Need A Tutor?    |   Need Homework Help?                                                                             Help and Support     | Join or Cancel

On June 1, 2019, Cain Company, a new firm, paid $4,750 rent in advance for a five-month period.
The $4,750 was debited to the Prepaid Rent account.
 
On June 1, 2019, the firm bought supplies for $7,700. The $7,700 was debited to the Supplies account.
An inventory of supplies at the end of June showed that items costing $3,175 were on hand.
 
On June 1, 2019, the firm bought equipment costing $52,800. The equipment has an expected useful life of 8 years and no salvage value.
The firm will use the straight-line method of depreciation.
 
Prepare end-of-June adjusting entries for Cain Company
 
 
A firm purchased a three-year insurance policy for $5,760 on July 1, 2019. The $5,760 was debited to the Prepaid Insurance account.
On December 1, 2019, a firm signed a contract with a local radio station for advertising that will extend over a two-year period.
The firm paid $27,840 in advance and debited the amount to Prepaid Advertising.
 
Prepare end-of-month adjusting entries for each of the above situations.
 

   
On January 31, 2019, the general ledger of Palmer Company showed the following account balances.
 

ACCOUNTS
Cash	63,000
Accounts Receivable	22,500
Supplies	9,000
Prepaid Insurance	8,200
Equipment	91,500
Accum. Depr.—Equip.	0
Accounts Payable	16,700
Sadie Palmer, Capital	81,950
Fees Income	117,000
Depreciation Exp.—Equip.	0
Insurance Expense	0
Rent Expense	10,600
Salaries Expense	10,850
Supplies Expense	0

Additional information:
 
Supplies used during January totaled $5,700.
Expired insurance totaled $2,050.
Depreciation expense for the month was $1,825.

Complete the worksheet through the Adjusted Trial Balance section.
Assume that every account has the normal debit or credit balance. The worksheet covers the month of January.
 

   
Assume that a firm reports net income of $84,000 prior to making adjusting entries for the following items: expired rent,
$6,400; depreciation expense, $7,600; and supplies used, $3,000.
 
Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

   
Desoto Company must make three adjusting entries on December 31, 2019.
 
Supplies used, $10,100 (supplies totaling $16,200 were purchased on December 1, 2019, and debited to the Supplies account).
 
Expired insurance, $7,300; on December 1, 2019,
the firm paid $43,800 for six months’ insurance coverage in advance and debited Prepaid Insurance for this amount.
 
Depreciation expense for equipment, $4,900.

Required:
Prepare the journal entries for these adjustments and post the entries to the general ledger accounts
 

The trial balance of Neal Company as of January 31, 2019, after the company completed the first month of operations,
is shown in the partial worksheet below. 
 
Required:
Complete the worksheet by making the following adjustments: supplies on hand at the end of the month, $7,600; expired insurance,
$7,200; depreciation expense for the period, $3,300.
 
Analyze:
How does the insurance adjustment affect Prepaid Insurance?
 
Complete the worksheet by making the following adjustments: supplies on hand at the end of the month,
$7,600; expired insurance, $7,200; depreciation expense for the period, $3,300.
 

 
How does the insurance adjustment affect Prepaid Insurance?
 

   
Problem 5.2A Reconstructing a partial worksheet. LO 5-1, 5-2, 5-3
The adjusted trial balance of University Book Store as of November 30, 2019, after the firm’s first month of operations, appears below.

Appropriate adjustments have been made for the following items:
 
Supplies used during the month, $5,500.
Expired rent for the month, $6,700.
Depreciation expense for the month, $1,750.
 

UNIVERSITY BOOK STORE Adjusted Trial Balance November 30, 2019
Account Name		Debit			Credit
Cash	$	45,850
Accounts Receivable		7,324
Supplies		8,600
Prepaid Rent		40,200
Equipment		54,700
Accumulated Depreciation-Equipment				$	1,750
Accounts Payable					17,400
Ruby Darbandi, Capital					83,074
Ruby Darbandi, Drawing		7,400
Fees Income					93,170
Depreciation Expense-Equipment		1,750
Rent Expense		6,700
Salaries Expense		16,400
Supplies Expense		5,500
Utilities Expense		970
Totals	$	195,394		$	195,394

Required:
Record the adjusting entries in the Adjustments columns.
Complete the Trial Balance columns of the worksheet prior to making the adjusting entries.
 


