Exercise 3-1 Preparing adjusting entries LO P1
a. Depreciation on the company’s equipment for 2013 is computed to be $18,000.
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.
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.
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.
Prepare the adjusting entry that would be recorded on Monday, December 31, 2013.
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
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.
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.
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 P1
For 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