FINANCIAL ACCT.FUND(LL)W/ACCESS>CUSTOM<
FINANCIAL ACCT.FUND(LL)W/ACCESS>CUSTOM<
6th Edition
ISBN: 9781260255119
Author: Wild
Publisher: MCG CUSTOM
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Chapter 3, Problem 5E

a.

To determine

Prepare adjusting entry to record the accrued revenue and the amount of service revenue earned that was collected in advance.

a.

Expert Solution
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Explanation of Solution

Adjusting entry to record the accrued revenue for the year ended December 31:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Accounts receivable2,100
Service revenue ($7,000×30%)2,100
(To record the earned service revenue)

Table (1)

Accrued revenues:

Accrued revenues are the revenues that have been earned, but the cash has not yet been collected for the earned revenue. These accrued revenues create assets. For the portion of collection of cash, created assets would be reduced by way of passing an adjusting entry.

Performed services must be billed while making an adjusting entry to record the accrued service revenue. Accrued service revenue increases both accounts receivable and service revenue.

  • Debit to increase the accounts receivable (asset account).
  • Credit to increase the service revenue account (Stockholders’ equity account).

Adjusting entry to record the amount of service revenue earned that was collected in advance:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Unearned fees4,900
Fees earned 4,900
(To record the amount of earned service revenue that was collected in advance)

Table (2)

Fees received in advance represent unearned revenue. At the end of Year December 31, earned unearned revenue of $4,900 ($7,000×70%) must be recognized by decreasing the unearned revenue (liability account) and by increasing the service revenue (revenue account).  

  • Debit to decrease the unearned fees account (liability account).
  • Credit to increase the fee earned account (stockholders’ equity account).

b.

To determine

Prepare adjusting entry to record the depreciation expense for the year ended December 31.

b.

Expert Solution
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Explanation of Solution

Adjusting entries to record the depreciation expense of computers:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Depreciation expense – Computers1,600
      Accumulated depreciation - Computers1,600
(To record the amount of depreciation on computers)

Table (3)

Depreciation expense is the written down value of the tangible asset at the end of each accounting year. Accumulated depreciation is the cumulative depreciation expense till the date from the date of purchase of an asset.

  • Debit to increase the Depreciation expense account (Increase in Depreciation expense decreases stockholders’ equity account).
  • Credit to increase the Accumulated depreciation account (contra asset account).

c.

To determine

Prepare adjusting entry to record the depreciation expense for the year ended December 31.

c.

Expert Solution
Check Mark

Explanation of Solution

Adjusting entries to record the depreciation expense of office furniture:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Depreciation expense – Office furniture1,850
      Accumulated depreciation - Office furniture1,850
(To record the amount of depreciation on office furniture)

Table (4)

Depreciation expense is the written down value of the tangible asset at the end of each accounting year. Accumulated depreciation is the cumulative depreciation expense till the date from the date of purchase of an asset.

  • Debit to increase the Depreciation expense account (Increase in Depreciation expense decreases stockholders’ equity account).
  • Credit to increase the Accumulated depreciation account (contra asset account).

d.

To determine

Prepare the adjusting entry for Salaries expense for the year ended December 31.

d.

Expert Solution
Check Mark

Explanation of Solution

Adjusting entry to record the salaries wages for the year ended December 31:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Salaries expense (SE–)2,250
Salaries payable (L+)2,250
(To record the salaries accrued but not yet paid)

Table (5)

  • Debit to increase the salaries expense account (Increase in salaries expense decreases stockholders’ equity account).
  • Credit to increase the salaries payable account (liability account).

Working note:

Calculate the amount of salaries expenses for the year ended December 31

Salaries expenses=(Adjusted balance of salaries expensesUnadjusted balance of salaries expenses)=$15,750$13,500=$2,250

e.

To determine

Prepare adjusting entry to record the insurance expense for the year ended December 31.

e.

Expert Solution
Check Mark

Explanation of Solution

Adjusting entries to record the insurance expense for the year ended December 31:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Insurance expense1,400
      Prepaid insurance1,400
(To record the prepaid insurance has expired)

Table (6)

Prepaid insurance is a prepaid expense, which should be adjusted through an adjusting entry with the amount equal to the cost of the prepaid insurance expired at the end of the accounting year.

  • Debit to increase the insurance expense account (Increase in insurance expense decreases stockholders’ equity account).
  • Credit to decrease the prepaid insurance account (asset account).

f.

To determine

Prepare adjusting entry to record the amount of office supplies used for the year ended December 31.

f.

Expert Solution
Check Mark

Explanation of Solution

Adjusting entry to record the amount of office supplies used for the year ended December 31:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Supplies expense580
Office supplies 580
(To record the amount of office supplies used during the period)

Table (7)

For the portion of used office supplies, office supplies balance (asset) would be reduced by way of passing an adjusting entry. Office supplies expense of $580 for the used supplies must be recognized.

  • Debit to increase the Office supplies expense account (Increase in office supplies expense decreases stockholders’ equity account).
  • Credit to decrease the office supplies account (asset account).

g.

To determine

Prepare adjusting entry to record the accrued utilities expenses for the year ended December 31.

g.

Expert Solution
Check Mark

Explanation of Solution

Adjusting entry to record the accrued utilities expenses for the year ended December 31:

DateAccounts title and explanation

Debit

($)

Credit

($)

December 31Utilities expense90
       Utilities payable90
(To record the utilities expenses incurred but not yet paid)

Table (8)

  • Utilities expense is an expense account (increase in Utilities expense decreases stockholders’ equity account), hence debit to increase Utilities expense account with $90.
  • Utilities payable is a liability, which is increased by $600. Hence, credit to increase the Utilities payable account by $90.

Working note:

Calculate the amount of accrued utilities expense for the year ended December 31

Accrued utilities expense=(Adjusted balance of salaries expensesUnadjusted balance of salaries expenses)=$1,335$1,245=$90

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Chapter 3 Solutions

FINANCIAL ACCT.FUND(LL)W/ACCESS>CUSTOM<

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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