Effects of Adjustments and Corrections Listed here are a series of accounts that are numbered for identification.

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Effects of Adjustments and Corrections Listed here are a series of accounts that are numbered for identification. All accounts needed to answer this question are included. The same account may be used in several answers. 1. Cash 2. Accounts receivable 3. Notes receivable 4. Inventory 5. Accrued interest receivable 6. Accrued rent receivable 7. Fuel on hand 8. Prepaid rent 9. Prepaid insurance 10. Prepaid repairs and maintenance 11. Land 12. Buildings 13. Machinery and equipment 14. Accounts payable 15. Notes payable Required 16. Accrued wages and salaries payable 17. Accrued interest payable 18. Unearned subscription revenue 19. Capital stock 20. Sales 21. Fuel expense 22. Sales and wages 23. Insurance expense 24. Repairs and maintenance expense 25. Rent expense 26. Rent revenue 27. Subscription revenue 28. Interest revenue 29. Interest expense Prepare any necessary adjusting or correcting entries called for by the following situations, which were discovered at the end of the calendar year. With respect to each situation, assume that no entries have been made concerning the situation other than those specifically described (i.e., no monthly adjustments have been made during the year). Consider each situation separately. These transactions were not necessarily conducted by one firm. Amounts are in thou- sands of dollars.

a. A $3,000 purchase of equipment on December 30 was erroneously debited to Accounts Payable. The credit was correctly made to Cash.

b. A business made several purchases of fuel oil. Some purchases ($800) were debited to Fuel Expense, whereas others ($1,100) were charged to an asset account. An oil gauge revealed $400 of fuel on hand at the end of the year. There was no fuel on hand at the beginning of the year. What adjustment was necessary on December 31?

c. On April 1, a business took out a fire insurance policy. The policy was for 2 years, and the full pre- mium of $1,600 was paid on April 1. The payment was debited to Insurance Expense on April 1. What adjustment was necessary on December 31?

d. On December 1, $6,000 was paid in advance to the landlord for 5 months rent. The tenant debited Prepaid Rent for $6,000 on December 1. What adjustment is necessary on December 31 on the tenant's books?

e. Machinery is repaired and maintained by an outside maintenance company on an annual fee basis, payable in advance. The $900 fee for the year beginning October 1 was paid on October 1 and charged to Repairs and Maintenance Expense. What adjustment is necessary on December 31?

f. On November 16, $800 of machinery was purchased, $200 cash was paid down, and a 90-day, 5 percent note payable was signed for the balance. The November 16 transaction was properly recorded. Prepare the adjustment for the interest. g. A publisher sells subscriptions to magazines. Customers pay in advance. Receipts are originally credited to Unearned Subscription Revenue. On June 1, $24,000 in 1-year subscriptions were col- lected and recorded. What adjustment was necessary on December 31? h. On December 30, certain merchandise inventory was purchased for $1,000 on open account. The bookkeeper debited Machinery and Equipment and credited Accounts Payable for $1,000. Prepare a correcting entry. i. A 120-day, 8 percent, $20,000 cash loan was made to a customer on November 1. The November 1 transaction was recorded correctly. What adjustment is necessary on December 317

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Introduction To Financial Accounting

ISBN: 0131479725

9th Edition

Authors: Charles T Horngren, John A Elliott

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