Adjusting and Closing Entries - Accruals Demonstration Problem 1 Anderson Architects

MODULE 4
ADJUSTING AND CLOSING ENTRIES - ACCRUALS
Demonstration Problem 1
Anderson Architects
The transactions for the year 2000 for Anderson Architects have already been recorded. This problem shows how to
prepare adjusting entries for December 2000.
Dec. 31 A note payable of $6,000 has been outstanding since September 1, 2000. Under the terms of the note,
the note plus interest (12%) is to be paid on March 1, 2001. No interest has been recorded on the note.
Dec. 31 Wages of $650 for December will be paid in January.
Dec. 31 Services were performed for a client for $800. The client has not been billed yet.
Dec. 31 Advertising costs of $105 for December will be paid in January.
DATE ACCOUNT DEBIT CREDIT

2000
Dec. 31 Interest Expense 240
Interest Payable 240
Dec. 31 Wages Expense 650
Wages Payable 650
Dec. 31 Accounts Receivable 800
Service Revenue 800
Dec. 31 Advertising Expense 105
Accounts Payable 105
Practice Problem 1
Comfort Furniture Company
The transactions for the year 2000 for Comfort Furniture Co. have been recorded in the accounting system. This
assignment requires you to prepare adjusting entries for Comfort Furniture Co. for December 2000.
Dec. 31 Wages owed but unpaid at the end of December were $5,000.
Dec. 31 The company signed a 12%, six-month note for $6,000 on November 1, 2000.
No interest has been recorded for November and December.
Dec. 31 Service provided to a customer for $350 has not been recorded.
Dec. 31 Advertising cost of $90 for December has not been recorded.

2000
Dec. 31 Wages Expense 5,000
Wages Payable 5,000
Service Revenue 350
Accounts Payable 90
98
Practice Assignment 2
Conway Floor Covering Incorporated
The transactions for Conway Floor Covering Inc. for the year 2000 have been recorded in the accounting system. This
assignment requires you to record the adjusting entries for December 2000.
Dec. 31 Performed services for a client for $850. The customer will be billed in January.
Dec. 31 $15,000 was borrowed by signing a 10%, 2 year note on September 1, 2000.
Record the interest on the note.
Dec. 31 Employee wages of $950 for December will be paid in January.

2000
Service Revenue 850
Dec. 31 Wages Expense 950
Wages Payable 950
Accounts Payable 95
Homework Problem 1
Gym on Wheels
Gym on Wheels provides gymnastics lessons at various daycare centers. The transactions for the year 2000 have been
recorded in the accounting system. This assignment requires you to prepare adjusting entries for December 2000.
Dec. 31 The note payable of $8,000 has been outstanding since July 1, 2000. Under the terms of the note, the
note plus interest (12%) is to be paid on July 1, 2001. No interest has been recorded on the note.
Dec. 31 Instructors’ salaries of $2,000 for December will be paid in January.
Dec. 31 December fees of $160 will be collected in January.
Dec. 31 $85 will be paid in January for advertising in December.

2000
Dec. 31 Salaries Expense 2,000
Salaries Payable 2,000
Service Revenue 160
Accounts Payable 85
99
Homework Problem 2
Borden Realty
The transactions for Borden Realty for the year 2000 have been recorded in the accounting system. This assignment
requires you to prepare adjusting entries for December 2000.
Dec. 31 Services provided to customers for $2,600 were unrecorded at the end of December.
Dec. 31 $115 will be paid in January for advertising in December.
Dec. 31 $1,080 of salaries earned by employees during December will be paid in January.
Dec. 31 The note payable of $12,000 has been outstanding since September 1, 2000. Under the terms of the note,
the note plus interest (10%) is to be paid on September 1, 2001. No interest has been recorded on the
note.

2000
Dec. 31 Accounts Receivable 2,600
Service Revenue 2,600
Homework Problem 3
Party Town Incorporated
The transactions for Party Town Inc. for the year 2000 have been recorded in the accounting system. This assignment
Dec. 31 A birthday party was arranged in December. The customer will pay $200 in January.
Dec. 31 Party Town Inc. borrowed $20,000 by signing a 12%, 2 year note on July 1, 2000.
Dec. 31 Employee wages of $750 for December will be paid in January.

2000
Service Revenue 200
Dec. 31 Interest Expense 1,200
Interest Payable 1,200
Dec. 31 Salaries Expense 750
Salaries Payable 750
100
Homework Problem 4
Star Interior Designs
The transactions for Star Interior Designs for the year 2000 have been recorded in the accounting system. This
assignment requires you to prepare adjusting entries for December 2000.
Dec. 31 Performed services for a client for $1,250. The customer will be billed in January.
Dec. 31 $10,000 was borrowed by signing a 12%, two year note on October 1, 2000.
Dec. 31 Employee wages of $1,150 for December will be paid in January.

2000
Dec. 31 Accounts Receivable 1,250
Service Revenue 1,250
Homework Quiz
Accruals
1. An expense has not been paid and has not yet been recognized in the accounts by a routine entry. To properly
adhere to the Matching Principle, which of the following is required:
a. Capital Stock entry
b. Deferral entry
c. Accrual entry
d. Inventory entry
2. Warren, Inc. has wages that have been earned but not paid at the end of the accounting period. The entry to
properly accrue Wages Expense includes:
a. Wages Payable, debit; Wages Income, credit
b. Wages Income, debit; Wages Payable, credit
c. Wages Payable, debit; Wages Expense, credit
d. Wages Expense, debit; Wages Payable, credit
3. Warren, Inc. neglects to make the required adjusting entry for wages at the end of the accounting period. Which
of the following statements reflect the impact of this oversight?
a. Salary Expense for the year is overstated.
b. Liabilities at the end of the year are understated.
c. Assets at the end of the year are understated.
d. Owner's equity at the end of the year is understated.
4. Accrued Expenses usually appear on the Balance Sheet as:

a. Cash
b. Liabilities
c. Assets
d. Capital Stock
5. Accrued Revenue is recorded when:

