Vol. 1, Chapter 3 - Accounting Adjustments
Problem 1
1. ($20,000 – 2,000) ÷ 48 = $375 per month
2. Jan. 31 Depreciation Expense $375
Accumulated Depreciation—Van $375
To record depreciation expense for January
Problem 2
Cash register:
Depreciation expense = 1,800 – 500 = 1,300 = 21.67 / month
(5 × 12) 60
$260 = 21.67 × 12 (for Jan.–Dec.)
10 8-top tables:
Depreciation expense = 2,500 – 500 = 2,000 = 16.67 / month (10 × 12) 120
$166.70 = 16.67 × 10 (for Mar.–Dec.)
Van:
Depreciation expense = 30,000 – 3,000 = 27,000 = 450 / month (5 × 12) 60
$2,700 = 450 × 6 (for July–Dec.)
Range:
Depreciation expense = 4,500 – 800 = 3,700 = 44.05 / month (7 × 12) 84
44.05 = 1.47 / day
30
44.05 × 3 = 132.15 (for Oct.–Dec.) 1.47 × 14 = 20.58 (for month of Sept.)
$152.73 = 132.15 + 20.58
Problem 3
1. Prepaid Insurance $ 1,200
Cash $ 1,200
Payment of insurance premium for May 1–Oct. 31
2. There is no insurance expense for April because the insurance coverage does not begin until May.
3. $1,200 = $200
6
4. Prepaid Insurance
4/24/XX $1,200.00
5/31/XX – $ 200.00
1. $182,500 = $500 / day in wages 365
$500 × 6 days = $3,000
2. Wages Expense $3,000
Accrued Wages Payable $3,000
Problem 5
1. June 15 Cash $ 400
Advance Deposits $ 400
To record receipt of deposit as unearned revenue
2. July 2 Accounts Receivable $ 100 Advance Deposits 200
Revenue $ 300
To record revenue earned
July 3 Accounts Receivable $ 600 Advance Deposits 200
Revenue $ 800
To record revenue earned
Problem 6
1. Interest expense = 80,000 × .06 × (30 – 4) = $341.92 365
Interest Expense $341.92
Interest Payable $341.92
2. July: 80,000 × .06 × (31 / 365) = $407.67
August: 80,000 × .065 × (31 / 365) = $441.64
Sept: 80,000 × .065 × (30 / 365) = $427.40
Oct: 80,000 × .065 × (31 / 365) = $441.64
Nov: 80,000 × .065 × (30 / 365) = $427.40 Dec: 80,000 × .07 × (31 / 365) = $475.62
Interest expense for July–Dec. = 407.67 + 441.64 + 427.40 + 441.64 + 427.40 + 475.62 = $2,621.37
3. Interest Expense $475.62
Interest Payable $475.62
1. Average Daily Pay $4,200 = $300 14
Pay for the 26th, 27th, 28th, 29th, 30th, and 31st:
6 × $300 = $1,800
2. Adjusting Entry
Wages Expense $1,800
Accrued Wages Payable $1,800 To record wages payable at end of January
Problem 8
Debit Account Credit Account Deferral or Accrual
1. Wage Expense Wages Payable or Accrued Wages Accrual
2. Unearned Revenue Revenue Deferral
3. Depreciation Expense Accumulated Depreciation Deferral
4. Rent Expense Prepaid Rent Deferral
5. Accrued Interest Receivable Interest Income Accrual 6. Electricity Expense Electricity Expense Payable Accrual
Problem 9
1. Interest (March) = Principal × Rate × Time = $ 5,000.00 × 0.08 × 31 / 365 = $ 33.97
2. Adjusting Entry
Interest Expense $ 33.97
Interest Payable $ 33.97
3. Interest (April) = $ 5,000.00 × 0.08 × 30 / 365 = $ 32.88
Interest Expense $ 32.88
Interest Payable $ 32.88
4. Interest (May) = $ 5,000.00 × 0.08 × 31 / 365 = $ 33.97
Interest Expense $ 33.97
Interest Payable 66.85
Notes Payable 500.00
Cash $ 600.82
To record payment of quarterly interest and loan installment.
(a) Insurance Expense $11,250 (1)
Prepaid Insurance $11,250 (1)
(b) Depreciation Expense $14,000 (2)
Accumulated Depreciation, Equipment $14,000 (2)
(c) Wages Expense $1,800 (3)
Accrued Wages Payable $1,800 (3)
(d) Interest Expense $4,000 (4)
Interest Payable $4,000 (4)
(e) Guest Deposits $800
Room Revenue $800
(1) 15,000 = 1,250 × 9 = 11,250
12
(2) 80,000 – 10,000 = 70,000 = 14,000 5 5 (3) 2,100 = 300 × 6 = 1,800
7
(4) 50,000 × .08 = 4,000
Problem 11
Overstate or Understate Net Income Balance Sheet Effect
1. Overstate Assets and Owners’ Equity will be overstated.
2. Understate Liabilities will be overstated; Owners’ Equity will be understated.
3. Overstate Assets and Owners’ Equity will be overstated.
4. Understate Assets and Owners’ Equity will be understated.
5. Overstate Liabilities will be understated; Owners’ Equity will be overstated.
6. Understate Assets and Owners’ Equity will be understated.
7. Overstate Liabilities will be understated; Owners’ Equity will be overstated.
8. Overstate Liabilities will be understated; Owners’ Equity will be overstated.
1.
