Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 3, Problem 64BPSB

Problem 3-64B Identification and Preparation of Entries

Morgan Dance Inc. provides ballet, tap, and jazz dancing instruction to promising young dancers. Morgan began operations in January 2020 and is preparing its monthly financial statements. The following items describe Morgan’s transactions in January 2020:

  1. Morgan requires that dance instruction be paid in advance-either monthly or quarterly.
  2. On January 1, Morgan received $4,125 for dance instruction to be provided during 2020.
  3. On January 31, Morgan noted that $825 of dance instruction revenue is still unearned.
  4. On January 20, Morgan’s hourly employees were paid $1,415 for work performed in January.
  5. Morgan’s insurance policy requires semiannual premium payments. Morgan paid the $3,000 insurance policy which covered the first half of 2020 in December 2019.
  6. When there are no scheduled dance classes, Morgan rents its dance studio for birthday parties for $100 per two-hour party. Four birthday parties were held during January. Morgan will not bill the parents until February.
  7. Morgan purchased $350 of office supplies on January 10.
  8. On January 31, Morgan determined that Office supplies of $770 were unused.
  9. Morgan received a January utility bill for S770. The bill will not be paid until it is due in February.

Required:

  1. Identify whether each transaction is an adjusting entry or a regular journal entry. If the entry is an adjusting entry, identify it as an accrued revenue, accrued expense, deferred revenue, or deferred expense.
  2. Prepare the entries necessary to record the transactions above and on the previous page.
Expert Solution
Check Mark
To determine

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
  • Requirement-1:

To Indicate:

If the given transactions is regular or adjusting journal entry and type of adjusting journal entry, if any.

Answer to Problem 64BPSB

The given transactions are regular or adjusting journal entry and type of adjusting journal entry, if any as follows:

    Morgan Dance Inc.
    Transaction Type of entryType of adjusting entry
    a.Regular Journal Entry NA
    b.Adjusting entry Accrued Revenue
    c.Regular Journal Entry NA
    d.Regular Journal Entry NA
    e.Adjusting entry Accrued Revenue
    f.Regular Journal Entry NA
    g.Adjusting entry Accrued Expense
    h.Adjusting entry Accrued Expense

Explanation of Solution

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period.

The given transactions are regular or adjusting journal entry and type of adjusting journal entry, if any as follows:

    Morgan Dance Inc.
    Transaction Type of entryType of adjusting entry
    a.Regular Journal Entry NA
    b.Adjusting entry Accrued Revenue
    c.Regular Journal Entry NA
    d.Regular Journal Entry NA
    e.Adjusting entry Accrued Revenue
    f.Regular Journal Entry NA
    g.Adjusting entry Accrued Expense
    h.Adjusting entry Accrued Expense
Expert Solution
Check Mark
To determine

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
  • Requirement-2:

To Prepare The journal entries for the given transactions.

Answer to Problem 64BPSB

The journal entries for the given transactions are as follows:

    Morgan Dance Inc.
    Adjusting entries
    #Date Account TitleDebit Credit
    aJan. 1Cash $ 4,125
    Unearned Service Revenue $ 4,125
    bJan. 31Unearned Service Revenue $ 3,300
    Service Revenue $ 3,300
    c.Jan. 20Salaries Expense $ 1,415
    Cash $ 1,415
    d.Prepaid Insurance $ 3,000
    Cash $ 3,000
    e.Jan. 31Accounts Receivable $ 400
    Service Revenue $ 400
    f.Jan. 10Office Supplies $ 350
    Cash $ 350
    g.Jan. 31Office Supplies Expense $ 265
    Office Supplies $ 265
    h.Jan. 31Utilities Expense $ 770
    Utilities Payable $ 770

Explanation of Solution

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period.