a. Services have already been earned and recorded.
b. Services have already been paid for in cash and are expected to be earned in the upcoming accounting
period.
c. Services have already been paid for in cash.
d. Services have been earned but have not yet been recorded.
6. Accrued Revenue usually appears on the Balance Sheet as:
101
a. Cash
b. Liabilities
c. Assets
d. Capital Stock
7. At December 31, 2002, interest expense of $960 is owed on a two-year bank note that will not be paid until July
2003, what is the appropriate accrual at the end of 2002?
a. Interest Expense .................. 960
Cash ..........................…….. 960
b. Interest Payable .................. 960
Interest Expense ................. 960
c. Cash .............................. …. 960
Interest Expense ..............… 960
d. Interest Expense .................. 960
Interest Payable ..............… 960
8. Scott's Lawn Service borrowed $10,000 from 3rd National Bank on November 1, 2001. The loan is for a term of
three years and carries a 10% rate of interest. Interest is due at the maturity of the loan. The entry to properly
accrue 2001 Interest Expense should include:
a. A debit to Interest Expense and a credit to Interest Payable.
b. A debit to Interest Expense and a credit to Cash.
c. A debit to Interest Expense and a credit to Accounts Receivable.
d. A debit to Interest Expense and a credit to Loan Receivable.
three years and carries a 10% rate of interest. Interest is due at the maturity of the loan. To properly accrue
interest expense in 2001, Scott should:
a. Do nothing as the loan is not due until November 2004.
b. Recognize Interest Expense for 2 of the loan's 36-month term.
c. Recognize Interest Expense for 12 of the loan's 36-month term.
d. Recognize Interest Expense for 10 of the loan's 36-month term.
interest expense in 2001, Scott should debit Interest Expense and credit Interest Payable for:
a. $1,500
b. $1,000
c. $ 500
d. $ 250
interest expense in 2002, Scott should debit Interest Expense and credit Interest Payable for:
a. $1,500
b. $1,000
c. $ 500
d. $ 250
12. Sandra's Styling Salon, a Sole Proprietorship, pays weekly salaries of $5,000 each Friday for a five-day week
ending on that day. The accrual required for a fiscal period ending on Thursday is:
a. Debit Salaries Payable, $4,000; credit Cash, $4,000
b. Debit Salary Expense, $4,000; credit Drawing, $4,000
c. Debit Salary Expense, $4,000; credit Salaries Payable, $4,000
d. Debit Drawing, $4,000; credit Cash, $4,000
ending on that day. The accrual required for a fiscal period ending on a Tuesday includes a debit to Salaries
Expense and a credit to Salaries Payable for:
a. $1,600
b. $2,000
c. $3,000
d. $3,200
102
ending on that day. If $4,000 is accrued as Salaries Payable in the current fiscal period, the payment of salaries
on the first Friday of the next fiscal period will include a:
a. Debit to Salaries Expense for $4,000.
b. Debit to Salaries Expense for $5,000.
c. Debit to Salaries Payable for $5,000.
d. Debit to Salaries Payable for $4,000.
15. Pace's Hardware, a Corporation, pays its employees each Friday for a five-day total workweek. The payroll is
$12,000 per week. If the end of the accounting period occurs on a Wednesday, the adjusting entry to record
Salaries Payable would include a:
a. Debit to Salary Expense of $4,800.
b. Debit to Salary Expense of $6,000.
c. Credit to Salaries Payable of $2,400.
d. Credit to Salaries Payable of $7,200.
16. Rental Services, Inc. earned $2,000 of Rental Revenue in December 2001, but does not expect payment until
January 2002. What is the appropriate accrual entry at December 31, 2001?
a. Debit Rent Receivable; credit Cash.
b. Debit Rent Receivable; credit Rent Revenue.
c. Debit Rent Revenue; credit Rent Receivable
d. Debit Cash; credit Rent Revenue
17. Rental Services, Inc. reviews its records at the end of December 2001 in anticipation of the end of its calendar
year. This process reveals that:
 2,000 of Accounts Receivable outstanding at the beginning of December has been collected and recorded.
 The December utility bill has not yet been paid. A phone call to the provider reveals that the invoice will
total $1,200 and will be mailed on January 4, 2002.
 Billing of $25,000 has been issued for the month.
 Services of $5,000 to Construction Experts were completed on December 30, 2001, but billing will not be
rendered until January 3, 2002.
If Rental Services takes no action on any of the above items:
a. Expenses for 2001 will be overstated by $1,200.
b. Expenses for 2001 will be understated by $5,000.
c. Expenses for 2002 will be overstated by $1,200.
d. Expenses for 2002 will be understated by $5,000.
 $2,000 of Accounts Receivable outstanding at the beginning of December has been collected and recorded.

a. Revenues for 2001 will be overstated by $1,200.
b. Revenues for 2001 will be understated by $5,000.
c. Revenues for 2002 will be overstated by $1,200.
d. Revenues for 2002 will be understated by $5,000.

a. Assets for 2001 will be overstated by $1,200.
b. Assets for 2001 will be understated by $5,000.
c. Liabilities for 2001 will be overstated by $1,200.
103
d. Liabilities for 2001 will be understated by $5,000.
Rental Services makes all appropriate accrual entries resulting from the above information. Revenues and
expenses for the month of December, 2001 total:
a. Revenues: $25,000; Expenses: $ -0-
b. Revenues: $30,000; Expenses: $ 1,200
c. Revenues: $25,000; Expenses: $ 1,200
d. Revenues: $30,000; Expenses: $ -0-
21. Tony's Landscaping Service borrowed $5,000 from a bank by signing a 12%, one-year note on October 1, 2000.
What is the amount of interest expense recognized on December 31, 2000?
a. $600
b. $150
c. $200
d. $0
Interest is accrued on December 31, 2000, by:
a. Crediting Interest Expense; debiting Cash
b. Debiting Interest Expense; crediting Interest Payable
c. Debiting Interest Expense; crediting Notes Payable
d. Debiting Interest Expense; crediting Cash
The total amount (including interest) of cash paid on October 1, 2001, to the bank is:
a. $5,600
b. $5,000
c. $6,200
d. $5,450
The note and the interest are paid on October 1, 2001. However, interest for 2000 was accrued on December 31,
2000. When the note is repaid on October 1, 2001, Interest Expense is debited by:
a. $0
b. $600
c. $450
d. $150
25. A company pays its employees every Friday. The amount paid every week is $120 per day. September 30, 2000,
is a Tuesday. The amount of salary accrued on September 30, 2000, is:
a. $0
b. $240
c. $360
d. $600
26. A company pays its employees every Friday. The amount paid every week is $600. September 30, 2000, is
a Tuesday. The amount of salary paid on October 3, 2000 is:
a. $0
b. $240
c. $360
d. $600
27. A company pays its employees every Friday. The amount paid every week is $600. September 30, 2000, is a
Tuesday. Assume that salaries for September were accrued on September 30. The amount of salaries expense
recognized on October 3, 2000 is:
104
a. $0
b. $240
c. $360
d. $600
Tuesday. Which of the following statements is true about the entry prepared on September 30, 2000?
a. Salaries payable must be debited by $240
b. Salaries Payable must be credited by $240
c. Salaries Payable must be debited by $360
d. Salaries Payable must be credited by $360
Tuesday. Assume that salaries for September were accrued on September 30. Which of the following statements
is true about the entry prepared on October 3, 2000?
a. Salaries payable must be debited by $240
b. Salaries Payable must be credited by $240
c. Salaries Payable must be debited by $360
d. Salaries Payable must be credited by $360
30. Accrued expenses occur when:

