Question 1
The Red Roses Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $
800$800 for four months of advertising.
How much advertising expense should Red Roses Law Firm record for the two months ending February
28 under the
a. cash basis?
b. accrual basis?
a. Under the cash basis, Red Roses Law Firm will record $
two months ending February 28.
b. Under the accrual basis, Red Roses Law Firm will record $
for the two months ending February 28.
of advertising expense for the
of advertising expense
Question 2
Momentous Occasions is a photography business that shoots videos at college parties. The freshman
class pays $1,000 in advance on March 3 to guarantee services for its party to be held on April 2. The
sophomore class promises a minimum of $2,800 for filming its formal dance and actually pays cash of
$4,100 on February 28 at the dance.
Answer the following questions about the correct way to account for revenue under the accrual basis:
a. Considering the $1,000 paid by the freshman class, on what date was revenue earned? Did the
earnings occur on the same date cash was received?
b. Considering the $4,100 paid by the sophomore class, on what date was revenue earned? Did the
earnings occur on the same date cash was received?
a. Considering the $1,000 paid by the freshman class, the revenue was earned ?
The earnings ? occur on the same date cash was received.
b. Considering the $4,100 paid by the sophomore class, the revenue was earned ?
on April 2.
on December 31.
on February 28.
on March 3.
The earnings
?
Did
did not
occur on the same date cash was received.
Question 3
The unadjusted trial balance of Aurora Air Purification System Aurora Air Purification System at
December 31, 20162016, and the data needed for the adjustments follow.
(Click the icon to view the trial balance.)
Aurora Air Purification System
Unadjusted Trial Balance
31-Dec-16
Balance
Debit
$7,800
19,800
2,600
1,100
19,900
Account Title
Cash
Accounts Receivable
Prepaid Rent
Office Supplies
Equipment
Accumulated
Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Aurora, Capital
Aurora, Withdrawals
9,300
Service Revenue
Salaries Expense
3,100
Rent Expense
Depreciation Expense—Equipment
Advertising Expense
1,300
Supplies Expense
Total
$64,900
(Click the icon to view the adjusting entry information.)
Adjustment data at December 31 follow:
Credit
$4,100
3,000
2,800
39,600
15,400
$64,900
a. On December 15, Aurora contracted to perform services for a client receiving $2,800 in advance.
Aurora recorded this receipt of cash as Unearned Revenue. As of December 31, Aurora has completed
$1,800 of the services.
b. Aurora prepaid two months of rent on December 1.
c. Aurora used $600 of office supplies.
d. Depreciation for the equipment is $700.
e. Aurora received a bill for December’s online advertising, $1,000. Aurora will not pay the bill until
January. (Use Accounts Payable.)
f. Aurora pays its employees on Monday for the previous week’s wages. Its employees earn $1,500 for a
five-day workweek. December 31 falls on Wednesday this year.
g. On October 1, Aurora agreed to provide a four-month air system check (beginning October 1) for a
customer for $3,000. Aurora has completed the system check every month but payment has not yet
been received and no entries have been made.
Requirements
1. Journalize the adjusting entries on December 31.
2. The T-accounts, along with their unadjusted balances have been opened for you. Post the adjusting
entries to the T-accounts.
3. Prepare the adjusted trial balance.
4. How will Aurora Air Purification System Aurora Air Purification System use the adjusted trial balance?
Requirement 1.
Journalize the adjusting entries on December 31. (Record debits first, then credits. Select the explanation
on the last line of the journal entry table.)
a. On December 15, Aurora contracted to perform services for a client receiving $2,800 in advance.
Aurora recorded this receipt of cash as Unearned Revenue. As of December 31, Aurora has
completed $1,800 of the services.
Dat
e
(a) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
b. Aurora prepaid two months of rent on December 1. (Assume that the Prepaid Rent balance as
shown on the unadjusted trial balance represents the two months of rent prepaid on December
1.)
Dat
e
(b) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
c. Aurora used $ 600$600 of office supplies.
Dat
e
(c) Dec. 31
d. Depreciation for the equipment is $ 700.
Dat
e
(d) Dec. 31
e. Aurora received a bill for December’s online advertising, $1,000.Aurora will not pay the bill until
January. (Use Accounts Payable.)
