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Concept explainers
a.
Prepare unadjusted
a.
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Explanation of Solution
Unadjusted trial balance:
Unadjusted trial balance is a statement which contains complete list of accounts with their unadjusted balances, after
Prepare an unadjusted trial balance as of December 31 for Incorporation P.
Incorporation P Unadjusted Trial Balance As of December 31 | ||
Debit ($) | Credit ($) | |
Cash | 2,150 | |
Accounts receivable | 3,800 | |
Prepaid rent | 12,600 | |
Prepaid insurance | 2,970 | |
Supplies | 4,250 | |
Equipment | 22,800 | |
Accounts payable | 1,910 | |
Unearned photography fees | 2,600 | |
Common stock | 24,000 | |
Photography fees earned | 34,480 | |
Wages expense | 11,000 | |
Utilities expense | 3,420 | |
Total | 62,990 | 62,990 |
Table (1)
Hence, it is proved that the sum of the debits equals the sum of the credits in the unadjusted trial balance of Incorporation P.
b.
Record the
b.
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Explanation of Solution
1.
Adjusting entry for accrued service revenues:
Date | Accounts title and explanation | Post Ref. | Debit ($) | Credit ($) |
December 31 | Fees Receivable | 925 | ||
Photography Fee earned | 925 | |||
(To record the amount of revenue earned but not recorded) |
Table (2)
- Fees Receivable is an asset account. There is an increase in assets, and therefore, it is debited.
- Photography fee earned is a revenue account. There is an increase in
Stockholders’ Equity , and therefore, it is credited.
2.
Adjusting entry for
Date | Accounts title and explanation | Post Ref. | Debit ($) | Credit ($) |
December 31 | Depreciation Expense- Equipment | 2,280 | ||
2,280 | ||||
(To record the amount of depreciation for the year) |
Table (3)
- Depreciation expense is an expense. There is an increase in the expenses, and therefore it is debited.
- Accumulated Depreciation is a contra-asset account. There is decrease in assets, and therefore it is credited.
Working note:
Calculate depreciation for the year.
3.
Adjusting entry for accrued utilities expenses:
Date | Accounts title and explanation | Post Ref. | Debit ($) | Credit ($) |
December 31 | Utility Expense | 400 | ||
Utility Payable | 400 | |||
(To record the amount of accrued utility expenses) |
Table (4)
- Utility Expense is an expense. There is an increase in the expenses, and therefore, it is debited.
- Utility Payable is a liability account. There is an increase in liabilities, and therefore, it is credited.
4.
Adjusting entry for recognizing the rent expense on prepaid rent:
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Rent Expense | 6,300 | ||
Prepaid Rent | 6,300 | |||
(To record the amount of prepaid rent expired during the period) |
Table (5)
- Rent expense is an expense. There is an increase in the expenses, and therefore it is debited.
- Prepaid Rent is an asset. There is a decrease in assets, and therefore it is credited.
Working note:
Calculate rent expense.
5.
Adjusting entry for earned unearned Photography fees:
Date | Accounts title and explanation | Post Ref. | Debit ($) | Credit ($) |
December 31 | Unearned Photography fees | 2,600 | ||
Photography fees earned | 2,600 | |||
(To record the amount of unearned photography fees earned during the year) |
Table (6)
- Unearned photography fees are liability. There is a decrease in liabilities, and therefore it is debited.
- Photography fees earned is a component of Equity account. There is an increase in Equity, and therefore it is credited.
6.
Adjustment of Prepaid Insurance:
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Insurance Expense | 990 | ||
Prepaid Insurance | 990 | |||
(To record the amount of prepaid insurance expired during the period) |
Table (7)
- Insurance expense is an expense. There is an increase in the expenses, and therefore it is debited.
- Prepaid Insurance is an asset. There is a decrease in assets, and therefore it is credited.
Working note:
Calculate insurance expense.
7.
Adjustment of Office Supplies:
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Supplies Expense | 2,730 | ||
Office Supplies | 2,730 | |||
(To record the amount of office supplies used during the period) |
Table (8)
- Supplies expense is an expense. There is an increase in the expenses, and therefore it is debited.
- Office Supplies is an asset. There is a decrease in assets, and therefore it is credited.
Working note:
Calculate the Supplies used during the year.
8.
Adjusting entry for accrued wages expenses:
Date | Accounts title and explanation | Post Ref. | Debit ($) | Credit ($) |
December 31 | Wages Expense | 375 | ||
Wages Payable | 375 | |||
(To record the amount of accrued wages expenses) |
Table (9)
- Wages Expense is an expense. There is an increase in the expenses, and therefore, it is debited.
- Wages Payable is a liability account. There is an increase in liabilities, and therefore, it is credited.
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Chapter 3 Solutions
Financial Accounting for Undergraduates
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