a. Cash is paid before an expense is recognized
b. Cash is paid after an expense is recognized
c. An expense is recognized at the same time as the cash payment
d. A liability is decreased when the expense is recognized
MODULE 4
ADJUSTING AND CLOSING ENTRIES - DEFERRALS
Anderson Architects
The transactions for the year 2000 for Anderson Architects have already been recorded. This problem shows how to
prepare adjusting entries for Anderson Architects for December 2000.
Dec. 31 A computer was purchased on January 1, 1998 for $1,600. The useful life of the computer is 4 years.
Dec. 31 On October 1, 2000, Anderson Architects had paid $4,800 as rent for a six month period.
This had been recorded as prepaid rent.
Dec. 31 The amount of supplies available at the end of December was $200. The amount of supplies at the
beginning of the period was $450. $250 of supplies were purchased during the year.
Dec. 31 Furniture costing $3,000 was purchased on Jan 1, 1997. The useful life of the furniture is estimated to be
5 years.
Dec. 31 Services were provided to a customer for $450. The cash was collected in advance on November 28,
2000.

2000
Dec. 31 Depreciation Expense 400
Accumulated Depreciation 400
Dec. 31 Rent Expense 2,400
Prepaid Rent 2,400
Dec. 31 Supplies Expense 500
Supplies 500
Dec. 31 Unearned Revenue 450
Service Revenue 450
Practice Problem 1
Comfort Furniture Company
The transactions for the year 2000 for Comfort Furniture Co. have been recorded in the accounting system. This
assignment requires you to prepare adjusting entries for Comfort Furniture for December 2000.
105
beginning of the period was $1,100.
Dec. 31 On January 1, 1998, Comfort Furniture purchased a computer for $2,400. The estimated useful life of
the computer is 4 years. Record the depreciation for the year 2000.
Dec. 31 On November 1, 2000, Comfort Furniture paid $2,400 as rent for a three month period. This had been
recorded as prepaid rent.

2000
Supplies 600
Prepaid Rent 1,600
Practice Assignment 2
Conway Floor Covering Incorporated
The transactions for Conway Floor Covering Inc. for the year 2000 have been recorded in the accounting system. This
assignment requires you to prepare adjusting entries for December 2000.
Dec. 31 Services were provided to a customer for $550. The cash was collected in advance on December 10,
2000.
Dec. 31 On September 1, 2000, Conway Floor Covering Inc. had paid $5,400 as rent for a six month period. This
had been recorded as prepaid rent.
Dec. 31 A computer was purchased on January 1, 1998, for $2,400. The useful life of the computer is 4 years.

2000
Service Revenue 550
Prepaid Rent 3,600
Supplies 210
Homework Problem 1
Gym on Wheels
Gym on Wheels provides gymnastics lessons at various daycare centers. The transactions for the year 2000 have been
recorded in the accounting system. This assignment requires you to prepare adjusting entries for December 2000.
Dec. 31 A number of children registered on December 1 and paid the month's fees in advance. These fees totaled
$500 and unearned revenue was credited when the fees were paid.
beginning of the period was $1,500.
Dec. 31 On January 1, 1998, Gym on Wheels had purchased a computer for $2,000. The estimated useful life of
the computer is 4 years. Record the depreciation for 2000.
Dec. 31 On December 1, 2000, Gym on Wheels had paid $2,400 as rent for a three month period. This had been
106
2000
Service Revenue 500
Dec. 31 Supplies Expense 1,000
Supplies 1,000
Dec. 31 Rent Expense 800
Prepaid Rent 800
Homework Problem 2
Borden Realty
The transactions for Borden Realty for the year 2000 have been recorded in the accounting system. This assignment
Dec. 31 A computer was purchased for $1,600 on January 1, 1998. The useful life of the computer is 4 years.
Dec. 31 Furniture costing $4,800 was purchased on January 1, 2000. The useful life of the furniture is estimated
to be 10 years and the salvage value is $800.
beginning of the period was $1,000. $1,850 of supplies were purchased during 2000.
Dec. 31 On September 1, 2000, Borden Realty had paid $6,600 as rent for a six month period. This had been

2000
Dec. 31 Supplies Expense 2,000
Supplies 2,000
Prepaid Rent 4,400
Homework Problem 3
Party Town Incorporated
The transactions for Party Town Inc. for the year 2000 have been recorded in the accounting system. This assignment
Dec. 31 Depreciation on the building owned by Party Town Inc. is estimated to be $12,500 for the period.
Dec. 31 Party Town Inc. purchased furniture for $4,200 on January 1, 1997. The estimated useful life of the
furniture is seven years. Record the depreciation for 2000.
Dec. 31 Excess space in the building was rented to another business on October 1, 2000, and six months' rent of
$7,200 was collected in advance.
Dec. 31 The amount of party supplies available at the end of December was $150. The amount of supplies at the
beginning of the period was $200. $550 of supplies were purchased during 2000.

2000
Dec. 31 Depreciation Expense 12,500
Accumulated Depreciation 12,500
107
Dec. 31 Unearned Rent Revenue 3,600
Rent Revenue 3,600
Supplies 600
Homework Problem 4
Star Interior Designs
The transactions for Star Interior Designs for the year 2000 have been recorded in the accounting system. This
assignment requires you to record the adjusting entries for December 2000.
Dec. 31 Depreciation on a truck owned by Star Interior Designs is estimated to be $1,250 for the period.
Dec. 31 Furniture costing $3,600 was purchased on January 1, 1997. The estimated useful life of the furniture is
six years. Record the depreciation for 2000.
Dec. 31 Six months' rent of $7,200 was paid in advance on October 1, 2000.

2000
Dec. 31 Depreciation Expense 1,250
Accumulated Depreciation 1,250
Prepaid Rent 3,600
Supplies 500
Homework Quiz
Deferrals
1. Rental Services, Inc. (RSI) records all advance rental receipts in the liability account, Unearned Rent. What entry
does RSI make to record the receipt of these advance receipts?
a. Debit: Unearned Rent; Credit: Rent Revenue
b. Debit: Cash; Credit: Unearned Rent
c. Debit: Unearned Rent; Credit: Rent Expense
d. Debit: Rent Expense; Credit: Cash
2. Advance payments for services are called:

a. Unrecorded Revenues
b. Unrecorded Expenses
c. Prepaid Expenses
d. Unearned Revenues
3. The adjusting entry required to record depreciation on a building for the fiscal period consists of:
a. Debit: Depreciation Expense; Credit: Building
b. Debit: Depreciation Expense; Credit: Accumulated Depreciation
c. Debit: Accumulated Depreciation; Credit: Depreciation Expense
d. Debit: Building; Credit: Depreciation
4. Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