Analyze: 
What was the balance of Prepaid Rent prior to the adjusting entry for expired rent?
 

 
   
Problem 5.3A Preparing financial statements from the worksheet. LO 5-4
The completed worksheet for Cantu Corporation as of December 31, 2019,
after the company had completed the first month of operation, appears below.
 

CANTU CORPORATION Worksheet Month Ended December 31, 2019
		Trial Balance						Adjustments						Adjusted Trial Balance						Income Statement						Balance Sheet
Account Name		Debit			Credit			Debit			Credit			Debit			Credit			Debit			Credit			Debit			Credit
Cash		77,600												77,600												77,600
Accounts Receivable		12,400												12,400												12,400
Supplies		10,900									6,400			4,500												4,500
Prepaid Advertising		16,800									2,800			14,000												14,000
Equipment		70,000												70,000												70,000
Accumulated Depreciation—Equipment											1,400						1,400												1,400
Accounts Payable					12,400												12,400												12,400
Selena Cantu, Capital					108,400												108,400												108,400
Selena Cantu, Drawing		7,600												7,600												7,600
Fees Income					93,900												93,900						93,900
Supplies Expense								6,400						6,400						6,400
Advertising Expense								2,800						2,800						2,800
Depreciation Expense-Equipment								1,400						1,400						1,400
Salaries Expense		17,200												17,200						17,200
Utilities Expense		2,200												2,200						2,200
Totals		214,700			214,700			10,600			10,600			216,100			216,100			30,000			93,900			186,100			122,200
Net Income																				63,900									63,900
																				93,900			93,900			186,100			186,100

Required:
 
Prepare an income statement.
Prepare a statement of owner’s equity. The owner made no additional investments during the month.
Prepare a balance sheet.
 
Req1

Req2

Req3


Analyze: 
If the adjustment to Prepaid Advertising had been $5,600 instead of $2,800, what net income would have resulted?
 

   
Paula Judge owns Judge Creative Designs. The trial balance of the firm for January 31, 2019, the first month of operations, is shown below.

End-of-the-month adjustments must account for the following items:
Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $700.
The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period.
Rent of $1,200 expired during the month.
Depreciation is computed using the straight-line method.  The equipment has an estimated useful life of 10 years with no salvage value.
 
Required:
Complete the worksheet for the month.
Prepare an income statement, statement of owner’s equity, and balance sheet.
No additional investments were made by the owner during the month.
Journalize and post the adjusting entries.
 

 

 
 

 

 
 

 

Analyze
If the adjusting entries had not been made for the month, would net income be overstated or understated?
 

   
A firm paid $9,000 for supplies during the accounting period. At the end of the accounting period, the firm
had $5,800 of supplies on hand. What adjustment is entered onto the worksheet?
 
Supplies Expense is debited for $3,200
Supplies is credited for $3,200
   
Paxton office supply company purchased equipment for $80,000. Depreciation Expense for the month is $1,600.
What is the balance of the equipment account after posting the depreciation entry?
 
$80,000
   
Three years ago, Overnight Delivery bought a delivery truck for $80,000. The truck has no salvage value and a 5-year
useful life. What is the book value of the truck at the end of three years?
 
$32,000
   
On January 1st, a firm paid $42,000 for six months' rent, January through June.
What is the adjustment for rent expense at the end of January?
 
Rent Expense is debited for $7,000 and Prepaid Rent is credited for $7,000
   
Generally accepted accounting principles require the

a.  cash basis of accounting.
b.  modified cash basis of accounting.
c.  accrual basis of accounting.
d.  adjusted basis of accounting.
   
