1460T_c03.qxd11/18/0508:34 am Page109 EQA Exercises·109 (LO 5)E3-6 (Adjusting Entries)Karen Weller,D.D.S.,opened a dental practice on January 1,2007.During the first month of operations the following transactions occurred. 1.Performed services for patients who had dental plan insurance.At January 31,$750 of such ser- vices was earned but not yet billed to the insurance companies. 2. Utility expenses incurred but not paid prior to January 31 totaled $520. 3.Purchased dental equipment on January 1 for $80,000,paying $20,000 in cash and signing a $60,000,3-year note payable.The equipment depreciates $400 per month.Interest is $500 per month. 4.Purchased a one-year malpractice insurance policy on January 1 for $12,000. 5.Purchased $1,600 of dental supplies.On January 31,determined that $500 of supplies were on hand. Instructions Prepare the adjusting entries on January 31.(Omit explanations.)Account titles are:Accumulated Depreciation-Dental Equipment;Depreciation Expense;Service Revenue;Accounts Receivable;Insur- ance Expense;Interest Expense;Interest Payable;Prepaid Insurance;Supplies;Supplies Expense;Utili- ties Expense;and Utilities Payable. (Lo 5)E3-7 (Analyze Adjusted Data)A partial adjusted trial balance of Piper Company at January 31,2007, shows the following. PIPER COMPANY ADJUSTED TRIAL BALANCE JANUARY 31.2007 Debit Credit Supplies $700 Prepaid Insurance 2,400 Salaries Payable $800 ⊕ Unearned Revenue 750 Supplies Expense 950 Insurance Expense 400 Salaries Expense 1,800 Service Revenue 2,000 Instructions Answer the following questions,assuming the year begins January 1. (a)If the amount in Supplies Expense is the January 31 adjusting entry,and $850 of supplies was purchased in January,what was the balance in Supplies on January 1? (b)If the amount in Insurance Expense is the January 31 adjusting entry,and the original insur- ance premium was for one year,what was the total premium and when was the policy pur- chased？ (c) If $2,500 of salaries was paid in January,what was the balance in Salaries Payable at December 31,2006? (d)If $1,600 was received in January for services performed in January,what was the balance in Un- earned Revenue at December 31,2006? (L05) E3-8 (Adjusting Entries)Andy Roddick is the new owner of Ace Computer Services.At the end of August 2007,his first month of ownership,Roddick is trying to prepare monthly financial statements.Be- low is some information related to unrecorded expenses that the business incurred during August. 1.At August 31,Roddick owed his employees $1,900 in wages that will be paid on September 1. 2.At the end of the month he had not yet received the month's utility bill.Based on past experience, he estimated the bill would be approximately $600. 3.On August 1,Roddick borrowed $30,000 from a local bank on a 15-year mortgage.The annual in- terest rate is 8%. 4.A telephone bill in the amount of $117 covering August charges is unpaid at August 31. Instructions Prepare the adjusting journal entries as of August 31,2007,suggested by the information above. ⊕
Exercises • 109 E3-6 (Adjusting Entries) Karen Weller, D.D.S., opened a dental practice on January 1, 2007. During the first month of operations the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $750 of such services was earned but not yet billed to the insurance companies. 2. Utility expenses incurred but not paid prior to January 31 totaled $520. 3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable. The equipment depreciates $400 per month. Interest is $500 per month. 4. Purchased a one-year malpractice insurance policy on January 1 for $12,000. 5. Purchased $1,600 of dental supplies. On January 31, determined that $500 of supplies were on hand. Instructions Prepare the adjusting entries on January 31. (Omit explanations.) Account titles are: Accumulated Depreciation—Dental Equipment; Depreciation Expense; Service Revenue; Accounts Receivable; Insurance Expense; Interest Expense; Interest Payable; Prepaid Insurance; Supplies; Supplies Expense; Utilities Expense; and Utilities Payable. E3-7 (Analyze Adjusted Data) A partial adjusted trial balance of Piper Company at January 31, 2007, shows the following. PIPER COMPANY ADJUSTED TRIAL BALANCE JANUARY 31, 2007 Debit Credit Supplies $ 700 Prepaid Insurance 2,400 Salaries Payable $ 800 Unearned Revenue 750 Supplies Expense 950 Insurance Expense 400 Salaries Expense 1,800 Service Revenue 2,000 Instructions