Chapter 3

Adjusting the Accounts

PROBLEMS: SET B
Prepare adjusting entries,
post to ledger accounts, and
prepare adjusted trial balance.

P3-1B Jason Elsner started his own consulting firm, Elsner Company, on June 1, 2014.
The trial balance at June 30 is shown below.
ELSNER COMPANY
Trial Balance
June 30, 2014

(LO 4, 5, 6), AN

Account Number
101
112
126
130
157
201
209
301
400
726
729

Debit
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accounts Payable
Unearned Service Revenue
Owners Capital
Service Revenue
Salaries and Wages Expense
Rent Expense

Credit

$ 7,1 50
6,000
2,000
3,000
15,000
$ 4,500
4,000
21,750
7,900
4,000
1,000
$38,150

$38,150

In addition to those accounts listed on the trial balance, the chart of accounts for Elsner
Company also contains the following accounts and account numbers: No. 158 Accumulated
DepreciationEquipment, No. 212 Salaries and Wages Payable, No. 631 Supplies Expense,
No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense.
Other data:
Supplies on hand at June 30 are $750.
A utility bill for $150 has not been recorded and will not be paid until next month.
The insurance policy is for a year.
$2,800 of unearned service revenue is recognized for services performed during the
month.
5. Salaries of $1,900 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value. It is being depreciated at $250
per month for 60 months.
7. Invoices representing $1,200 of services performed during the month have not been
recorded as of June 30.
1.
2.
3.
4.

(c) Adj. trial balance $41,650

Prepare adjusting entries,
post, and prepare adjusted
trial balance and financial
statements.

Instructions
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number for
your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance
as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at June 30, 2014.
P3-2B Maquoketa River Resort opened for business on June 1 with eight air-conditioned
units. Its trial balance before adjustment on August 31 is as follows.
MAQUOKETA RIVER RESORT
Trial Balance
August 31, 2014

(LO 4, 5, 6), AN
Account Number
101
126

P-6

Debit
Cash
Supplies

$ 19,600
3,300

Credit

Problems: Set B
130
140
143
149
201
208
275
301
306
429
622
726
732

Prepaid Insurance
Land
Buildings
Equipment
Accounts Payable
Unearned Rent Revenue
Mortgage Payable
Owners Capital
Owners Drawings
Rent Revenue
Maintenance and Repairs Expense
Salaries and Wages Expense
Utilities Expense

P-7

6,000
25,000
125,000
26,000
$

6,500
7,400
80,000
100,000

5,000
80,000
3,600
51,000
9,400
$273,900

$273,900

In addition to those accounts listed on the trial balance, the chart of accounts for
Maquoketa River Resort also contains the following accounts and account numbers:
No. 112 Accounts Receivable, No. 144 Accumulated DepreciationBuildings, No. 150
Accumulated DepreciationEquipment, No. 212 Salaries and Wages Payable, No. 230
Interest Payable, No. 620 Depreciation Expense, No. 631 Supplies Expense, No. 718
Interest Expense, and No. 722 Insurance Expense.
Other data:
1.
2.
3.
4.
5.
6.
7.

Insurance expires at the rate of $300 per month.

A count on August 31 shows $800 of supplies on hand.
Annual depreciation is $6,000 on buildings and $2,400 on equipment.
Unearned rent revenue of $4,800 was earned prior to August 31.
Salaries of $400 were unpaid at August 31.
Rentals of $4,000 were due from tenants at August 31. (Use Accounts Receivable.)
The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)

Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1August 31.
(b) Prepare a ledger using the three-column form of account. Enter the trial balance
amounts and post the adjusting entries. (Use J1 as the posting reference.)
(c) Prepare an adjusted trial balance on August 31.
(d) Prepare an income statement and an owners equity statement for the 3 months ending August 31 and a balance sheet as of August 31.
P3-3B Delgado Advertising Agency was founded by Maria Delgado in January of 2013.
Presented below are both the adjusted and unadjusted trial balances as of December 31,
2014.

DELGADO ADVERTISING AGENCY

Trial Balance
December 31, 2014
Unadjusted
Dr.
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accumulated DepreciationEquipment
Accounts Payable
Interest Payable
Notes Payable
Unearned Service Revenue

Cr.

$ 11,000
20,000
8,600
3,350
60,000

Adjusted
Dr.

Cr.

$ 11,000
21,500
4,800
2,500
60,000
$ 28,000
5,000
0
5,000
7,200

$ 34,000
5,000
150
5,000
5,900

(c) Adj. trial balance

$281,000
(d) Net income $18,300
Ending capital balance
$113,300
Total assets $203,400
Prepare adjusting entries and
financial statements.