Dat
e
Accounts
and
Debi
t
Credit
(e) Dec. 31
Explanatio
n
0
0
0
0
0
f. Aurora pays its employees on Monday for the previous week’s wages. Its employees earn $1,500 for a
five-day workweek. December 31 falls on Wednesday this year
Dat
e
(f) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
g. On October 1, Aurora agreed to provide a four-month air system check (beginning October 1) for a
customer for $3,000. Aurora has completed the system check every month but payment has not yet
been received and no entries have been made.
Dat
e
(g) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debi
t
Credit
Requirement 2.
The T-accounts, along with their unadjusted balances have been opened for you. Post the adjusting
entries to the T-accounts.
The T-accounts, along with their unadjusted balances, if applicable, have been opened for you. Post the
adjusting entries to the T-accounts using the corresponding letters (a) through (g) as posting references.
Use a "Bal." posting reference to show the ending balance of each account.
Review the adjusting journal entries you prepared in Requirement 1.
Requirement 3. Prepare the adjusted trial balance.
Review the T-accounts you prepared in Requirement 2.
Aurora Air Purification System
Adjusted Trial Balance
31-Dec-16
Balance
Debit
Account
Credit
Title
Cash
Accounts Receivable
Prepaid Rent
Office Supplies
Equipment
Accumulated Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Aurora, Capital
Aurora, Withdrawals
Service Revenue
Salaries Expense
Rent Expense
Depreciation ExpenseEquipment
Advertising Expense
Supplies Expense
Total
Requirement 4. How will Aurora Air Purification System aurora Air Purification System use the adjusted
trial balance?
The company will use the adjusted trial balance to
?
calculate taxes due
plan the next year’s budget
prepare financial statements
report net income or loss
Question 5
Stewart Fishing Charters has collected the following data for the December 31 adjusting entries:
(Click the icon to view the data.)
a. The company received its electric bill on December 20 for $230 but will not pay it until January 5. (Use
the Utilities Payable account.)
b. Stewart purchased a three-month boat insurance policy on November 1 for $2,100. Stewart recorded
a debit to Prepaid Insurance.
c. As of December 31, Stewart had earned $2,500 of charter revenue that has not been recorded or
received.
d. Stewart’s fishing boat was purchased on January 1 at a cost of $81,500. Stewart expects to use the
boat for five years and that it will have a residual value of $6,500. Determine annual depreciation
assuming the straight-line depreciation method is used.
e. On October 1, Stewart received $6,000 prepayment for a deep-sea fishing charter to take place in
December. As of December 31, Stewart has completed the charter.
Requirements
1.
Journalize the adjusting entries needed on December 31 for Stewart Fishing Charters. Assume Stewart
records adjusting entries only at the end of the year.
2. If Stewart had not recorded the adjusting entries, indicate which specific category of accounts on the
financial statements would be misstated and if the misstatement is overstated or understated.
Requirement 1. Journalize the adjusting entries needed on December 31 for Stewart Fishing Charters.
Assume Stewart records adjusting entries only at the end of the year. (Record debits first, then credits.
Select the explanation on the last line of the journal entry table.)
a. The company received its electric bill on December 20 for $230 but will not pay it until January 5.
(Use the Utilities Payable account.)
Date
(a) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
b. Stewart purchased a three-month boat insurance policy on November $2,100. Stewart recorded
a debit to Prepaid Insurance.
Date
(b) Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
c. As of December 31, Stewart had earned $2,500 of charter revenue that has not been recorded or
received.
Date
(c) Dec. 31
Accounts
and
Explanatio
n
0
0
Debit
Credit
0
0
0
d. Stewart’s fishing boat was purchased on January 1 at a cost of $81,500. Stewart expects to use the
boat for five years and that it will have a residual value of $6,500. Determine annual depreciation
assuming the straight-line depreciation method is used.
Date
Accounts
and
Explanatio
n
0
0
0
0
0
(d) Dec. 31
Debit
Credit
e. On October 1, Stewart received $6,000 prepayment for a deep-sea fishing charter to take place in
December. As of December 31, Stewart has completed the charter. (When the cash was received,
assume that a liability account was credited.)
Date
Accounts
and
Explanatio
n
0
0
0
0
0
(e) Dec. 31
Debit
Credit
Requirement 2.
If Stewart had not recorded the adjusting entries, indicate which specific category of accounts on the
financial statements would be misstated and if the misstatement is overstated or understated.
Begin by completing the table for adjustment an and then transactions b through e.