The journal entries for the given transactions are as follows:

    Morgan Dance Inc.
    Adjusting entries
    #Date Account TitleDebit Credit
    aJan. 1Cash $ 4,125
    Unearned Service Revenue $ 4,125
    (Being amount received in advance)
    bJan. 31Unearned Service Revenue $ 3,300
    Service Revenue (4125-825) $ 3,300
    (Being revenue accrued)
    c.Jan. 20Salaries Expense $ 1,415
    Cash $ 1,415
    (Being expense paid in cash)
    d.Prepaid Insurance $ 3,000
    Cash $ 3,000
    (Being amount paid in advance )
    e.Jan. 31Accounts Receivable $ 400
    Service Revenue (100*4) $ 400
    (Being revenue accrued)
    f.Jan. 10Office Supplies $ 350
    Cash $ 350
    (Being supplies purchased )
    g.Jan. 31Office Supplies Expense (350-85) $ 265
    Office Supplies $ 265
    (Being expense accrued)
    h.Jan. 31Utilities Expense $ 770
    Utilities Payable $ 770
    (Being expense accrued)

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Chapter 3 Solutions

Cornerstones of Financial Accounting

Ch. 3 - Prob. 11DQCh. 3 - Describe the effect on the financial statements...Ch. 3 - Prob. 13DQCh. 3 - Prob. 14DQCh. 3 - Prob. 15DQCh. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - ( Appendix 3A) What is the relationship between...Ch. 3 - Prob. 20DQCh. 3 - Which of the following statements is true? Under...Ch. 3 - In December 2019, Swanstrom Inc. receives a cash...Ch. 3 - Which transaction would require adjustment at...Ch. 3 - Which of the following statements is false?...Ch. 3 - Dallas Company loaned to Ewing Company on December...Ch. 3 - Rons Diner received the following bills for...Ch. 3 - In September 2019, GolfWorld Magazine obtained...Ch. 3 - Hurd Inc. prepays rent every 3 months on March 1,...Ch. 3 - Which of the following statements is incorrect...Ch. 3 - Reinhardt Company reported revenues of $122,000...Ch. 3 - Prob. 11MCQCh. 3 - Cornerstone Exercise 3-12 Accrual- and Cash-Basis...Ch. 3 - Cornerstone Exercise 3-13 Accrual- and Cash-Basis...Ch. 3 - Prob. 14CECh. 3 - Prob. 15CECh. 3 - Cornerstone Exercise 3-16 Identification of...Ch. 3 - Cornerstone Exercise 3-17 Accrued Revenue...Ch. 3 - Cornerstone Exercise 3-18 Accrued Expense...Ch. 3 - Cornerstone Exercise 3-19 Deferred Revenue...Ch. 3 - Cornerstone Exercise 3-20 Deferred Expense...Ch. 3 - Cornerstone Exercise 3-21 Adjustment for Supplies...Ch. 3 - Cornerstone Exercise 3-22 Adjustment for...Ch. 3 - Prob. 23CECh. 3 - Cornerstone Exercise 3-24 Preparing an Income...Ch. 3 - Cornerstone Exercise 3-25 Preparing a Retained...Ch. 3 - Cornerstone Exercise 3-26 Preparing a Balance...Ch. 3 - Cornerstone Exercise 3-27 Preparing and Analyzing...Ch. 3 - Brief Exercise 3-28 Accrual- and Cash-Basis...Ch. 3 - Brief Exercise 3-29 Revenue and Expense...Ch. 3 - Brief Exercise 3-30 Identification of Adjusting...Ch. 3 - Brief Exercise 3-31 Adjusting Entries-Accruals...Ch. 3 - Brief Exercise 3-32 Adjusting Entries-Deferrals...Ch. 3 - Brief Exercise 3-33 Preparing an Income Statement...Ch. 3 - Brief Exercise 3-34 Preparing a Retained Earnings...Ch. 