a. Depreciation Expense: Expense; Accumulated Depreciation: Contra Asset
b. Depreciation Expense: Asset Deferral; Accumulated Depreciation: Contra Asset
c. Depreciation Expense: Expense; Accumulated Depreciation: Asset
d. Depreciation Expense: Contra Asset; Accumulated Depreciation: Expense
5. Caldwell Rentals receives rent for January 2002 from a tenant in December 2001. This payment will be:
a. A 2001 Revenue
b. A 2002 Expense
c. A 2001 Expense
108
d. A 2001 Liability
6. Rental Services, Inc. (RSI) pays $5,700 for three years' rent on its Office Building on August 1, 2001. The entry
to record this transaction involves which of the following account titles and classifications?
a. Debit: Prepaid Rent, Asset; Credit: Cash, Asset
b. Debit: Cash, Asset; Credit: Unearned Rent, Asset
c. Debit: Rent Expense, Expense; Credit: Cash, Asset
d. Debit: Unearned Rent, Asset; Credit: Cash, Asset
7. Rental Services, Inc. (RSI) pays $7,500 for four years' rent on its Office Building on August 1, 2001. The
adjusting entry required at December 31, 2001 is:
a. Debit: Prepaid Rent; Credit: Cash
b. Debit: Rent Expense; Credit: Unearned Rent
c. Debit: Rent Expense; Credit: Prepaid Rent
d. Debit: Unearned Rent; Credit: Cash 
8. Rental Services, Inc. (RSI) pays $10,800 for three years' rent on its Office Building on August 1, 2001. The
dollar amount of the adjusting entry required at December 31, 2001 and 2002 is:
a. December 21, 2001: $1,500; December 31, 2002: $3,600
b. December 21, 2001: $1,800; December 31, 2002: $1,800
c. December 21, 2001: $1,800; December 31, 2002: $3,600
d. December 21, 2001: $3,600; December 31, 2002: $3,600
9. Karl Company, a Sole Proprietorship, signed a two-year rental agreement on October 1, 2001, for $9,600. The
agreement covers its building for the next two years. Karl debited Prepaid Rent to record the payment. The
December 31, 2001 adjusting entry includes a credit to:
a. Rent Expense of $1,200
b. Rent Expense of $8,400
c. Prepaid Rent of $1,200
d. Prepaid Rent of $8,400
10. At the beginning of the year, the Unearned Rent account has a balance of $30,000. The Unearned Rent account
balance at the end of the year is $6,000. Given this information, Rent Revenue for the current year must be:
a. $30,000
b. $24,000
c. $12,000
d. $ 6,000
11. The asset account, Supplies, has a balance of $1,950 at the beginning of the year and was debited during the year
for $5,600, representing the total of supplies purchased during the year. If $1,500 of supplies is on hand at the
end of the year, Supplies Expense reported on the income statement for the year is:
a. $1,500
b. $1,900
c. $5,600
d. $6,050
12. At the beginning of the period, Stenger, Inc. had $3,600 in the asset account, Supplies. During the period, it
purchased $1,400 of additional items, debiting the Supplies asset account. At the end of the period, Stenger
determined that only $1,200 of supplies were still on hand. What adjusting entry should Stenger, Inc. make at the
end of the period?
a. Debit: Supplies .......................... 1,200
Credit: Supplies Expense ................ 1,200
b. Debit: Supplies .......................... 3,400
Credit: Supplies Expense ................ 3,400
c. Debit: Supplies Expense .................. 3,800
Credit: Supplies ........................ 3,800
d. Debit: Supplies Expense .................. 1,200

Credit: Supplies ........................ 1,200
13. The Unearned Revenue account before adjustment at the end of the month has a credit balance of $2,400,
representing an advance payment received on the first day of the month. If $1,600 of Revenue is earned during
the month, the balance in the Unearned Revenue at the end of the month, after adjustments, is:
a. $ 800 credit
b. $1,600 credit
c. $2,400 credit
109
d. $4,000 credit
14. The Unearned Rent account has a beginning credit balance of $15,000. After adjusting entries at the end of the
accounting period, $5,000 of the $15,000 is unearned. The adjusting entry required at the end of the period is:
a. Debit: Unearned Rent; Credit: Rent Revenue
b. Debit: Cash; Credit: Unearned Rent
c. Debit: Unearned Rent; Credit: Rent Expense
d. Debit: Rent Expense; Credit: Cash
15. The Unearned Rent account has a beginning credit balance of $15,000. After adjusting entries at the end of the
accounting period, $5,000 of the $15,000 is unearned. The amount of the adjusting entry required at the end of
the period is:
a. $15,000
b. $10,000
c. $ 5,000
d. $ -0-
 2,000 of Accounts Receivable outstanding at the beginning of December has been collected and recorded.
 The December bills have all been paid. Expenses total $15,500.
 Billing for December services amounted to $25,000.
 The adjusted balance in the Unearned Revenue account at the end of the month should be a $10,000 credit.
Its balance prior to adjustments was $18,000.
Rental Services, Inc.'s Revenues for December, 2001 are: 

