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Principles of Accounting, Volume 1: Financial Accounting

Exercise Set B

Principles of Accounting, Volume 1: Financial AccountingExercise Set B
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EB 1.

LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.

  1. provided legal services to client, who paid at the time of service
  2. received cash for legal services performed last month
  3. received cash from clients for future services to be provided
  4. provided legal services to client, to be collected next month
EB 2.

LO 4.2Identify whether each of the following transactions, which are related to expense recognition, are accrual, deferral, or neither.

  1. recorded employee salaries earned, to be paid in future month
  2. paid employees for current month salaries
  3. paid employee salaries for work performed in a prior month
  4. gave an employee an advance on future wages
EB 3.

LO 4.2 and LO 4.3Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).

 
    Impact 1 Impact 2
A. Prepaid Insurance adjusted from $5,000 to $3,600    
B. Interest Payable adjusted from $5,300 to $6,800    
C. Prepaid Insurance adjusted from $18,500 to $6,300    
D. Supplies account balance $500, actual count $220    
Table 4.5
EB 4.

LO 4.2What two accounts are affected by the needed adjusting entries?

  1. supplies actual counts are lower than account balance
  2. employee salaries are due but not paid at year end
  3. insurance premiums that were paid in advance have expired
EB 5.

LO 4.3Reviewing insurance policies revealed that a single policy was purchased on March 1, for one year's coverage, in the amount of $9,000. There was no previous balance in the Prepaid Insurance account at that time. Based on the information provided,

  1. Make the December 31 adjusting journal entry to bring the balances to correct.
  2. Show the impact that these transactions had.
EB 6.

LO 4.3On September 1, a company received an advance rental payment of $12,000, to cover six months’ rent on an office building. There was no beginning balance in the Unearned Rent account for the period. Based on the information provided,

  1. Make the December 31 adjusting journal entry to bring the balances to correct.
  2. Show the impact that these transactions had.
EB 7.

LO 4.3Reviewing payroll records indicates that one-fifth of employee salaries that are due to be paid on the first payday in January, totaling $15,000, are actually for hours worked in December. There was no previous balance in the Salaries Payable account at that time. Based on the information provided, make the December 31 adjusting journal entry to bring the balances to correct.

EB 8.

LO 4.3On July 1, a client paid an advance payment (retainer) of $10,000, to cover future legal services. During the period, the company completed $6,200 of the agreed-on services for the client. There was no beginning balance in the Unearned Revenue account for the period. Based on the information provided, make the journal entries needed to bring the balances to correct for:

  1. original transaction
  2. December 31 adjustment
EB 9.

LO 4.3Prepare journal entries to record the business transaction and related adjusting entry for the following:

  1. March 1, paid cash for one year premium on insurance contract, $18,000
  2. December 31, remaining unexpired balance of insurance, $3,000
EB 10.

LO 4.3Prepare journal entries to record the following adjustments:

  1. revenue earned but not collected, nor recorded, $14,000
  2. revenue earned that had originally been collected in advance, $8,500
  3. taxes due but not yet paid, $ 2,750
EB 11.

LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.

Excerpt from Unadjusted Trial Balance. Debits: Equipment 66,000; Supplies 6,000. Credits: Accumulated Depreciation 22,000; Salaries Payable 3,500.
  1. amount due for employee salaries, $4,800
  2. actual count of supplies inventory, $ 2,300
  3. depreciation on equipment, $3,000
EB 12.

LO 4.4Prepare an adjusted trial balance from the following adjusted account balances (assume accounts have normal balances).

Accounts Payable 22,400; Accounts Receivable 45,750; Administrative Expense 57,700; Cash 56,500; Common Stock 40,000; Prepaid Rent 8,750; Revenue 106,300.
EB 13.

LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances).

Accounts Payable 10,075; Accounts Receivable 15,500; Cash 64,575; Common Stock 31,000; Fees Earned Revenue 82,000; Operating Expense 38,000; Supplies 5,000.

Adjustments needed:

  • Physical count of supplies inventory remaining at end of period, $2,150
  • Taxes payable at end of period, $3,850
EB 14.

LO 4.5From the following Company B adjusted trial balance, prepare simple financial statements, as follows:

  1. Income Statement
  2. Retained Earnings Statement
  3. Balance Sheet
Adjusted Trial Balance. Debit Accounts: Cash 77,800; Accounts Receivable 19,500; Supplies 7,650; Operating Expense 39,200; Total Debits 144,150. Credit Accounts: Accounts Payable 8,500; Taxes Payable 5,350; Common Stock 35,000; Fees Earned Revenue 95,300; Total Credits 144,150.
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