Answer the following questions, assuming the year begins January 1. (a) If the amount in Supplies Expense is the January 31 adjusting entry, and $850 of supplies was purchased in January, what was the balance in Supplies on January 1? (b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for one year, what was the total premium and when was the policy purchased? (c) If $2,500 of salaries was paid in January, what was the balance in Salaries Payable at December 31, 2006? (d) If $1,600 was received in January for services performed in January, what was the balance in Unearned Revenue at December 31, 2006? E3-8 (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August 2007, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August. 1. At August 31, Roddick owed his employees $1,900 in wages that will be paid on September 1. 2. At the end of the month he had not yet received the month’s utility bill. Based on past experience, he estimated the bill would be approximately $600. 3. On August 1, Roddick borrowed $30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%. 4. A telephone bill in the amount of $117 covering August charges is unpaid at August 31. Instructions Prepare the adjusting journal entries as of August 31, 2007, suggested by the information above. (L0 5) (L0 5) (L0 5) 1460T_c03.qxd 11/18/05 08:34 am Page 109
1460T_c03.qd11/18/0508:34 am Page110 EQA 110.Chapter 3 The Accounting Information System (L0 5)E3-9 (Adjusting Entries)Selected accounts of Urdu Company are shown below. Supplies Accounts Receivable Beg.Bal 80010/31 470 10/17 2,400 10/31 1,650 Salaries Expense Salaries Payable 10/15 800 10/31 600 10/31 600 Unearned Service Revenue Supplies Expense 10/31 400 10/20 650 10/31 470 Service Revenue 10/17 2,400 10/31 1,650 10/31 400 Instructions From an analysis of the T-accounts,reconstruct(a)the October transaction entries,and(b)the adjusting journal entries that were made on October 31,2007.Prepare explanations for each journal entry. (L0 5)E3-10 (Adjusting Entries)Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. GRECO RESORT TRIAL BALANCE ⊕ AUGUST 31,2007 Debit Credit Cash $19,600 Prepaid Insurance 4,500 Supplies 2,600 Land 20,000 Cottages 120,000 Furniture 16,000 Accounts Payable $4,500 Unearned Rent Revenue 4,600 Mortgage Payable 60,000 Common Stock 91,000 Retained Earnings 9.000 Dividends 5,000 Rent Revenue 76,200 Salaries Expense 44,800 Utilities Expense 9,200 Repair Expense 3,600 $245,300 $245,300 Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1,2007 2.An inventory count on August 31 shows $450 of supplies on hand. 3. Annual depreciation rates are cottages(4%)and furniture(10%).Salvage value is estimated to be 10%of cost. 4.Unearned Rent Revenue of $3,800 was earned prior to August 31. 5.Salaries of $375 were unpaid at August 31. 6.Rentals of $800 were due from tenants at August 31. 7. The mortgage interest rate is 8%per year
110 • Chapter 3 The Accounting Information System E3-9 (Adjusting Entries) Selected accounts of Urdu Company are shown below. Supplies Accounts Receivable Beg. Bal. 800 10 ⁄ 31 470 10 ⁄ 17 2,400 10 ⁄ 31 1,650 Salaries Expense Salaries Payable 10 ⁄ 15 800 10 ⁄ 31 600 10 ⁄ 31 600 Unearned Service Revenue Supplies Expense 10 ⁄ 31 400 10 ⁄ 20 650 10 ⁄ 31 470 Service Revenue 10 ⁄ 17 2,400 10 ⁄ 31 1,650 10 ⁄ 31 400 Instructions From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting journal entries that were made on October 31, 2007. Prepare explanations for each journal entry. E3-10 (Adjusting Entries) Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1, 2007. 2. An inventory count on August 31 shows $450 of supplies on hand. 3. Annual depreciation rates are cottages (4%) and furniture (10%). Salvage value is estimated to be 10% of cost. 4. Unearned Rent Revenue of $3,800 was earned prior to August 31. 5. Salaries of $375 were unpaid at August 31. 6. Rentals of $800 were due from tenants at August 31. 7. The mortgage interest rate is 8% per year. GRECO RESORT TRIAL BALANCE AUGUST 31, 2007 Debit Credit Cash $ 19,600 Prepaid Insurance 4,500 Supplies 2,600 Land 20,000 Cottages 120,000 Furniture 16,000 Accounts Payable $ 4,500 Unearned Rent Revenue 4,600 Mortgage Payable 60,000 Common Stock 91,000 Retained Earnings 9,000 Dividends 5,000 Rent Revenue 76,200 Salaries Expense 44,800 Utilities Expense 9,200 Repair Expense 3,600 $245,300 $245,300 (L0 5) (L0 5) 1460T_c03.qxd 11/18/05 08:34 am Page 110