a. $25,000
b. $33,000
c. $35,000
d. $43,000
17. Failing to adjust an Unearned Revenue that has been partially earned and was originally recorded as a credit to
Unearned Revenue will usually result in an:
a. Overstatement of Revenues and an overstatement of Liabilities
b. Overstatement of Revenues and an understatement of Liabilities
c. Understatement of Revenues and an understatement of Liabilities
d. Understatement of Revenues and an overstatement of Liabilities 
18. Copko Computer Services, a Sole Proprietorship, purchased new Computer Equipment for $52,000 on January 1,
2001. Copko assigned it a four-year life and a $6,000 salvage value. Depreciation Expense for 2001 amounts to:
a. $11,500
b. $13,000
c. $14,500
d. $15,000
2001. Copko assigned it a four-year life and a $6,000 salvage value. Book Value at the end of 2001 is:
a. $46,500
b. $40,500
c. $34,500
d. $34,000
2001. Copko assigned it a four-year life and a $6,000 salvage value. Depreciation Expense for 2003 and
Accumulated Depreciation at the end of 2003 are:
a. Depreciation Expense: $11,500; Accumulated Depreciation: $11,500
b. Depreciation Expense: $23,000; Accumulated Depreciation: $23,000
c. Depreciation Expense: $11,500; Accumulated Depreciation: $34,500
d. Depreciation Expense: $23,000; Accumulated Depreciation: $34,500
21. A company purchased furniture for $2,800 on January 1, 1998. The useful life of the furniture is estimated to
be seven years. The depreciation expense for 2000 is:
a. $400
b. $1,200
c. $800
d. $1,600
110
22. A company purchased furniture for $2,800 on January 1, 1998. The useful life of the furniture is estimated to be
seven years. The balance in accumulated depreciation after posting the adjustments for 2000 is:
a. $400
b. $1,200
c. $800
d. $1,600
23. A company purchased furniture for $2,800 on January 1, 1998. The useful life of the furniture is estimated to
be seven years. The book value of the furniture after posting the adjustments for 2000 is:
a. $400
b. $1,200
c. $800
d. $1,600
24. A company pays rent of $1,800 for three months in advance on November 1, 2000. Which of the following
statements is true for the journal entry prepared on November 1?
a. Rent Expense is debited
b. Prepaid Rent is debited
c. Prepaid Rent is credited
d. Cash is debited
25. A company pays rent of $1,800 for three months in advance on November 1, 2000. Which of the following
statements is true for the journal entry prepared on December 31?
a. Rent Expense is debited
b. Prepaid Rent is debited
c. Rent Expense is credited
d. Cash is credited
26. The balance in the Supplies account of a company on January 1, 2000 was $250. Supplies were purchased for
$650 in 2000. The balance in the Supplies account on December 31, 2000, was $350. The Supplies Expense for
2000 was:
a. $750
b. $550
c. $350
d. $650
27. The balance in the Supplies account of a company on January 1, 2000 was $250. Supplies were purchased for
$650 in 2000. The balance in the Supplies account on December 31, 2000, was $350. The Supplies Expense is
recorded by:
a. Debiting Supplies Expense; crediting Cash
b. Debiting Supplies; crediting Cash
c. Debiting Supplies Expense; crediting Supplies
d. Debiting Supplies; crediting Supplies Expense
28. A company sold subscriptions for six months on October 1, 2000. $600 was collected in advance from
customers. Which of the following statements is true about the entry prepared on October 1?
a. Revenue is credited
b. Cash is credited
c. Unearned Revenue is credited
d. Unearned Revenue is debited
29. A company collected $600 on October 1, 2000, from customers for magazine subscriptions for six months from
that date. An adjusting entry is prepared on December 31, 2000, by:
a. Debiting Unearned Revenue; crediting Cash
b. Debiting Unearned Revenue; crediting Revenue
c. Debiting Revenue; crediting Unearned Revenue
d. Debiting Accounts Receivable; crediting Revenue
30. Which of the following statements is true about deferred revenues?

a. A liability is increased when cash is collected in advance
b. A liability is decreased when cash is collected in advance
c. A liability is increased when revenue is recognized
d. Revenue is recognized when cash is collected
111
MODULE 4
CLOSING ENTRIES
Clean-Rite Service
The transactions for Clean-Rite Service for March 2000 have been recorded in the accounting system. Clean-Rite Service
is organized as a sole-proprietorship. This problem illustrates the preparation of closing entries for March 2000. The trial
balance for March 31, 2000, is given below:
Clean-Rite Service
Trial Balance
March 31, 2000
Account name Debit Credit

Cash $1,085
Supplies 35
Equipment 400
Truck 1,000
Notes Payable $1,750
Lisa, Capital 500
Lisa, Drawings 100
Service Revenue 450
Supplies Expense 80
$2,700 $2,700
Mar. 31 Close the revenue accounts.

Mar. 31 Close the expense accounts.
Mar. 31 Close the Income Summary account.
Mar. 31 Close the Drawings account.

Mar. 31 Service Revenue 450
Income Summary 450
Mar. 31 Income Summary 80
Supplies Expense 80
Mar. 31 Income Summary 370
Lisa, Capital 370
Mar. 31 Lisa, Capital 100
Lisa, Drawings 100
112
The transactions for Music Stop for April 2000 have been recorded in the accounting system. Music Stop is organized as
a corporation. This problem illustrates the preparation of closing entries. The trial balance for April 30, 2000, is given
below:
Music Stop
Trial Balance
April 30, 2000

Cash $36,400
Inventory 17,000
Equipment 12,000
Accounts Payable $15,000
Note Payable 40,000
Capital Stock 10,000
Retained Earnings 0
Sales Revenue 4,500
Cost of Goods Sold 3,000
Salaries Expense 1,000
Utilities Expense 100
$69,500 $69,500
Apr. 30 Close the revenue accounts.

Apr. 30 Close the expense accounts.
Apr. 30 Close the Income Summary account.

2000
Apr. 30 Sales Revenue 4,500
Income Summary 4,500
Apr. 30 Income Summary 4,100
Apr. 30 Income Summary 400
Retained Earnings 400
113
Practice Problem 1
Glenwood Nursery
The transactions for Music Stop for April 2000 have been recorded in the accounting system. Glenwood Nursery is
organized as a sole-proprietorship. This problem requires you to prepare closing entries for Glenwood Nursery. The trial
balance for April 30, 2000, is given below:
Glenwood Nursery
Trial Balance
April 30, 2000

Cash $27,050
Inventory 6,600
Supplies 250
Notes Payable $8,000
John, Capital 25,000
John, Drawings 1,000
Sales Revenue 4,700
Supplies Expense 350 _______
$37,700 $37,700
Apr. 30 Close the revenue accounts.

Apr. 30 Close the expense accounts.
Apr. 30 Close the income summary accounts.
Apr. 30 Close the drawings accounts.

2000
Apr. 30 Sales Revenue 4,700
Supplies Expense 350
John, Capital 1,900
Apr. 30 John, Capital 1,000
John, Drawings 1,000
114
Practice Problem 2
Country Fresh Farms Incorporated
June 30, 2000
The transactions for June 2000 for Country Fresh Farms Inc. have been recorded in the accounting system. This problem
requires you to prepare closing entries for Country Fresh Farms Inc. The trial balance for June 30, 2000, is given below:
Country Fresh Farms Incorporated

Trial Balance
June 30, 2000

Cash $23,070
Inventory 3,850
Supplies 180
Retained Earnings 2,100
Dividends 1,000
Sales Revenue 15,000
Salaries Expense 4,000 ______
$38,500 $38,500
Jun. 30 Close the revenue accounts.

Jun. 30 Close the expense accounts.
Jun. 30 Close the Income Summary account.
Jun. 30 Close the Dividends account.

2000
Jun. 30 Sales Revenue 15,000
Jun. 30 Income Summary 10,400
Jun. 30 Retained Earnings 1,000
Dividends 1,000
115
Homework Problem 1
Cookies and More
Cookies and More sells cookies and baked products in a mall. Cookies and More is organized as a sole-proprietorship.
The transactions for December 2000 for Cookies and More have been recorded in the accounting system. This
assignment requires you to close the accounts for this period. The trial balance for December 31, 2000, is given below:
Cookies and More

Trial Balance
December 31, 2000

Cash $16,230
Inventory 4,750
Supplies 270
Note Payable 12,000
Kelly, Capital 5,000
Kelly, Drawings 2,000
Supplies Expense 2,000
_______ _______
$28,650 $28,650
Dec. 31 Close the revenue accounts.

