1. 3
The Adjusting Process
Student Version

2. Describe the nature of the adjusting process.1
Describe the nature of the adjusting process.
3-2

3. Types of Accounts Requiring Adjustment1
Types of Accounts Requiring Adjustment
Prepaid expenses are the advance payment of future expenses and are recorded as assets when cash is paid.

4. Types of Accounts Requiring Adjustment1
Types of Accounts Requiring Adjustment
Unearned revenues are the advance receipt of future revenues and are recorded as liabilities when cash is received.

5. Types of Accounts Requiring Adjustment1
Types of Accounts Requiring Adjustment
Accrued revenues are unrecorded revenues that have been earned and for which cash has yet to be received.

6. Types of Accounts Requiring Adjustment1
Types of Accounts Requiring Adjustment
Accrued expenses are unrecorded expenses that have been incurred and for which cash has not been paid.

7. Journalize entries for accounts requiring adjustment.2
Journalize entries for accounts requiring adjustment.
3-7

8. 2
Prepaid Expenses
NetSolutions’ Supplies account has a balance of $2,000 in the unadjusted trial balance. Some of these supplies have been used. On December 31, a count reveals that $760 of supplies are on hand.
Supplies (balance on trial balance) $2,000
Supplies on hand, December – 760
Supplies used $1,240

9. 2 Supplies Supplies Expense Bal. 2,000 Dec. 31 1,240 Bal. 80014 55
Bal. 2,000
Dec. 31 1,240
Bal. 800
Dec. 31 1,240
760
2,040

10. 2
Prepaid Expenses
The debit balance of $2,400 in NetSolutions’ Prepaid Insurance account represents the December 1 prepayment of insurance for 12 months.

11. 2 Prepaid Insurance 15 Insurance Expense 56 Bal. 2,400 Dec. 31 200
2,200

12. 2
Unearned Revenues
The December 31 unadjusted trial balance of NetSolutions indicates a balance in the unearned rent account of $360.

13. 2
Unearned Rent 23
Rent Revenue 42
Dec
Bal. 360

14. 2 Dec. 31 120 Unearned Rent Bal. 360 23 240 Bal. Rent Revenue 42

15. 2
Accrued Revenues
NetSolutions signed an agreement with Danker Co. on December 15 to provide services at $20 per hour. As of December 31, NetSolutions had provided 25 hours of assistance.

16. 2 Accounts Receivable 12 Fees Earned 41 Bal. 2,220 Bal. 16,340
Dec
2,720
Bal.

17. 2 Accounts Receivable 12 Fees Earned 41 Bal. 2,220 Bal. 16,340
Dec
Dec
2,720
Bal.
16,840
Bal.

18. 2
Accrued Expenses
NetSolutions pays it employees biweekly. During December, NetSolutions paid wages of $950 on December 13 and $1,200 on December 27. As of December 31, NetSolutions owes $250 of wages to employees for Monday and Tuesday.

19. 2
Wages Payable 22
Wages Expense 51
Bal. 4,275
Dec
Bal. 4,525

20. 2 Wages Payable 22 Wages Expense 51 Dec. 31 250 Bal. 4,275 Dec. 31 250

21. 2
The journal entry for the payment of wages on January 10 is shown below.
After posting

22. 2
NetSolutions estimates the depreciation on its office equipment to be $50 for the month of December.

23. Accum. Depr.—Office Equip.2
Depreciation Expense 53
Accum. Depr.—Office Equip. 19
Dec

24. Accum. Depr.—Office Equip.2
Depreciation Expense 53
Accum. Depr.—Office Equip. 19
Dec
Dec

25. 2
NetSolutions’ balance sheet would show office equipment at cost, less accumulated depreciation.
Office equipment $1,800
Less accumulated
depreciation $1,750
Book value

26. Summarize the adjustment process.3
Summarize the adjustment process.
3-26

27. 3
Exhibit 7
Adjusting Entries—NetSolutions
(continued)

28. 3
Exhibit 7
Adjusting Entries—NetSolutions (continued) .

29. Prepare an adjusted trial balance.4
Prepare an adjusted trial balance.
3-29

30. 4
Exhibit 9
Adjusted Trial Balance—NetSolutions