1.5 Exercises

Exercise 1.1

The following data are taken from an unadjusted trial balance at December 31, 2015:

Additional Information:

1. The prepaid rent consisted of a payment for three months’ rent at $200 per month for December 2015, January 2016, and February 2016.
2. Office supplies on hand at December 31, 2015 amounted to $300.
3. The estimated income taxes for 2015 are $5,000.
4. All but $500 in the Unearned Commissions account has been earned in 2015.
5. Salaries for the last three days of December amounting to $300 have not yet been recorded.

Required:

Prepare all necessary adjusting entries in general journal format.

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Exercise 1.2

Below are descriptions of various monthly adjusting entries:

1. Adjusting entry for revenue earned but not yet billed to the customer.
2. Adjusting entry for cash received from a customer for revenue not yet earned.
3. Adjusting entry for revenue earned that was originally received as cash in advance in the previous month.
4. Adjusting entry for services received from a supplier, but not yet paid.
5. Adjusting entry for cash paid to a supplier for repair services not yet received.
6. Adjusting entry for repair services received that was originally paid as cash in advance to the supplier in the previous month.
7. Adjusting entry for salaries earned by employees, but not yet paid.
8. Adjusting entry for annual depreciation expense for equipment.

Required:

For each description above, identify the likely journal entry debit and credit account.

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Exercise 1.3

The trial balance and other important financial information for consulting engineers MVR Consulting Limited is presented below:

MVR Consulting Limited Trial Balance At December 31, Y3
	Debit	Credit
Cash	$63,500
Accounts Receivable	45,630
Allowance for doubtful accounts		$1,450
Supplies	3,240
Equipment	96,500
Accumulated depreciation - equipment		6,250
Notes payable		12,500
Common shares		50,000
Retained earnings		19,830
Service revenue		256,400
Rent expense	24,500
Salaries and wage expense	89,650
Insurance expense	18,500
Utilities expense	3,650
Office Expense	1260
	$346,430	$346,430
Additional Information:
1. Service revenue includes fees received in advance from clients of $13,450.
2. Services performed for clients that were not recorded by December 31 were $15,200.
3. Bad debt expense for the year is estimated to be $1,700.
4. Insurance expense includes a premium paid on December 31 in the amount of $5,200 for the period starting on January 1, Y3.
5. Equipment is depreciated on a straight-line basis over 10 years. Residual value is $10,000.
6. MVR signed a short-term note with the bank. The detailes are a 90-day, 8% note for $12,500 on December 1, Y3.
7. Rent is $2100 per month. The rent for Y3 and for January Y4 has been paid.
8. Salaries and wages earned but unpaid at December 31, Y3 are $3,500.
9. Dividends of $1,000 were declared for payment on February 1, Y4.

Required:

Prepare the appropriate adjusting entry (if needed) for each of the above transactions

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Exercise 1.4

The trial balance of Belmont Inc. on December 31, Y5 is as follows:

	Debit	Credit
Cash	$ 7,465
Accounts Receivables	3,560
Prepaid insurance	4,350
Supplies	1,520
Equipment	12,000
Accumulated Depreciation - Equipment		$1,200
Accounts Payable		3,060
Unearned revenue		3,560
Common Shares		10,000
Retained earnings		8,633
Service revenue		6,320
Advertising expense	328
Salaries and wage expense	3,100
Office expense	450
	$32,773	$32,773
The following adjusting entries have not been entered for the fiscal year ended December 31, Y5:
1. The equipment has a useful life of 6 years, no residual value.
2. The insurance policy was paid on November 1, Y5 and is a twelve-month policy.
3. An physical count of the inventory of supplies indicated $965 on hand at December 31, Y5.
4. Half of the unearned revenue was billed at December 31, Y5.
5. Work in the amount of $2,345 was completed for customers but not invoiced or billed at December 31, Y5.
6. A telephone bill in the amount of $580 was received but not entered into accounts payable at December 31, Y5.

Required:

Prepare the adjusting journal entries as needed for the above information and prepare a completed worksheet.

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Exercise 1.5

Required:

Extend the amounts from the adjusted trial balance to the appropriate statement

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Exercise 1.6

The following independent transactions are available for Oxford Corporation for the fiscal Y4.

Oxford Corporation has a December 31 year end

No adjusting journal entries have been completed for the year.

1. On September 30, Y4 Oxford borrowed $320,000. The bank issued a 120 day, 4% note.
2. On August 1, Y4, Oxford paid the annual (12 month) insurance policy in the amount of $32,500.
3. The unearned revenue account has a balance of $52,300. One-third of that amount was earned in the current year.
4. All employees are paid weekly (for the pay period ending on Friday). The average weekly wage is $62,000. December 31 is a Tuesday.
5. Equipment in the amount of $32,000 was purchased on April 1, Y4. It is estimated to have a useful life of 4 years, no residual value.
6. Work completed for customers that have not yet been invoiced totalled $31,800 at December 31, Y4.
7. Supply inventory on the unadjusted trial balance was $4,265. A physical count indicated $2,144 supplies on hand at December 31, Y4.
8. An invoice for advertising expense was received for $3,200 but was not recorded on the unadjusted trial balance at December 31, Y4.
9. On December 20, Y4, Oxford received a cheque in the amount of $21,000 from a customer. The work is to be completed in January, Y5 but was included in December, Y4 revenue.
10. Bad debt expense was estimated to be $12,560 at December 31, Y4.

Required:

Prepare the appropriate adjusting or correcting journal entry for the above items.