Exercise 3-2 For each of the following separate cases, prepare adjusting entries required of financial statements for the Preparing adjusting entries year ended (date of) December 31, 2011. (Assume that prepaid expenses are initially recorded in asset PI accounts and that fees collected in advance of work are initially recorded as liabilities.) a. One-third of the work related to $30,000 cash received in advance is performed thi b. Depreciation on the company's equipment for 2011 is $19,127. d. The Office Supplies account had a $480 debit balance on December 31, 2010. During 2011, $5,349 of office supplies are purchased. A physical count of supplies at December 31, 2011, shows $587 of supplies available. Check te Dr. insurance Expense, e. The Prepaid Insurance account had a $5,000 balance on December 31, 2010, An analysis of insurance $2,800, iff Cr, interest Revenue, $750 policies shows that $2,200 of unexpired insurance benefits remain at December 31,2011. f. The company has earned (but not recorded) $750 of interest from investments in CDs for the year ended December 31, 2011. The interest revenue will be received on January 10, 2012. g. The company has a bank loan and has incurred (but not recorded) interest expense of $3,500 for the year ended December 31, 2011. The company must pay the interest on January 2, 2012 . Exercise3-3PreparingadjustingentriesP1Prepareadjustingjournalentriesfortheyearended(dateof)December31,2011,foreachoftheseseparatesituations.Assumethatprepaidexpensesareinitiallyrecordedinassetaccounts.Alsoassumethatfeescol-lectedinadvanceofworkareinitiallyrecordedasliabilities. a. Depreciation on the company's equipment for 2011 is computed to be $16,000. b. The Prepaid Insurance account had a $7,000 debit balance at December 31,2011 , before adjusting for the costs of any expired coverage. An analysis of the company's insurance policies showed that $1,040 of unexpired insurance coverage remains. c. The Office Supplies account had a $300 debit balance on December 31,2010 ; and $2,680 of office Check (c) Dr. Ofticu Supples supplies were purchased during the year. The December 31, 2011, physical count showed \$354 of sup- Expense, 11,600 plies available. d. One-half of the work related to $10,000 of cash received in advance was performed this period. e. The Prepaid Insurance account had a $5,600 debit balance at December 31,2011 , before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $4,600 of coverage had expired. f. Wage expenses of $4,000 have been incurred but are not paid as of December 31,2011
