 4,600 Totals $411,900 $411,900 O. Tybalt invested $5,000 cash in the business in exchange for more common stock during year 2013 (the December 31, 2012, credit balance of retained earnings was $121,400). Tybalt Construction is required to make a $7,000 payment on its long-term notes payable during 2014. Required:1.1Prepare the income statement for the calendar year 2013 |
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