Adjustin
g
Entry
Specific Category of
Accounts on
Over /
the
Balance Sheet Understated
(a)
0
0
Specific Category
of Accounts on
the
Income
Statement
0
Ove
r/
Understated
0
0
(b)
(c)
(d)
(e)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Question 6
The worksheet of Moore’s Landscaping Services follows but is incomplete.
(Click the icon to view the worksheet.)
Moore’s Landscaping
Services
Worksheet
31-Dec-16
Unadjusted
Trial Balance
Debit
Credit
$27,500
6,600
Account Names
Cash
Accounts
Receivable
Office Supplies
520
Prepaid Rent
2,900
Equipment
55,000
Accumulated Depreciation—Equipment
Trucks
60,000
Accumulated Depreciation—Trucks
Accounts Payable
$4,100
Utilities Payable
750
Salaries Payable
Interest Payable
Unearned Revenue
5,000
Notes Payable
30,000
Moore, Capital
76,670
Moore,
12,000
Withdrawals
Service Revenue
90,000
Rent Expense
11,600
Salaries Expense 25,600
Adjustments
Debit
(h)
Adju
Trial
Deb
Credit
$2,500
(e)
3,500
(a)
(f)
1,450
5,000
(b)
(a)
$380
1,450
(c)
900
(d)
1,000
(f)
(g)
5,000
150
(e, h)
6,000
Supplies Expense
Utilities Expense 4,800
Depreciation Expense—Equipment
Depreciation Expense—Trucks
Interest Expense
Total
$206,52 $206,52
0
0
(b)
380
(c)
(d)
(g)
$14,880
900
1,000
150
$14,880
Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns.
Question 7
At the beginning of the year, office supplies of $1,400 were on hand. During the year, Sprint Air
Conditioning Service paid $6,500 for more office supplies. At the end of the year, Sprint has $500 of
office supplies on hand.
Read the requirements
1. Record the adjusting entry assuming that Sprint records the purchase of office supplies by initially
debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies Expense Taccounts. Make sure to include the beginning balance and purchase of office supplies in the Office
Supplies T-account.
2. Record the adjusting entry assuming that Sprint records the purchase of office supplies by initially
debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies Expense Taccounts. Make sure to include the beginning balance in the Office Supplies T-account, and the purchase
of office supplies in the Supplies Expense T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
Requirement 1. Record the adjusting entry assuming that Sprint records the purchase of office supplies
by initially debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies
Expense T-accounts. Make sure to include the beginning balance and purchase of office supplies in the
Office Supplies T-account.
Begin by recording the adjusting entry assuming that Sprint records office supplies by initially debiting an
asset account. (Record debits first, then credits. Select the explanation on the last line of the journal
entry.)
Date
Accounts
and
Explanatio
n
0
0
Debit
Credit
0
0
0
Now post the adjusting entry to the Office Supplies and Supplies Expense T-accounts.
Enter the beginning balances on the first line of each account. Use a "Jan. 1" reference to show the
beginning balance. Make sure to include the purchase of office supplies in the Office Supplies T-account,
then post the adjusting entry. Use a "Bal." reference to show the ending balance of each account. (For
accounts with a $0 unadjusted balance, make sure to enter "0" on the normal side of the accounts.)
Office
Supplies
0
0
0
0
Supplies Expense
0
0
0
0
0
0
0
0
Requirement 2. Record the adjusting entry assuming that Sprint records the purchase of office supplies
by initially debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies
Expense T-accounts. Make sure to include the beginning balance in the Office Supplies T-account, and
the purchase of office supplies in the Supplies Expense T-account.
Begin by recording the adjusting entry assuming that Sprint records office supplies by initially debiting an
expense account. (Record debits first, then credits. Select the explanation on the last line of the journal
entry.)
Date
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
Now post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to
include the beginning balance in the Office Supplies T-account, and the purchase of office supplies in the
Supplies Expense T-account.
Enter the beginning balances on the first line of each account. Use a "Jan. 1" reference to show the
beginning balance. Make sure to include the purchase of office supplies in the Office Supplies T-account,
then post the adjusting entry. Use a "Bal." reference to show the ending balance of each account. (For
accounts with a $0 unadjusted balance, make sure to enter "0" on the normal side of the accounts.)
Office
Supplies
0
0
0
0
Supplies Expense
0
0
0
0
0
0
0
0
Requirement 3. Compare the ending balances of the T-accounts under both approaches. Are they the
same?