Dec. 31 Close the expense accounts.
Dec. 31 Close the Income Summary account.
Dec. 31 Close the Drawings account.

2000
Dec. 31 Sales Revenue 10,000
Dec. 31 Income Summary 5,400
Supplies Expense 2,000
Kelly, Capital 4,600
Dec. 31 Kelly, Capital 2,000
Kelly, Drawings 2,000
116
Homework Problem 2
Sullivan Sporting Goods
The transactions for June 2000 for Sullivan Sporting Goods have been recorded in the accounting system. Sullivan
Sporting Goods is organized as a sole-proprietorship. This assignment requires you to prepare closing entries for June
2000. The trial balance for June 30, 2000, is given below:
Sullivan Sporting Goods

Trial Balance
June 30, 2000

Cash $17,680
Inventory 12,150
Supplies 320
James, Capital 25,000
James, Drawings 800
Salaries Expense 2,365 _______
$41,400 $41,400
Jun. 30 Close the revenue accounts.

Jun. 30 Close the expense accounts.
Jun. 30 Close the Income Summary account.
Jun. 30 Close the Drawings account.

2000
Jun. 30 Sales Revenue 15,000
James, Capital 4,550
Jun. 30 James, Capital 800
James, Drawings 800
117
Homework Problem 3
Comfort Furniture
The transactions for August 2000 for Comfort Furniture have been recorded in the accounting system. Comfort Furniture
is organized as a corporation. This assignment requires you to prepare closing entries for August 2000. The trial balance
for August 2000 is given below:
Comfort Furniture
Trial Balance
August 31, 2000

Cash $30,815
Accounts Receivable 15,000
Inventory 32,000
Supplies 560
Dividends 1,025
$98,600 $98,600
Dec.31 Close the revenue accounts.

Dec.31 Close the expense accounts.
Dec.31 Close the income summary account.
Dec.31 Close the dividends account.

2000
Aug. 31 Sales Revenue 25,000
Aug. 31 Income Summary 19,200
Aug. 31 Income Summary 5,800
Aug. 31 Retained Earnings 1,025
Dividends 1,025
118
Homework Problem 4
APlus Hardware
The transactions for December 2000 for Aplus Hardware have been recorded in the accounting system. Aplus Hardware
is organized as a corporation. This assignment requires you to prepare closing entries for December 2000. The trial
balance for December 2000 is given below:
APlus Hardware
Trial Balance
December 31, 2000

Cash $35,800
Inventory 14,100
Supplies $ 200
Accounts Payable $ 2,800
Retained Earnings 0
Dividends 1,025
Rent Expense 800 _______
$60,300 $60,300
Dec. 31 Close the revenue accounts.

Dec. 31 Close the expense accounts.
Dec. 31 Close the income summary account.
Dec. 31 Close the dividends account.
Dec. 31 Sales Revenue 12,500

Rent Expense 800
Dec. 31 Retained Earnings 1,025
Dividends 1,025
119
Homework Quiz
Closing Entries
1. Which of the following statements about Closing Entries is true?

a. Closing entries need not be journalized since company management knows they have been taken into
consideration.
b. Closing entries need not be posted to the ledger accounts if the financial statements have already been
prepared.
c. Closing entries are not required if adjusting entries have been prepared.
d. Closing entries must be journalized and posted.
2. In a Sole Proprietorship, which of the following accounts is closed to Income Summary at the end of the fiscal
year?
a. Drawing
b. Accumulated Depreciation
c. Prepaid Expenses
d. Supplies Expense
3 In a Sole Proprietorship, which of the following accounts will NOT be closed to Income Summary at the end of
the fiscal year?
a. Salaries Expense
b. Fees Earned
c. Drawing
d. Depreciation Expense
4. In a Corporation, which of the following accounts is closed at year-end?

a. Capital Stock
b. Prepaid Rent
c. Dividends
d. Accounts Payable
5. In a Sole Proprietorship, which of the following accounts will be closed to Owner's Capital at the end of the fiscal
year?
a. Salaries Expense
b. Fees Earned
c. Drawing
d. Depreciation Expense
6. In a Sole Proprietorship, which of the following accounts will NOT be included in Closing Entries at the end of
the fiscal year?
a. Drawing
b. Accumulated Depreciation
c. Fees Earned
d. Supplies Expense
7. Which of the following correctly depicts a Closing Entry?

a. Debit: Income Summary; Credit: Prepaid Insurance
b. Debit: Prepaid Insurance; Credit: Income Summary
c. Debit: Insurance Expense; Credit: Income Summary
d. Debit: Income Summary; Credit: Insurance Expense
8. Which of the following correctly depicts a Closing Entry?

a. Debit: Income Summary; Credit: Unearned Revenue 
b. Debit: Unearned Revenue; Credit: Income Summary 
c. Debit: Fees Earned; Credit: Income Summary 
d. Debit: Income Summary; Credit: Fees Earned 
9. The Dividends account is:

a. Closed to Owner's Capital by being credited.
b. Closed to Retained Earnings by being credited.
c. Closed to Owner's Capital by being debited.
d. Closed to Retained Earnings by being debited.
120
10. A summary of selected 2001 calendar year end ledger accounts for Fritz's Auto Services, a Sole Proprietorship,
appears below:
Fritz, Capital
12/31 4,000| 1/1 6,000
| 12/31 14,000
Fritz, Drawing
6/30 2,000| 12/31 4,000
11/30 2,000|
Income Summary
12/31 10,000| 12/31 24,000
12/31 14,000|
Net income for the year ended December 31, 2001 is:
a. $ 4,000
b. $ 6,000
c. $10,000
d. $14,000
11. A summary of selected 2001 calendar year end ledger accounts for Fritz's Auto Services, a Sole Proprietorship,
appears below:
Fritz, Capital
12/31 4,000| 1/1 6,000
| 12/31 14,000
Fritz, Drawing
6/30 2,000| 12/31 4,000
11/30 2,000|
Income Summary
12/31 10,000| 12/31 24,000
12/31 14,000|
The 12/31 credit entry of $4,000 to Fritz, Drawing represents:

a. Part of the entry required to close the Drawing account to Owner's Capital.
b. Part of the entry required to close the Drawing account to Income Summary.
c. Part of the entry required to close the Drawing account to Expenses.
d. A correction of the 6/30 entry in the Drawing account.
12. A summary of selected 2001 calendar year end ledger accounts for Schneider Car Care, a Sole Proprietorship,
appears below:
Schneider, Capital
12/31 4,000| 1/1 6,000
| 12/31 26,000
Schneider, Drawing
6/30 2,000| 12/31 4,000
11/30 2,000|
Income Summary
12/31 10,000| 12/31 36,000
12/31 26,000|
Revenue for the year ended December 31, 2001 is:

