Chapter 3, Problem 3.13E

(a)

To determine

To record: The adjusting entry for interest revenue recognized at the end of the accounting year.

Answer to Problem 3.13E

Adjusting entry for service revenue is as follows:

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Interest receivable		270
	Interest revenue			270
	(To record the interest revenue recognized at the end of the accounting year)

Table (4)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Interest receivable is an assets account. There is an increase in assets, therefore it is debited.
• Interest revenue is revenue, and it increased the value of stockholder’s equity. Therefore, it is credited

(b)

To determine

To record: The adjusting entry for prepaid rent.

Answer to Problem 3.13E

Adjusting entry for prepaid rent is as follows:

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Rent expense		3,000
	Prepaid rent			3,00
	(To record the rent expense incurred at the end of the accounting year)

Table (2)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Rent expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
• Prepaid rent is an asset account. There is a decrease in assets, therefore it is credited.

(c)

To determine

To record: The adjusting entry for service revenue recognized at the end of the accounting year.

Answer to Problem 3.13E

Adjusting entry for service revenue is as follows:

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Unearned revenue		5,500
	Service revenue			5,500
	(To record the service revenue recognized at the end of the accounting year)

Table (4)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Unearned revenue is a liability account. There is a decrease in liability, therefore it is debited.
• Service revenue is revenue, and it increased the value of stockholder’s equity. Therefore, it is credited

(d)

To determine

To record: The adjusting entry for depreciation expense on December 31, 2018.

Answer to Problem 3.13E

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Depreciation Expense		5,500
	Accumulated Depreciation			5,500
	(To record the amount of depreciation for the year)

Table (2)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Depreciation expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
• Accumulated depreciation is a contra-asset account. There is a decrease in assets, therefore it is credited.

(e)

To determine

To record: The adjusting entry for salaries expense.

Answer to Problem 3.13E

Adjusting entry for salaries expense is as follows:

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Salaries expense		5,000
	Salaries payable			5,000
	(To record the salaries expense incurred at the end of the accounting year)

Table (5)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Salaries expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
• Salaries payable is a liability account. There is a decrease in liability, therefore it is credited.

(f)

To determine

To record: The adjusting entry for supplies expense.

Answer to Problem 3.13E

Adjusting entry for supplies expense is as follows:

Date	Accounts title and explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2015	Supplies expense		3,500
	Supplies			3,500
	(To record the supplies expense incurred at the end of the accounting year)

Table (3)

Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

Following is the rules of debit and credit of above transaction:

• Supplies expense is an expense, and it decreased the value of stockholder’s equity. Therefore, it is debited.
• Supplies are an asset account. There is a decrease in assets, therefore it is credited.