The ending balances in the Office Supplies account and the Supplies Expense account are
?
different,
the same,
??
?
depending on
regardless of
which of the two approaches is used.
Question8
Company has journalized the adjusting entries for the period ending December 31, 2016, and posted the
adjustments to the following T-accounts.
(Click the icon to view the T-accounts.)
Using this data, prepare an adjusted trial balance.
First Class Maids
Company
Adjusted Trial Balance
31-Dec-16
Balance
Debit
Account
Credit
Title
Cash
Office Supplies
Prepaid Insurance
Equipment
Accumulated Depreciation—Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Maltos, Capital
Maltos, Withdrawals
Service Revenue
Salaries Expense
Supplies Expense
Depreciation Expense—Equipment
Insurance Expense
Total
Question 10
The worksheet of Temp minus 2 minus Perm Employment ServiceTemp?2?Perm Employment Service
follows but is incomplete.
(Click the icon the view the worksheet.)
Requirements
1. Calculate and enter the adjustment amounts directly in the Adjustments columns. Use letters a
through d to label the four adjustments.
2. Prepare each adjusting journal entry calculated in Requirement 1. Date the entries and include
explanations.
Requirement 1. Calculate and enter the adjustment amounts directly in the Adjustments columns. Use
letters a through d to label the four adjustments.
The balance sheet accounts have only been assigned one possible letter reference, in order, (a, b, c, or
d). To determine the letter reference to use for each adjustment, first determine the balance sheet
account affected and then select the corresponding letter reference to adjust the applicable income
statement account.
Requirement 2. Prepare each adjusting journal entry calculated in Requirement 1. Date the entries and
include explanations. (Record debits first, then credits. Select the explanation on the last line of the
journal entry table.)
Journalize adjustment (a) from the worksheet you prepared in Requirement 1.
Review the worksheet.
Date
(a) Apr. 30
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
b.Journalize adjustment (b) from the worksheet you prepared in Requirement 1.
Review the worksheet. LOADING…
Date
(b) Apr. 30
Accounts
and
Explanatio
n
0
0
0
Debit
Credit
0
0
c. Journalize adjustment (c) from the worksheet you prepared in Requirement 1.
Review the worksheet. LOADING…
Date
(c) Apr. 30
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
d. Journalize adjustment (d) from the worksheet you prepared in Requirement 1.
Review the worksheet. LOADING…
Date
(a) Apr. 30
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
Question 10
Landscaping has the following data for the December 31 adjusting entries:
(Click the icon to view the independent cases.)
a. Each Friday, Lorring pays employees for the current week’s work. The amount of the weekly payroll is
$6,000 for a five-day workweek. This year, December 31 falls on a Tuesday. Lorring will pay its employees
on January 33.
b. On January 1 of the current year, Lorring purchases an insurance policy that covers two years, $4,000.
c. The beginning balance of Office Supplies was $4,100. During the year, Lorring purchased office
supplies for $5,500, and at December 31 the office supplies on hand total $2,200.
d. During December, Lorring designed a landscape plan and the client prepaid $4,000. Lorring recorded
this amount as Unearned Revenue. The job will take several months to complete, and Lorring estimates
that the company has earned 50% of the total revenue during the current year.
e. At December 31, Lorring had earned $4,500 for landscape services completed for Tomball Appliances.
Tomball has stated that it will pay Lorring on January 10.
f. Depreciation for the current year includes Equipment, $3,000; and Trucks, $1,700.
g. Lorring has incurred $800 of interest expense on a $1,200 interest payment due on January 15.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the items affecting Lorring
Landscaping. Assume Lorring records adjusting entries only at the end of the year.
2. Journalize the subsequent journal entries for adjusting entries a, d, and g.
Requirement 1. Journalize the adjusting entry needed on December 31 for each of the items affecting
Lorring Landscaping. Assume Lorring records adjusting entries only at the end of the year. (Record debits
first, then credits. Select the explanation on the last line of the journal entry table.)
a. Each Friday, Lorring pays employees for the current week’s work. The amount of the weekly
payroll is $6,000 for a five-day workweek. This year December 31 falls on a Tuesday. Lorring will
pay its employees on January 33.
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
b. On January 1 of the current year, Lorring purchases an insurance policy that covers two years, $4,000.