a. $10,000
121
b. $26,000
c. $36,000
d. $46,000
appears below:
Schneider, Capital
12/31 4,000| 1/1 6,000
| 12/31 26,000
Schneider, Drawing
6/30 2,000| 12/31 4,000
11/30 2,000|
Income Summary
12/31 10,000| 12/31 36,000
12/31 26,000|
Expense for the year ended December 31, 2001 is:

a. $10,000
b. $26,000
c. $36,000
d. $46,000
appears below:
Schneider, Capital
12/31 4,000| 1/1 6,000
| 12/31 26,000
Schneider, Drawing
6/30 2,000| 12/31 4,000
11/30 2,000|
Income Summary
12/31 10,000| 12/31 36,000
12/31 26,000|
The ending balance in the Schneider, Capital account is:

a. $28,000 credit
b. $26,000 credit
c. $22,000 credit
d. $16,000 credit
15. Aaron's, Inc. shows the following income statement for the year ended December 31, 2001:
Revenues:
Sales Revenue $400,000
Rent Revenue 20,000 $420,000
Expenses:
Interest Expense $ 10,000
Rent Expense 10,000
Utilities Expense 30,000
Salaries Expense 260,000 310,000
Net Income $110,000
Based on this information, the entry to close Revenues and Expenses will include a:
122
a. Credit to Retained Earnings for $110,000
b. Debit to Retained Earnings for $110,000
c. Credit to Retained Earnings for $420,000
d. Credit to Retained Earnings for $400,000
16. Aaron's, Inc. shows the following income statement for the year ended December 31, 2001:
Revenues:
Sales Revenue $400,000
Rent Revenue 20,000 $420,000
Expenses:
Interest Expense $ 10,000
Rent Expense 10,000
Utilities Expense 30,000
Salaries Expense 260,000 310,000
Net Income $110,000
Based on this information, the entry to close Revenues will include a:

a. Credit to Sales Revenue for $310,000
b. Debit to Rent Revenue for $400,000
c. Credit to Sales Revenue for $420,000
d. Debit to Sales Revenue for $400,000
17. The December 31, 2001, account balances prior to the preparation of Closing Entries for Jolly Rancher
Corporation follow:
Debit Credit
Cash $200
Store supplies 600
Service fees revenue $1,000
Retained earnings 100
Accounts payable 140
Dividends 400
Unearned service fees revenue 360
Wage Expense 300
Store supplies expense 100
Based upon this information, after all closing entries have been made, the balance in Jolly Rancher's Retained
Earnings account will be:
a. $700 credit
b. $500 credit
c. $300 credit
d. $100 credit
18. The December 31, 2001, account balances prior to the preparation of Closing Entries for Jolly Rancher
Corporation follow:
Debit Credit
Cash $200
Store supplies 600
Service fees revenue $1,000
Retained earnings 100
Accounts payable 140
Dividends 400
Unearned service fees revenue 360
Wage Expense 300
Store supplies expense 100
Based upon this information, after all closing entries have been made, the balance in Jolly Rancher's Dividends
account will be:
a. $700 debit
123
b. $600 debit
c. $400 debit
d. $-0-
19. The balance in the Retained Earnings account is $37,000 on December 31, 2000. On December 31, 2001, the
balance of Retained Earnings is $34,200. During 2001, dividends of $8,400 were declared and paid. Based on
this information, net income for 2001 is:
a. $ 5,600
b. $14,000
c. $ 4,200
d. $ 8,400
20. On December 31, 2000, the balance in Pacman Inc.'s Retained Earnings account is $43,000. On December 31,
2001, the balance is $44,000. During 2001, dividends of $10,400 were declared and paid. Based on this
information, Net Income for 2001 is:
a. $ 3,400
b. $13,800
c. $ 7,000
d. $11,400
21. For a corporation, which of the following accounts are affected by the closing process?
a. Capital Stock
b. Cash
c. Revenue
d. Accounts Payable
22. Which of the following types of accounts is not affected by the closing process?
a. Revenue
b. Expense
c. Drawings
d. Cash
23. For sole-proprietorships, the balance in the Drawings account is transferred to:
a. Capital
b. Retained Earnings
c. Capital Stock
d. Drawings
24. For corporations, the balance in the Dividends account is transferred to:
a. Capital
b. Retained Earnings
c. Capital Stock
d. Drawings
25. After closing the revenue and expense accounts, the balance in the Income Summary account equals:
a. Zero
b. Net Income
c. Revenues
d. Expenses
26. At the end of the closing process, the balance in the Income Summary account equals:
a. Zero
b. Net Income
c. Revenues
d. Expenses
27. A business has earned revenues of $3,500 during a period. To close the revenue account we must:
a. debit Revenue; credit Income Summary
b. debit Income Summary; credit Revenue
c. debit Capital ; credit Revenue
d. debit Revenue; credit Capital
28. A Corporation has earned revenues of $3,500. Expenses for the month equal $1,800. The beginning balance in
Capital Stock was $10,000 and in Retained Earnings was $1,000. No dividends were paid. After closing the
balances in the Capital Stock and Retained Earnings accounts are:
a. $11,700; $1,000
124
b. $10,000; $2,700
c. $11,700; $2,700
d. $12,700; $0
29. A sole-proprietorship has earned revenues of $4,500. Expenses for the month equal $2,000. The owner
withdrew $500 for personal expenses. The beginning balance in the Capital account was $10,000. After closing
the balances in the Capital and Drawings accounts are:
a. $12,000; $0
b. $12,500; $500
c. $10,000; $3,000
d. $13,000; $0
30. A Corporation earned a net income of $2,000. Assume that the revenue and expense accounts have been closed
to Income Summary. To close the Income Summary account:
a. Capital account is credited
b. Retained Earnings is credited
c. Capital Stock is debited
d. Income Summary is credited
ADJUSTING ENTRIES
Adjusting entries are prepared to adjust account balances from cash basis to accrual basis. During the period, some
transactions are recorded using cash basis and these transactions are adjusted at the end of the period to reflect the
accrual basis accounting.
Adjusting Entries for Rent Expense
Exercise 1
125
On September 1, 20x1, Entity A entered into an agreement to rent office space for a year and paid $36,000 for a six-month
rent. Prepare journal entries on the following dates:
September 1, 20x1
Paid $36,000 rent for a six-month period from September 1, 20x1 to February 28, 20x2
Prepaid rent 36,000
Cash 36,000
December 31, 20x1
Record the rent expense for the period from September 1, 20x1 to December 31, 20x1
Rent expense 24,000
Prepaid rent 24,000
[Note]Monthly rent expense = $36,000 / 6 months = $6,000

