Adjusting Accounts and Preparing Statements

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Presentation transcript:

Adjusting Accounts and Preparing Statements Chapter 3 Exercises Adjusting Accounts and Preparing Statements

Adjusting Entries In-Class Exercises: Exercise No. Page

Adjusting Entries For each of the following cases, prepare adjusting entries required for financial statements for the year ended December 31, 2011. (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.) a. One-third of the work related to $30,000 cash, received in advance, is performed this period. b. Wages of $9,000 are earned by workers but not paid as of December 31, 2011. c. Depreciation on the company’s equipment for 2011 is $19,127. d. The Office Supplies account had a $480 debit balance on December 31, 2010. During 2011, $5,349 of office supplies are purchased. A physical count of supplies at December 31, 2011, shows $587 of supplies available. e. The Prepaid Insurance account had a $5,000 balance on December 31, 2010. An analysis of insurance policies shows that $2,200 of unexpired insurance benefits remain at December 31, 2011. f. The company has earned (but not recorded) $750 of interest from investments in CDs for the year ended December 31, 2011. The interest revenue will be received on Jan. 10, 2012. g. The company has a bank loan and has incurred (but not recorded) interest expense of $3,500 for the year ended December 31, 2011. The company must pay the interest on January 2, 2012.

Adjusting Entries

Adjusting Entries Beginning balance………….$ 480 Purchases…………………… 5,349 Total available…………….…$ 5,829 Less: Ending inventory…… (587) Supplies consumed………...$ 5,242

Adjusting Entries Beginning balance……………...$ 5,000 Less: Unexpired insurance…… (2,200) Insurance expired……………….$ 2,800

Adjusting Entries

Adjusting Entries In-Class Exercise: Exercise No. Page 3- 6 121 Adjusting & paying accrued wages

Adjusting Entries Pablo Management has five part-time employees, each of whom earns $100 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, 2011. The next week, the five employees worked only four days because New Year’s Day was an unpaid holiday. (a) Prepare the adjusting entry that would be recorded on Monday, December 31, 2011. (b) Prepare the journal entry that would be made to record payment of the employees’ wages on Friday, January 4, 2012

Adjusting Entries 5 workers x $100 x 1 day = $500

Adjusting Entries Last Payday S M T W T F S . 23 24 25 26 27 28 29 30 31 1 2 3 4 5 New Year’s Holiday End of year

Adjusting Entries 5 employees x $100 x 3 days = $1,500

Adjusting Entries