Question 1
Prepare general journal entries on December 31 to record the following unrelated year-end
adjustments.
a. Estimated depreciation on office equipment for the year, $4,000.
b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An examination
of insurance policies shows $950 of insurance expired.
c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An examination
of insurance policies shows $600 of unexpired insurance.
d. The company has three office employees who each earn $100 per day for a five-day
workweek that ends on Friday. The employees were paid on Friday, December 26, and have
worked full days on Monday, Tuesday, and Wednesday, December 29, 30, and 31.
e. On November 1, the company received 6 months' rent in advance from a tenant whose rent is
$700 per month. The $4,200 was credited to the Unearned Rent account.
f. The company collects rent monthly from its tenants. One tenant whose rent is $750 per month
has not paid his rent for December.
a. Dec. 31 4000
b. 31
c. 31
d. 31
e. 31
f. 31
djusting entries
no General Journal Debit Credit
a Depreciation expense 4000
Accumulated depreciation-office equipment 4000
b Insurance expense 950
Prepaid insurance 950
c Insurance expense (2400-600) 1800
Prepaid insurance 1800
d Salaries and wages expense 900
Salaries and wages payable (100*3*3) 900
e Unearned rent revenue 1400
Rent revenue 1400
Question 2
Based on the unadjusted trial balance for Bella's Beauty Salon and the adjusting information
given below, prepare the adjusting journal entries for Bella's Beauty Salon.
Bella Beauty Salon's unadjusted trial balance for the current year follows:
Bella Beauty Salon
Trial Balance
December 31
Cash......................................................................... $ 4,200
Prepaid insurance..................................................... 1,480
Shop supplies……………………………….… 990
Shop equipment………………………………. 3,860
Accumulated depreciation—shop equipment.......... $ 770
Building…………………………………..…… 57,500
Accumulated depreciation-building......................... 3,840
Land…………………………………………… 55,000
Unearned rent……………………………....…. 1,600
Long- term notes payable……………………... 50,000
Bella Hanson, Capital.............................................. 49,860
Rent earned………………………………....… 2,400
Fees earned…………………………..……..…. 23,400
Wages expense..…………………………...…. 3,200
Property taxes expense………………………... 690
Property taxes expense............................................ 600
Interest expense……………………………….. 4.350
Total………………………………………….. . $131,870 $131,870
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenues was
unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee
was paid last week but has worked four days this week for which she has not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of property
taxes expense has not been recorded
i. One month's interest on the note payable, $600, has accrued but is unrecorded.
Question 3
From the information provided, calculate Wooden's profit margin ratio for each of the three
years. Comment on the results, assuming that the industry average for the profit margin ratio is
6% for each of the three years.
2011 2010 2009
Net profit $ 2,630 $ 2,100 $ 1,850
Net Sales 36,500 32,850 31,200
Total Assets 400,000 385,000 350,000
Answer
2011 2010 2009
Net Income 2630 2100 1850
Net Sales 36500 32850 31200
Profit margin = (A/B) 7.21 % 6.39 % 5.93 %
Comment: Company's average profit ratio is an increasing trend and higher than the industry
average.
