Select Page

“E3-5 (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes
the following selected accounts before adjusting entries have been prepared.”

Debit    Credit
Prepaid Insurance            $3,600
Supplies            2,800
Equipment            25,000
Accumulated Depreciation – Equipment                $8,400
Notes Payable                20,000
Unearned Rent Revenue                9,300
Rent Revenue                60,000
Interest Expense            0
Salaries and Wage Expense            14,000
Totals:            $45,400     $97,700

An analysis of the accounts shows the following:
1. The equipment depreciation per month is:                    $250
2. One-third of the unearned rent was earned during the quarter.
3. Interest accrued for the month on notes payable is:                    $500
4. Supplies on hand total:                    $650
5. The monthly insurance expiration rate is:                    $300

“Instructions:
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: (Omit explanations.)”

Depreciation Expense            Interest Payable
Insurance Expense            Supplies Expense

1    Account Title                Amount
Account Title                    Amount
Text / Memo Line – Optional

2    Account Title                Amount
Account Title                    Amount
Text / Memo Line – Optional

3    Account Title                Amount
Account Title                    Amount
Text / Memo Line – Optional

4    Account Title                Amount
Account Title                    Amount
Text / Memo Line – Optional

5    Account Title                Amount
Account Title                    Amount
Text / Memo Line – Optional

E3-8 (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August.

1. At August 31, Roddick owed his employees salaries $1,900 in wages that will be paid on September 1.
$1,900
2. At the end of the month he had not yet received the month’s utility bill. Based on past experience, he
estimated the bill would be approximately:            $600
3. On August 1, Bryant borrowed            $60,000     from a local bank on a        15
-year mortgage. The annual interest rate is            8%
4. A telephone bill in the amount of            $117     covering August charges is unpaid at
August 31.

“Instructions:
Prepare the adjusting journal entries as of August 31, 2014.”

1    Account Title                Amount
Account Title                    Amount
Text / Memo line

2    Account Title                Amount
Account Title                    Amount
Text / Memo line

3    Account Title                Amount
Account Title                    Amount
Text / Memo line

4    Account Title                Amount
Account Title                    Amount
Text / Memo line

“P3-2 (Adjusting Entries and Financial Statements) Mason Advertising Agency was founded in January
2008. Presented below are adjusted and unadjusted trial balances as of December 31, 2012.”

MASON ADVERTISING AGENCY
Trial Balance
December 31, 2014
Unadjusted        Adjusted
Debit    Credit    Debit    Credit
Cash            $11,000         $11,000
Accounts Receivable            20,000         23,500
Supplies            8,400         3,000
Prepaid Insurance            3,350         2,500
Equipment            60,000         60,000
Accumulated Depreciation – Equipment                $28,000         $33,000
Accounts Payable                5,000         5,000
Interest Payable                0         150
Notes Payable                5,000         5,000
Unearned Service Revenue                7,000         5,600
Salaries and Wages Payable                0         1,300
Common Stock                10,000         10,000
Retained Earnings                3,500         3,500
Service Revenue                58,600         63,500
Salaries and Wages Expense            10,000         11,300
Insurance Expense                    850
Interest Expense            350         500
Depreciation Expense                    5,000
Supplies Expense                    5,400
Rent Expense            4,000         4,000
Totals:            $117,100     $117,100     $127,050     $127,050

Instructions:
(a) Journalize the annual adjusting entries that were made. (Omit explanations.)
Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

Dec 31    Account Title                Amount
Account Title                    Amount

(b) Prepare an income statement and a statement of retained earnings for the year ending December 31, 2014 and an unclassified balance sheet at December 31.

MASON ADVERTISING AGENCY
Income Statement
For the Year Ended December 31, 2014
Revenues
Account Title                    Amount
Expenses
Account Title                Amount
Account Title                Amount
Account Title                Amount
Account Title                Amount
Account Title                Amount
Account Title                Amount
Total expenses                     Formula
Net income                     Formula