(When the policy was purchased on January 1, assume that Lorring debited an asset account.)
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
c. The beginning balance of Office Supplies was $4,100. During the year, Lorring purchased office
supplies for $5,500, and at December 31 the office supplies on hand total $2,200. (Assume that Lorring
debits an asset account when supplies are purchased.)
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
d. During December, Lorring designed a landscape plan and the client prepaid $4,000. Lorring recorded
this amount as Unearned Revenue. The job will take several months to complete, and Lorring estimates
that the company has earned 50% of the total revenue during the current year.
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
e. At December 31, Lorring had earned $4,500 for landscape services completed for Tomball Appliances.
Tomball has stated that it will pay Lorring on January 10.?
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
f. Depreciation for the current year includes Equipment, $3,000; and Trucks, $1,700. (Prepare a
compound entry to record depreciation on both the equipment and the trucks.)
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
g.Lorring has incurred $ 800$800 of interest expense on a $ 1 comma 200$1,200 interest payment due
on January 15.
Date
Dec. 31
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
Requirement 2. Journalize the subsequent journal entries for adjusting entries a, d, and g. (Record debits
first, then credits. Select the explanation on the last line of the journal entry table.)
a. Each Friday, Lorring pays employees for the current week’s work. The amount of the weekly payroll is
$6,000 for a five-day workweek. This year December 31 falls on a Tuesday. Lorring will pay its employees
on January 33. Journalize the subsequent journal entry that Lorring will record on January 33.
Date
Jan. 3
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
d.During December, Lorring designed a landscape plan and the client prepaid 4,000. Lorring recorded
this amount as Unearned Revenue. The job will take several months to complete, and Lorring estimates
that the company has earned 5050 percent of the total revenue during the current year. Journalize the
subsequent journal entry that Lorring will record when the job is complete.
Date
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
g. Lorring has incurred $800 of interest expense on a $1,200 interest payment due on January 15.
Journalize the subsequent journal entry that Lorring will record on January 15.
Date
Jan.15
Accounts
and
Explanatio
n
0
0
0
0
0
Debit
Credit
Question 11
consider the facts presented in the following table for Tropical View Tropical View:
(Click the icon to view the table.)
Beginning Prepaid Rent
$
Payments for Prepaid Rent during the
year
Total amount to account for
Subtract: Ending Prepaid Rent
Rent Expense
$
Situatio
n
A
1,300
1,500
B
$1,100
b
C
$200
1,900
D
$700
f
2,800
600
a
1,300
700
$600
c
d
$1,600
e
300
$1,000
Complete the table by filling in the missing values.
Question 12
Acoustics recorded the following transactions during October 2016:
(Click the icon to view the transactions.)
a. Received $2,500 cash from customer for three months of service beginning October 1, 20162016, and
ending December 31, 20162016. The company recorded a $2,500 debit to Cash and a $2,500 credit to
Unearned Revenue.
b. Employees are paid $3,000 on Monday following the five-day work week. October 31, 2016, is on
Friday.
c. The company pays $440 on October 1, 2016 for its six-month auto insurance policy. The company
recorded a $ 440$440 debit to Prepaid Insurance and a $440 credit to Cash.
d. The company purchased office furniture for $8,300 on January 2, 2016. The company recorded a
$8,300 debit to Office Furniture and a $8,300 credit to Accounts Payable. Annual depreciation for the
furniture is $1,000.
e. The company began October with $50 of office supplies on hand. On October 10, the company
purchased office supplies on account of $100. The company recorded a $100 debit to Office Supplies and
a $100 credit to Accounts payable. The company used $120 of office supplies during October.
f. The company received its electric bill on October 30 for $325 but did not pay it until November 10.
g. The company paid November’s rent of $2,500 on October 30. On October 30, the company recorded a
$2,500 debit to Rent expense and a $2,500 credit to Cash.
Indicate if an adjusting entry is needed for each item on October 31 for the month of October. Assuming
the adjusting entry is not made, indicate which specific category or categories of accounts on the
financial statements are misstated and if they are overstated or understated. Use the following table as a
guide. Item a is completed as an example: (Leave unused cells blank.)
Begin by completing the table for transaction b and then transactions c through g. (If an adjusting entry
is not needed, select "No" and do not select any other labels.)
Item
Adjusting
Entry
Needed?
(a)
Yes
(b)
0
Specific Category of…