(LO 4, 5, 6), AN

P-8

3 Adjusting the Accounts

Unadjusted
Dr.
Salaries and Wages Payable
Owners Capital
Owners Drawings
Service Revenue
Salaries and Wages Expense
Insurance Expense
Interest Expense
Depreciation Expense
Supplies Expense
Rent Expense

Adjusted

Cr.

Dr.

0
25,500

2,100
25,500

12,000

12,000
58,600

61,400

10,000

12,100
850
500
6,000
3,800
4,000

350

4,000

$129,300 $129,300 $139,050

(b) Net income $34,150

Ending capital $47,650
Total assets $65,800
(c) (1) 6%
(2) $2,500

Preparing adjusting entries.

(LO 4, 5), AN
1. Salaries and wages
expense $2,640

2. Rent revenue $84,000

3. Advertising expense
$5,200

4. Interest expense $6,300

Cr.

$139,050

Instructions
(a) Journalize the annual adjusting entries that were made.
(b) Prepare an income statement and an owners equity statement for the year ending
December 31, 2014, and a balance sheet at December 31.
(c) Answer the following questions.
(1) If the note has been outstanding 6 months, what is the annual interest rate on that
note?
(2) If the company paid $12,500 in salaries in 2014, what was the balance in Salaries
and Wages Payable on December 31, 2013?
P3-4B A review of the ledger of Almquist Company at December 31, 2014, produces the
following data pertaining to the preparation of annual adjusting entries.
1. Salaries and Wages Payable $0. There are eight salaried employees. Salaries are paid
every Friday for the current week. Five employees receive a salary of $900 each
perweek, and three employees earn $700 each per week. Assume December 31 is a
Tuesday. Employees do not work weekends. All employees worked the last two days
of December.
2. Unearned Rent Revenue $354,000. The company began subleasing office space in its
new building on November 1. At December 31, the company had the following rental
contracts that are paid in full for the entire term of the lease.

Date

Term
(in months)

Monthly Rent

Number of
Leases

Nov. 1
Dec. 1

6
6

$5,000
$8,500

5
4

3. Prepaid Advertising $15,600. This balance consists of payments on two advertising

contracts. The contracts provide for monthly advertising in two trade magazines. The
terms of the contracts are as follows.

Contract

Date

Amount

Number of
Magazine
Issues

A650
B974

May 1
Oct. 1

$6,000
9,600

12
24

The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $120,000. This balance consists of a note for one year at an annual interest rate of 9%, dated June 1.
Instructions
Prepare the adjusting entries at December 31, 2014. (Show all computations.)

Problems: Set B
P3-5B On September 1, 2014, the account balances of Percy Equipment Repair were as
follows.
No.
101
112
126
153

Debit
Cash
$ 4,880
Accounts Receivable
3,520
Supplies
2,000
Equipment
15,000

No.

Credit

154
201
209
212
301

Accumulated DepreciationEquipment $ 1,500

Accounts Payable
3,400
Unearned Service Revenue
1,400
Salaries and Wages Payable
500
Owners Capital
18,600

$25,400

P-9

Journalize transactions and

follow through accounting
cycle to preparation of
financial statements.

(LO 4, 5, 6), AN

$25,400

During September, the following summary transactions were completed.

Sept. 8
10
12
15
17
20
22
25
27
29

Paid $1,400 for salaries due employees, of which $900 is for September.
Received $1,200 cash from customers on account.
Received $3,400 cash for services performed in September.
Purchased store equipment on account $3,000.
Purchased supplies on account $1,200.
Paid creditors $4,500 on account.
Paid September rent $500.
Paid salaries $1,250.
Performed services on account and billed customers $2,100 for these
services.
Received $650 from customers for future service.

Adjustment data consist of:

1.
2.
3.
4.

Supplies on hand $1,300.

Accrued salaries payable $300.
Depreciation is $100 per month.
Services related to unearned service revenue of $1,450 were performed.

Instructions
(a) Enter the September 1 balances in the ledger accounts.
(b) Journalize the September transactions.
(c) Post to the ledger accounts. Use J1 for the posting reference. Use the following additional accounts: No. 407 Service Revenue, No. 615 Depreciation Expense, No. 631
Supplies Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.
(d) Prepare a trial balance at September 30.
(e) Journalize and post adjusting entries.
(f) Prepare an adjusted trial balance.
(g) Prepare an income statement and an owners equity statement for September and a
balance sheet at September 30.

(d) Trial balance $30,750

(f) Adj. trial balance $31,150
(g) Net income $2,000
Ending capital $20,600
Total assets $24,600