Chapter 3 In-Class Activity
Adjusting Entries
For this in-class activity, assume adjusting entries are recorded at the end of each month.
Accrued Revenue
On August 1, Sun Devil LLC is hired by a customer to provide proof reading services for $1,200
a month. Throughout the month of August, Sun Devil LLC performs the proof reading services
for the client, however, the client does not pay for the services until the following month.
1. What is the appropriate adjusting journal entry that Sun Devil LLC will record on August 31
(month’s end)?
2. What is the appropriate journal entry that Sun Devil LLC will record when the customer pays
for the services in the following month?
Accrued Expenses
Sun Devil LLC has 2 employees that perform the proof reading services for its customers. During
the month of September, these employees earned wages of $775 for their work. Sun Devil LLC
will pay its employees on October 1 for the wages earned in September.
1. What is the appropriate adjusting journal entry that Sun Devil LLC will record on September
30?
2. What is the appropriate entry that Sun Devil LLC will record on October 1?
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Chapter 3 In-Class Activity
Deferred Revenue (Unearned Revenue)
Sparky Monthly is a company that offers magazine subscriptions to students each month. On
January 1, a customer pays $120 in advance to Sparky Monthly for a 12-month magazine
subscription.
1. What is the appropriate entry that Sparky Monthly will record on January 1?
2. What is the appropriate adjusting entry that Sparky Monthly will record on January 31?
3. What is the appropriate adjusting entry that Sparky Monthly will record on February 28
(month’s end)?
Deferred Expense (Prepaid Expense/Prepaid Asset)
Sparky Monthly rents an office building close to campus. On March 1, Sparky Monthly prepays 4
months’ rent. Rent for the office building is $1,000 a month.
1. What is the appropriate entry that Sparky Monthly will record on March 1?
2. What is the appropriate adjusting entry that Sparky Monthly will record on March 31?
3. What is the appropriate adjusting entry that Sparky Monthly will record on April 30?
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