3 - Prob. 35BECh. 3 - Brief Exercise 3-36 Preparing and Analyzing...Ch. 3 - Prob. 37BECh. 3 - Exercise 3-38 Accrual- and Cash-Basis Expense...Ch. 3 - Exercise 3-39 Revenue Recognition Each of the...Ch. 3 - Exercise 3-40 Revenue and Expense Recognition...Ch. 3 - Exercise 3-41 Cash-Basis and Accrual-Basis...Ch. 3 - Exercise 3-42 Revenue and Expense Recognition...Ch. 3 - Exercise 3-43 Recognizing Expenses Treadway Dental...Ch. 3 - Exercise 3-44 Revenue Expense and Recognition...Ch. 3 - Exercise 3-45 Identification of Adjusting Entries...Ch. 3 - Exercise 3-46 Identification and Analysis of...Ch. 3 - Exercise 3-47 Revenue Adjustments Sentry Transport...Ch. 3 - Expense Adjustments Faraday Electronic Service...Ch. 3 - Prob. 49ECh. 3 - Exercise 3-50 Prepayment of Expenses JDM Inc. made...Ch. 3 - Exercise 3-51 Adjustment for Supplies The downtown...Ch. 3 - Adjusting Entries Exercise 3-52 Allentown Services...Ch. 3 - Prob. 53ECh. 3 - Exercise 3-54 Recreating Adjusting Entries...Ch. 3 - Exercise 3-55 Effect of Adjustments on the...Ch. 3 - Exercise 3-56 Preparing an Income Statement Oxmoor...Ch. 3 - Exercise 3-57 Preparing a Retained Earnings...Ch. 3 - Exercise 3-58 Preparing a Balance Sheet Refer to...Ch. 3 - Exercise 3-59 Preparation of Closing Entries Grand...Ch. 3 - Exercise 3-60 Preparation of Closing Entries James...Ch. 3 - Exercise 3-61 Preparation of a Worksheet (Appendix...Ch. 3 - Problem 3-62A Cash-Basis and Accrual-Basis Income...Ch. 3 - Problem 3-63A Revenue and Expense Recognition...Ch. 3 - Problem 3-64A Identification and Preparation of...Ch. 3 - Problem 3-65A Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67A Adjusting Entries and Financial...Ch. 3 - Problem 3-68A Inferring Adjusting Entries from...Ch. 3 - Problem 3-69A Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71 A Preparing a Worksheet (Appendix 3A)...Ch. 3 - Prob. 62BPSBCh. 3 - Problem 3-63B Revenue and Expense Recognition Aunt...Ch. 3 - Problem 3-64B Identification and Preparation of...Ch. 3 - Problem 3-65B Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67B Adjusting Entries and Financial...Ch. 3 - Problem 3-68B Inferring Adjusting Entries from...Ch. 3 - Problem 3-69B Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71B Preparing a Worksheet (Appendix 3A)...Ch. 3 - Case 3-72 Cash- or Accrual-Basis Accounting Karen...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-74 Revenue Recognition Melaney Parks...Ch. 3 - Prob. 74.2CCh. 3 - Prob. 75CCh. 3 - Prob. 76CCh. 3 - Prob. 77.1CCh. 3 - Prob. 77.2CCh. 3 - Prob. 78.1CCh. 3 - Prob. 78.2CCh. 3 - Case 3-78 Interpreting Closing Entries Barnes...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Prob. 79.2CCh. 3 - Prob. 79.3CCh. 3 - Prob. 79.4CCh. 3 - Prob. 79.5CCh. 3 - Prob. 80.1CCh. 3 - Refer to the 10-K reports of Under Armour, Inc.,...Ch. 3 - Prob. 80.3CCh. 3 - Prob. 80.4CCh. 3 - Prob. 81.1CCh. 3 - Prob. 81.2CCh. 3 - Prob. 81.3CCh. 3 - Prob. 81.4CCh. 3 - Prob. 81.5CCh. 3 - Prob. 81.6CCh. 3 - Prob. 81.7C
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