Week 2

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Adjustment data at December 31 follow: a. As of December 31, Newport had $600 of Prepaid Insurance remaining. b. At the end of the month, Newport had $700 of office supplies remaining. c. Depreciation on the building is $3,500. d. Newport pays its employees weekly on Friday. Its employees earn $1,500 for a five-

day workweek. December 31 falls on Wednesday this year. e. On November 20, Newport contracted to perform services for a client receiving $2,500

in advance. Newport recorded this receipt of cash as Unearned Revenue. As of December 31, Newport has $1,500 still unearned.

Requirements

1. Journalize the adjusting entries on December 31. 2. Using the unadjusted trial balance, open the accounts (use a four-column ledger) with

the unadjusted balances. Post the adjusting entries to the ledger accounts. 3. Prepare the adjusted trial balance. 4. Assuming the adjusted trial balance has total debits equal to total credits, does this

mean that the adjusting entries have been recorded correctly? Explain.

2. d. CR Accumulated Depreciation $3,800

5/20/2018 Bookshelf Online: Horngren's Accounting

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P3-37A Using the worksheet to record the adjusting journal entries

Learning Objective 6

Ganville Theater Production Company’s partially completed worksheet as of December 31, 2016, follows.

Requirements

1. Analyze the worksheet to determine the adjusting entries that account for the differences between the unadjusted trial balance and the adjusted trial balance. Complete the worksheet. Use letters a through e to label the five adjustments.

2. Journalize the adjusting entries.

5/20/2018 Bookshelf Online: Horngren's Accounting

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4. Dec 31, CR Insurance Expense $7,500

P3A-38A Understanding the alternative treatment of prepaid expenses and unearned revenues

Learning Objectives 3, 7Appendix 3A

Night Flyer Pack’n Mail completed the following transactions during 2016:

Requirements

1. Journalize the transactions assuming that Night Flyer debits an asset account for prepaid expenses and credits a liability account for unearned revenues.

2. Journalize the related adjusting entries at December 31, 2016. 3. Post the journal and adjusting entries to the T-accounts, and show their balances at

December 31, 2016. (Ignore the Cash account.) 4. Repeat Requirements 1–3. This time, debit an expense account for prepaid expenses

and credit a revenue account for unearned revenues. 5. Compare the account balances in Requirements 3 and 4. They should be equal.

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Problems Group B

1. b. DR Insurance Expense $2,000

P3-39B Journalizing adjusting entries and subsequent journal entries

Learning Objective 3

Lorring Landscaping has the following data for the December 31 adjusting entries:

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 3.

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.

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