Connect Access Card For Financial Accounting Fundamentals
Connect Access Card For Financial Accounting Fundamentals
7th Edition
ISBN: 9781260482829
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 3, Problem 2AP

1.

To determine

Prepare the adjusting entries as of 31st December 2017.

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

1.

Expert Solution
Check Mark

Explanation of Solution

Prepare the adjusting entries as of 31st December 2017.

a. Prepare the adjusting entries to record the cost of supplies used.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Office supplies expense 14,846 
 Office supplies(1)  14,486
 (To record the adjusting entry for cost of supplies used)   

Table (1)

  • Office supplies expense is an expense account and it is increased. Therefore, debit office supplies expense with $14,846.
  • Office supplies are an asset account and it is decreased. Therefore, credit office supplies with $14,846.

Working note:

Calculate the amount of supplies used.

Supplies used=Opening balance+PurchasesSupplies in hand=$4,000+$13,400$2,554=$14,846 (1)

b. Prepare the adjusting entry to record the annual insurance coverage cost.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Insurance expense 7,120 
 Prepaid insurance (2)  7,120
 (To record the adjusting entry for annual insurance coverage cost)   

 Table (2)

  • Insurance expense is an expense account and it is increased. Therefore, debit Insurance expense with $7,120.
  • Prepaid insurance is an asset account and it is decreased. Therefore, credit prepaid insurance with $7,120.

Working note:

Calculate the amount of prepaid insurance.


Policy

Cost
Calculate the cost per monthCost per monthMonths Active in 2017
Cost for 2017
A$14,400($14,40024Months)$6003$1,800
B
$12,960
($12,96036Months)$36012$4,320
C$2,400($2,40012Months)$2005$1,000
Total    $7,120

Table (3) (2)

Note: Cost for 2017 is calculated by multiplying Cost per month and number of months active in 2017.

c. Prepare the adjusting entry to record the unpaid wages.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Salaries expense 3,920 
 Salaries payable (3)  3,920
 (To record the adjusting entry unpaid wages)   

 Table (4)

  • Salaries expense is an expense account and it is increased. Therefore, debit Salaries expense with $3,920.
  • Salaries payable is a liability account and it is increased. Therefore, credit salaries payable with $3,920.

Working note:

Calculate the amount of salaries payable.

Salaries payable=Number of days×Total amount=2Days×$1,960=$3,920 (3)

4. Prepare the adjusting entry to record the annual depreciation expense.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Depreciation expense, Building 30,500 
 Accumulated depreciation, Building (4)  30,500
 (To record the adjusting entry annual depreciation expense)   

 Table (5)

  • Depreciation is an expense account and it is increased. Therefore, debit depreciation expense with $30,500.
  • Accumulated depreciation is a contra-asset and it decreases the value of asset. Therefore, credit accumulated depreciation account with $30,500.

Working note:

Calculate the amount of annual depreciation expense:

Annual depreciation expense=(Cost of the assetSalvage valueEstimated life of the asset)=$960,000$45,00030Years=$30,500 (4)

e. Prepare the adjusting entry to record the unpaid December rent.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Rent receivable 3,000 
 Rent revenue  3,000
 (To record the adjusting entry for rent earned but unpaid for December rent)   

Table (6)

  • Rent receivable is an asset and it is increased. Therefore, debit rent receivable with $3,000.
  • Rent revenue is a revenue account and it is increased. Therefore, credit rent earned with $3,000.

f. Prepare the adjusting entry to record the unearned rent for November and December.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

December 31Unearned rent revenue (5) 5,600 
 Rent revenue  5,600
 (To record the adjusting entry for unearned rent for November and December)   

Table (7)

  • Unearned rent revenue is a liability and it is decreased. Therefore, debit unearned rent revenue with $5,600.
  • Rent revenue is a revenue account and it is increased. Therefore, credit rent earned with $5,600.

Working note:

Calculate the amount of revenue earned for November and December.

Rent earned=Number of months×Rent per month=2Months×$2,800=$5,600 (5)

2.

To determine

Prepare the journal entries to record the first subsequent cash transaction for c and e.

2.

Expert Solution
Check Mark

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare the journal entry to record the cash payment made for (c):

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

January 6Salaries payable 3,920 
 Salaries expense(6) 5,880 
 Cash  9,800
 (To record the payment of accrued and current salaries)   

Table (8)

  • Salaries payable is a liability and it is decreased. Therefore, debit salaries payable with $3,920.
  • Salaries expense is an expense account and it is increased. Therefore, debit Salaries expense with $5,880.
  • Cash is an asset account and it is decreased. Therefore, credit cash with $9,800.

Working note:

Salaries expense=Number of days×Total salaries=3Days×$1,960=5,800 (6)

Prepare the journal entry to record the amount of rent due for past two months.

DateAccounts title and explanationPost Ref.

Debit

($)

Credit

($)

January 15Cash ($3,000×2Months) 6,000 
 Rent receivable  3,000
 Rent revenue  3,000
 (To record the payment of amount of rent due for two months)   

Table (9)

  • Cash is an asset account and it is increased. Therefore, debit cash with $6,000.
  • Rent revenue is a revenue account and it is increased. Therefore, credit rent earned with $3,000.
  • Rent receivable is an asset and it is decreased. Therefore, credit rent receivable with $3,000.

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Chapter 3 Solutions

Connect Access Card For Financial Accounting Fundamentals

Ch. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 9DQCh. 3 - Prob. 10DQCh. 3 - Prob. 11DQCh. 3 - Prob. 12DQCh. 3 - Prob. 13DQCh. 3 - Prob. 14DQCh. 3 - Prob. 15DQCh. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - Prob. 19DQCh. 3 - Prob. 20DQCh. 3 - Prob. 21DQCh. 3 - Prob. 22DQCh. 3 - Prob. 23DQCh. 3 - Prob. 24DQCh. 3 - Prob. 25DQCh. 3 - Prob. 26DQCh. 3 - Prob. 27DQCh. 3 - Prob. 28DQCh. 3 - Prob. 29DQCh. 3 - Prob. 1QSCh. 3 - Prob. 2QSCh. 3 - Prob. 3QSCh. 3 - Prob. 4QSCh. 3 - Prob. 5QSCh. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Prob. 12QSCh. 3 - Prob. 13QSCh. 3 - Prob. 14QSCh. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Prob. 17QSCh. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - QS 3-21 Preparing closing entries from the...Ch. 3 - Prob. 22QSCh. 3 - QS 3-23 Identifying the accounting cycle List the...Ch. 3 - Prob. 24QSCh. 3 - Prob. 25QSCh. 3 - Prob. 26QSCh. 3 - Prob. 27QSCh. 3 - Prob. 28QSCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Exercise 3-8 Preparing closing entries Following...Ch. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Problem 3-7A Determining balance sheet...Ch. 3 - Prob. 8APCh. 3 - Prob. 1BPCh. 3 - Prob. 2BPCh. 3 - Prob. 3BPCh. 3 - Prob. 4BPCh. 3 - Prob. 5BPCh. 3 - Prob. 6BPCh. 3 - Prob. 7BPCh. 3 - Prob. 8BPCh. 3 - Prob. 3SPCh. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Prob. 3BTNCh. 3 - Prob. 4BTNCh. 3 - Prob. 5BTNCh. 3 - Prob. 7BTNCh. 3 - Prob. 9BTN
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