Chapter 3 Exercise
1. Item 1 0.83 of 1.42 points awarded Item Scored
a. Depreciation on the company's equipment for 2017 is computed to be $16,000.
b. The Prepaid Insurance account had a $7,000 debit balance at December 31, 2017, before
adjusting for the costs of any expired coverage. An analysis of the company’s insurance
policies showed that $1,150 of unexpired insurance coverage remains.
c. The Office Supplies account had a $460 debit balance on December 31, 2016; and $2,680 of
office supplies were purchased during the year. The December 31, 2017, physical count
showed
$543 of supplies available.
d. Three-fourths of the work related to $13,000 of cash received in advance was performed
this period.
e. The Prepaid Insurance account had a $5,100 debit balance at December 31, 2017, before
adjusting for the costs of any expired coverage. An analysis of insurance policies showed
that
$3,950 of coverage had expired.
f. Wage expenses of $2,000 have been incurred but are not paid as of December 31, 2017.
Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each of
these separate situations.
Explanation
b. Prepaid insurance* = ($7,000 – $1,150) = $5,850
c. Office supplies** = ($460 + $2,680 – $543) = $2,597
d. Revenue = ($13,000 × 3/4) = $9,750
Notes:
Prepaid Insurance*
Beg. Bal. 7,000
? Used
End. Bal. 1,150
Supplies**
Beg. Bal. 460
Purch. 2,680
? Used
End. Bal. 543
2. Following are two income statements for Alexis Co. for the year ended December 31. The left
number column is prepared before any adjusting entries are recorded, and the right column