Supplies Prepaid Insurance F&B Inventory $ 1,250 $ 1,000 $ 2,000
– $ 150 f – $ 500 b – $ 350 a $ 1,100 $ 500 $ 1,650
Acc. Dep.—Equipment Acc. Dep.—Building Salaries Payable $ 4,000 $ 6,000 $ 200 e
1,500 c 2,500 d $ 200
$ 5,500 $ 8,500 Cost of F&B Sales Salaries Expense Dep. Expense—Equipment $ 26,600 $ 1,000 c $ 1,500 a 350 e 200 $ 1,500 $ 26,950 $ 1,200 Dep. Expense—Building Supplies Expense Insurance Expense d $ 2,500 $ 2,000 b $ 500
$ 2,500 f 150 $ 500
$ 2,150 2. Dec. 31 Cost of Food and Beverage Sales $ 350
Food and Beverage Inventory $ 350
Dec. 31 Insurance Expense $ 500
Prepaid Insurance $ 500
Dec. 31 Depreciation Expense—Equipment $ 1,500 Accumulated Depreciation—Equipment $ 1,500 Dec. 31 Depreciation Expense—Building $ 2,500 Accumulated Depreciation—Building $ 2,500 Dec. 31 Salaries Expense $ 200
Salaries Payable $ 200
Dec. 31 Supplies Expense $ 150
Supplies $ 150
Trial Balance Adjustments
Adjusted Trial Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $ 3,000 $ 3,000
Accounts Receivable 5,000 5,000
Food Inventory 6,000 (b) $ 4,000 2,000
Equipment 25,000 25,000
Accumulated Depreciation $ 5,000 (c) 4,000 $ 9,000
Prepaid Insurance 6,000 (a) 3,000 3,000
Accounts Payable 4,000 4,000
SR, Capital 20,000 20,000
SR, Withdrawals 4,000 4,000
Sales 200,000 200,000
Salaries and Wages Expense 70,000 $ 1,350 (d) 71,350
Cost of Food Sold 60,000 60,000
Advertising Expenses 10,000 10,000
Other Operating Expenses 40,000 40,000 $229,000 $229,000
Insurance Expense 3,000 (a) 3,000
Food Expense 4,000 (b) 4,000
Depreciation Expense 4,000 (d) 4,000
Accrued Wages Payable 1,350 (c) 1,350
$12,350 $12,350 $234,350 $234,350
(1) 6,000 = 3,000 2
(2) 6,000 – 4,000 = 2,000
(3) 25,000 – 5,000 = 20,000 = 4,000 5 5
(4) 2,700 = 270 / day 10
270 × 5 = 1,350
Adjusting Entries
1. Insurance Expense $3,000 Prepaid Insurance $3,000
2. Food Expense $4,000
Food Inventory $4,000
3. Depreciation Expense $4,000 Accumulated Depreciation $4,000
4. Wages Expense $1,350
Accrued Wages Payable $1,350
1. Dec. 31 Cost of Food and Beverage Sold $ 750
Food and Beverage Inventory $ 750
2. Dec. 31 Office Supplies Expense $ 90
Office Supplies $ 90
3. Dec. 31 Depreciation Expense—Furniture $3,000
Accumulated Depreciation—Furniture $3,000
4. Dec. 31 Depreciation Expense—Equipment $4,000
Accumulated Depreciation—Equipment $4,000
5. Dec. 31 Rent Expense $ 800
Prepaid Rent $ 800
6. Dec. 31 Wages and Benefits $1,050
Accrued Wages $1,050
7. Dec. 31 Interest Expense $1,401
Interest Payable $1,401
8. Dec. 31 Repairs and Maintenance Expense $ 636
Accounts Payable $ 636
9. Dec. 31 Advance Deposits $ 300
Food and Beverage Revenue $ 300
1. Dec. 31 Insurance Expense $ 750
Prepaid Insurance $ 750
2. Dec. 31 Cleaning Supplies Expense $ 1,500
Cleaning Supplies $ 1,500
3. Dec. 31 Depreciation Expense—Furniture $10,000
Accumulated Depreciation—Furniture $10,000
4. Dec. 31 Depreciation Expense—Equipment $ 1,000
Accumulated Depreciation—Equipment $ 1,000
5. Dec. 31 Depreciation Expense—Building $20,000
Accumulated Depreciation—Building $20,000
6. Dec. 31 Housekeeper Wages $ 200
Accrued Wages $ 200
7. Dec. 31 Interest Receivable $ 176
Interest Income $ 176
8. Dec. 31 Utilities Expense $ 500
Accounts Payable $ 500
9. Dec. 31 Advertising Expense $ 240
Accounts Payable $ 240
10. Dec. 31 Advance Deposits $ 650
Room Revenue $ 650
11. Dec. 31 Accounts Receivable $ 300
Room Revenue $ 300