As an accounting clerk for a landscaping company, you are required to prepare a 10-column work sheet
each month. You have extended the Adjusted Trial Balance columns to the Income Statement columns
and the Balance Sheet columns. The Income Statement Debit column total is $18,000, and the Income
Statement Credit column total is $24,600. After completing the work sheet, the Income Statement Debit
column total and the net income or net loss, respectively, are

a. $24,600; $18,000
b. $24,600; $6,600
c. $18,000; $24,600
d. There is not enough information provided.
   
How does the posting of adjusting entries to the general ledger differ from all other entries?

a. There is no difference. Adjusting entries are posted in the same manner as all other entries.
b. The only exception is that "Adjusting" is written in the Item column of the general ledger.
c. Posting references are not required for adjusting entries.
d. Adjusting entries are not posted to the general ledger.

 
The only exception is that "Adjusting" is written in the Item column of the general ledger.
Farmer Mac's Organic Produce had supplies costing $150 at the beginning of the month.
During the month, Mac purchased additional supplies costing $575. At the end of the month,
Mac counted his supplies which showed that supplies costing $225 were still unused.  
Which of the following is the correct general ledger balance for Supplies after the adjusting entries have been posted?

a. $150
b. $575
c. $225
d. $500
   
An error will occur if

a. net income is added to the Income Statement Debit column.
b. net income is added to the Income Statement Credit column.
c. net income is added to the Balance Sheet Credit column.
d. net loss is added to the Balance Sheet Debit column.
   
Which of the following statements about work sheets is true?

a. Work sheets are a formal part of the accounting system.
b. Work sheets are helpful in planning adjustments and financial statement preparation.
c. Work sheets are required to be prepared during the accounting process.
d. Work sheets are formal financial statements required by GAAP.
   
You are the accounting clerk for a plumber. You determine the expired insurance for the month to be $400.
The Trial Balance column for Prepaid Insurance shows a debit of $1,600. Which of the following will be
entered in the Adjusted Trial Balance columns for Prepaid Insurance?

a. $400 in the Adjusted Trial Balance Debit column
b. $1,200 in the Adjusted Trial Balance Credit column
c. $1,200 in the Adjusted Trial Balance Debit column
d. $400 in the Adjusted Trial Balance Credit column
   
Which of the following would most likely cause an error on the work sheet?

a. Extending the amount for Sales Revenue to the Income Statement Credit column
b. Extending the amount for Wages Expense to the Income Statement Debit column
c. Extending the amount for Sales Revenue to the Balance Sheet Credit column
d. Extending the amount for Wages Payable to the Balance Sheet Credit column
   
In April, Farmer Mac's Organic Produce purchased a delivery truck for $42,000 that is expected to last for six years.
The depreciable cost of the truck is $36,000. Which of the following is the adjusting journal entry to record the reduction
of the truck's value due to wear and tear in April?

a. Depreciation Expense—Truck6,000Accumulated Depreciation—Truck6,000
b. Accumulated Depreciation —Truck7,000Depreciation Expense—Truck7,000
c. Accumulated Depreciation —Truck6,000Depreciation Expense—Truck6,000
d. Depreciation Expense—Truck500Accumulated Depreciation—Truck500

 
Adjustments on the work sheet

a. are posted to the ledger but not journalized because they have been reported on the work sheet.
b. are journalized but not posted to the ledger so that the ledger account balances are not affected.
c. must be journalized and posted to the ledger so that the balance of the ledger accounts is updated.
d. do not need to be journalized.
b.
are journalized but not posted to the ledger so that the ledger account balances are not affected.
   
A net loss is indicated when the

a. income statement total credits exceed the income statement total debits.
b. balance sheet total debits exceed the income statement total credits.
c. balance sheet total credits exceed the balance sheet total debits.
d. income statement total debits exceed balance sheet total credits.
c.
balance sheet total credits exceed the balance sheet total debits.
   