Rent expense for the period from September 1 to December 31 = $6,000 x 4 = $24,000
Adjusting Entries for Supplies Expense
Exercise 2
On December 1, 20x1, Entity B purchased $4,500 supplies and recorded as an asset. On December 31, 20x1, Entity B
checked supplies and found $1,200 in the inventory. Prepare journal entries on the following dates:
December 1, 20x1
Supplies 4,500
Cash 4,500
December 31, 20x1

Supplies expense 3,300
Supplies 3,300
[Note]
Supplies consumed during December = $4,500 - $1,200 = $3,300
Exercise 3
On December 1, 20x1, Entity C purchased $3,000 supplies and recorded as supplies expense.
On December 31, 20x1, Entity C checked supplies and found $1,000 in inventory. Prepare journal entries on the following
dates:
December 1, 20x1
Cash 4,500
December 31, 20x1

Debit Credit
Supplies 1,200
[Note]
Supplies left in the inventory at December 31, 20x1 = $1,200
Adjusting Entries for Insurance Expense
Exercise 4
On December 1, 20x1, Entity D signed a new insurance contract and paid $6,300 insurance premium for a three-month
period from December 1 20x1 to February 20x2. Prepare journal entries on the following dates:
December 1, 20x1
Prepaid insurance 6,300
Cash 6,300
December 31, 20x1

Insurance expense 2,100
[Note]
Insurance expense for December 20x1 = $6,300 / 3 months = $2,100
The balances of prepaid insurance account are as follows:
Balance at December 1, 20x1 = $6,300
Balance at December 31, 20x1 = $6,300 - $2,100 = $4,200
Adjusting Entries for Salaries Expense
Exercise 5
On December 16, 20x1, Entity E hired a new staff with a monthly salary of $4,600. Monthly salary is paid on the 15th of
each month. Prepare journal entries on the following dates:
December 16, 20x1
No journal entry is prepared when a new staff is hired.
126
December 31, 20x1
Salaries expense 2,300
Salaries payable 2,300
[Note]
Salaries expense = $4,600 / 2 = $2,300
Adjusting Entries for Unearned Revenue
Exercise 6
On November 9, 20x1, Entity G received $1,200 from a subscriber to a magazine issued by the entity. Each issue of the
magazine is published and sent to subscribers on the first day of each month. Prepare journal entries on the following
dates:
November 9, 20x1
Cash 12,000
Unearned subscription revenue 12,000
December 1, 20x1
Unearned subscription revenue 1,000
Subscription revenue 1,000
YT is a global freight forwarding company. It is in the business since two decade and during that time period, it has
acquired sufficient experience for gaining new customers and maintaining a high level of balance for meeting
customer’s satisfaction. Every year, YT closes its financial year on 30th June. In order to close this year’s accounting
records, accountant need to take care of the following transactions:
1. Closing inventory $ 20,000.
2. Prepaid/ unexpired insurance $ 3,000.
3. Depreciation on machinery $ 2,000.
4. Provide interest on capital invested $ 2,000.
5. Commission received from customer in advance $ 2,000.
6. Outstanding salary $ 6,000.
7. Interest accrued on security bonds $ 1,000.
8. Alan who is a customer of YT went into bankruptcy. Amount proved to be irrecoverable from this customer is
$ 1,000.
9. Interest on drawing is to be provided $ 500.
10. It is the company policy to provide Allowance for doubtful debt @ 10 % on ending balance of accounts
receivable which is $ 40,000.
Required
As an accountant of YT, you are required to pass on adjusting entries.
Solution
YT
Adjusting Entries
Date Particulars Debit Credit

Closing inventory 20,000
P & L A/c 20,000
(to record closing inventory adjustment)
Insurance expense 3,000
To record adjustment of prepaid insurance)
Salaries expense 6,000
Salary payable 6,000
(Outstanding salary adjustment)
Depreciation expense 2,000
Allowance for depreciation 2,000
(to record depreciation on machinery for the year)
Interest receivable 1,000
Interest income 1,000
(interest receivable on investment adjusted)
Commission income 2,000
Unearned commission 2,000
(commission received recorded as liability)
Bad debt expense 1,000
Accounts receivable – Alan 1,000
(to record bad debts written off adjusting entry)
Bad debt expense 4,000
127
Allowance for doubtful debts 4,000
(allowance for doubtful debt adjusted)
Interest on Capital 2,000
Capital 2,000
(interest on capital adjusted)
Capital 500,
Interest on drawings
(interest on drawings adjusted)
128

Adjusting and Closing Entries - Accruals Demonstration Problem 1 Anderson Architects

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Adjusting and Closing Entries - Accruals Demonstration Problem 1 Anderson Architects

Caricato da

Copyright:

Formati disponibili

MODULE 4

ADJUSTING AND CLOSING ENTRIES - ACCRUALS

Dec. 31 Wages of $650 for December will be paid in January.

Dec. 31 Advertising costs of $105 for December will be paid in January.

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

Dec. 31 Employee wages of $950 for December will be paid in January.

Dec. 31 Advertising costs of $95 for December will be paid in January.

DATE ACCOUNT DEBIT CREDIT

Dec. 31 Instructors’ salaries of $2,000 for December will be paid in January.

Dec. 31 December fees of $160 will be collected in January.

Dec. 31 $85 will be paid in January for advertising in December.

DATE ACCOUNT DEBIT CREDIT

Dec. 31 $115 will be paid in January for advertising in December.

DATE ACCOUNT DEBIT CREDIT

Dec. 31 Employee wages of $750 for December will be paid in January.

Dec. 31 Advertising costs of $135 for December will be paid in January.

DATE ACCOUNT DEBIT CREDIT

Dec. 31 Employee wages of $1,150 for December will be paid in January.

Dec. 31 Advertising costs of $115 for December will be paid in January.

DATE ACCOUNT DEBIT CREDIT

4. Accrued Expenses usually appear on the Balance Sheet as:

5. Accrued Revenue is recorded when:

6. Accrued Revenue usually appears on the Balance Sheet as:

If Rental Services takes no action on any of the above items:

If Rental Services takes no action on any of the above items:

30. Accrued expenses occur when:

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

DATE ACCOUNT DEBIT CREDIT

2. Advance payments for services are called:

4. Depreciation Expense and Accumulated Depreciation are classified, respectively, as:

d. Debit: Supplies Expense .................. 1,200

Rental Services, Inc.'s Revenues for December, 2001 are:<BR>

30. Which of the following statements is true about deferred revenues?

Account name Debit Credit

Mar. 31 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Account name Debit Credit

Apr. 30 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Account name Debit Credit

Apr. 30 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Country Fresh Farms Incorporated

Account name Debit Credit

Jun. 30 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Cookies and More

Account name Debit Credit

Dec. 31 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Sullivan Sporting Goods

Account name Debit Credit

Jun. 30 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Account name Debit Credit

Dec.31 Close the revenue accounts.

DATE ACCOUNT DEBIT CREDIT

Account name Debit Credit