ACCT110 - Accounting Principles I

Prepare Adjusting Entries

Directions:

Look at the problems below. Select one letter from either problem and write the journal entry. Ensure

that the format you use for your entry is the same as the format used in your text. Indent the credits.

Type the problem number and letter number in the subject line of your entry. Do not duplicate entries.

Feel free to help your classmates or ask them for help.

PROBLEM 3-2C

Gary Company follows the practice of recording prepaid expenses and unearned revenues in balance

sheet accounts. Gary%u2019s annual accounting period ends on December 31, 2008. The following information

concerns the adjusting entries to be recorded as of that date:

a. The Office Supplies account started this year with a $4,000 balance. During 2008, the company

purchased supplies for $8,400, and this was added to the Office Supplies account. The inventory

of supplies available on December 31, 2008 totaled $1,800.

b. An analysis of the company's insurance policies provided these facts:

Policy Date of Purchase Months of Coverage Cost

A January 1, 2007 24 $4,800

B April 1, 2008 36 $3,600

C July 1, 2008 12 $5,400

The total premium for each policy was paid in full (for all months) at the purchase date and the Prepaid

Insurance account was debited for the full cost (year-end adjusting entries for Prepaid Insurance were

properly recorded in all prior years).

c. The company has 20 employees who earn a total of $3,200 in salaries each working day. They

are paid each Monday for their work during the five-day work week ending on the previous Friday.

Assume that December 31, 2008 is a Tuesday and that all 20 employees worked the first two

days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five

full days on Monday, January 6, 2009.

d. The company purchased a building on January 1, 2008. It cost $785,000 and is expected to have

$35,000 salvage value at the end of its predicted 25-year life. Annual depreciation is $30,000.

e. Since the company is not large enough to occupy the entire building it owns, it rented space to a

tenant at $2,400 per month starting on October 1, 2008. The rent was paid on time on October 1

and November 1, and the amount received was credited to the Rent Earned account. However,

the tenant has not paid the December rent. The company has worked out an agreement with the

tenant, who has promised to pay both the December and January rent in full on January 15. The

tenant has agreed to not fall behind again.

f. On December 1, the company rented space to another tenant for $3,200 per month. The tenant

paid six months' rent in advance on that date. The payment was recorded with a credit to the

Unearned Rent account.

Required: Use the information to prepare adjusting entries as of December 31, 2008.

ACCT110 Prepare Adjusting Entries Activity 2

PROBLEM 3-3C

Champlain Confuser Systems, a tech center owned by Sam Champlain, provides training to individuals

who pay tuition directly to the school. The school also offers training to groups in off-site locations. The

center's unadjusted trial balance as of December 31, 2008 can be found below. Champlain Confuser

Systems initially records prepaid expenses and unearned revenues in balance sheet accounts. The

following are descriptions of items a through h, which require adjusting entries on December 31, 2008.

a. An analysis of the company%u2019s insurance policies shows that $3,600 of coverage has expired.

b. An inventory count shows that teaching supplies costing $900 are available at year-end 2008.

c. Annual depreciation on the equipment is $7,200.

d. Annual depreciation on the professional library is $1,500.

e. On October 1, the company agreed to do a special five-month course for a client. The contract

calls for a monthly fee of $2,000, and the client paid the fees for the first four months in advance.

When the cash was received, the Unearned Training Fees account was credited. The fee for the

fifth month will be recorded when it is collected in 2009.

f. On November 1, the school agreed to teach a four-month class (beginning immediately) to an

individual for $1,700 per month. The tuition will be payable at the end of the class. The services

are being provided as agreed, and no payment has been received.

g. The school%u2019s five employees are paid weekly. As of the end of the year, four days%u2019 wages have

accrued at the rate of $150 per day for each employee.

h. The balance in the Prepaid Rent account represents rent for December.

CHAMPLAIN CONFUSER SYSTEMS

Unadjusted Trial Balance

December 31, 2008

Cash................................................................... $ 25,000

Accounts receivable........................................... -0-

Teaching supplies ............................................. 3,800

Prepaid insurance.............................................. 9,800

Prepaid rent........................................................ 500

Professional library............................................ 12,000

Accumulated depreciation%u2014Professional library...........$ 3,000

Equipment.......................................................... 69,000

Accumulated depreciation%u2014Equipment............. 22,900

Accounts payable............................................... 6,000

Salaries payable................................................. -0-

Unearned training fees....................................... 10,000

ACCT110 Prepare Adjusting Entries Activity 3

S. Champlain, Capital......................................... 40,000

S. Champlain, Withdrawals................................ 14,000

Tuition fees earned............................................ 99,900

Training fees earned.......................................... 25,000

Depreciation expense%u2014Equipment.................... -0-

Depreciation expense%u2014Professional library...... -0-

Salaries expense ...............................................54,800

Insurance expense.............................................. -0-

Rent expense...................................................... 5,500

Teaching supplies expense................................ -0-

Advertising expense........................................... 6,000

Utilities expense................................................. 6,400 _____

Totals................................................................. $206,800 $206,800

Required: Prepare adjusting entries for items (a) through (h). Assume adjusting entries are made only at year-end