Which of the following statements regarding receivables and payables is true?

a. Receivables and payables are recognized for revenues and operating expenses only under the modified cash basis of accounting.
b. Receivables and payables are recognized for revenues and operating expenses only under the accrual basis of accounting.
c. Receivables and payables are recognized for revenues and operating expenses only under the cash basis of accounting.
d. Receivables and payables are recognized for revenues and operating expenses only under the adjusted basis of accounting.
b.
Receivables and payables are recognized for revenues and operating expenses only under the accrual basis of accounting.
   
Depreciation is consistent with the

a. revenue recognition principle.
b. matching principle.
c. market value principle.
d. historical cost principle.
   
As assets are used, which of the following is recognized?

a. Book value
b. Liability
c. Revenue
d. Expense

 
To which of the following columns will the asset and drawing account balances be extended from the
Adjusted Trial Balance columns?

a. Balance Sheet Debit column
b. Balance Sheet Credit column
c. Income Statement Debit column
d. Income Statement Credit column
   
Farmer Mac's Organic Plants purchased a computer, printer paper, and ink on April 2. The computer
cost $1,200, the paper cost $20, and the ink cost $40. The computer is expected to last two years and
have no salvage value. At the end of the month, Farmer Mac received a bill for $150 for the setup and
installation of the computer that will be paid in May. The company determined it still has half of the ink
and paper. Under the accrual basis of accounting, which of the following amounts would Farmer
Mac report as expense for these items during the month of April?

a. $80
b. $230
c. $1,260
d. $1,410
   
Which of the following statements regarding journalizing adjusting entries is true?

a. Calculations for depreciation are required as an explanation for depreciation adjusting entries.
b. An explanation is required for all adjusting entries.
c. The notation "Adjusting Entry" is required after each adjusting entry.
d. No explanations are required for adjusting entries.
   
Assume the Trial Balance Debit column shows Prepaid Rent is $900, the Adjustments Credit column shows
Prepaid Rent is $300, the Adjusted Trial Balance Debit column shows Prepaid Rent is $1,200, and the Balance
Sheet Debit column shows Prepaid Rent is $1,200. Which of the following statements best describes the error
(if any) on the work sheet?

a. In the Income Statement Debit column, Prepaid Rent should be $1,200.
b. In the Adjusted Trial Balance Debit column, Prepaid Rent should be $600.
c. In the Balance Sheet Credit column, Prepaid Rent should be $1,200.
d. Based on the information provided, there is no error.
   
The adjusting entry to account for use of supplies consists of
 
a debit to Supplies Expense and a credit to Supplies
   
The adjusting entry to account for use of prepaid insurance consists of
 
a debit to Insurance Expense and a credit to Prepaid Insurance
   
The adjusting entry to account for use of prepaid advertising consists of
 
debit to Advertising Expense and a credit to Prepaid Advertising
   
On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to
 
the Income Statement Credit column
   
Which of the following statements is true?
 
the cost of supplies used represents an operating expense of the business
   
On a worksheet, the adjusted balance of the Prepaid Rent account is extended to the
 
Balance Sheet Debit column
   
Which of the following need not be completed separately if a worksheet is prepared
 
a trial balance
   
When a trial balance is in balance
 
the debit account balances equal the credit account balances
   
Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage value.
Under the straight line method, monthly depreciation would be
 
$600
   
On a worksheet the adjusting entry to account for depreciation of equipment consists of
 
a debit to depreciation expense and credit to accumulated depreciation
   
If the prepaid expenses are not adjusted, assets on the balance sheet
 
will be overstated
   
If long-term assets are not adjusted, expenses on the income statement
 
will be understated
   
On November 25, 2010, the company paid $24000 rent in advance for a six month period (Dec-May)
On December 31 the adjustment for expired rent would include
 
a $4000 credit to Prepaid Rent
   
All changes in account balances are caused by transactions between the business and another business or individual
 
False
   
Prepaid expenses, such as prepaid rent and prepaid insurance, represent assets for a business until they are used
 
True
   
Land is a long term asset that is not subject to depreciation
 
True
   
The statement of owners equity is prepared from the data in the Income Statement section of the worksheet
 
False
   
If adjustments are entered on a worksheet it is not necessary to record them in the journal or the ledger
 
False