1. Adjusting Accounts and Preparing Statements
Chapter 3 Exercises
Adjusting Accounts and Preparing Statements

2. Adjusting Entries In-Class Exercises: Exercise No. Page

3. Adjusting Entries
For each of the following cases, prepare adjusting entries required for financial statements for the year ended December 31, (Assume that prepaid expenses are initially recorded in asset 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 this period. b. Wages of $9,000 are earned by workers but not paid as of December 31, c. Depreciation on the company’s equipment for 2011 is $19,127. d. The Office Supplies account had a $480 debit balance on December 31, During 2011, $5,349 of office supplies are purchased. A physical count of supplies at December 31, , shows $587 of supplies available. e. The Prepaid Insurance account had a $5,000 balance on December 31, An analysis of insurance policies shows that $2,200 of unexpired insurance benefits remain at December , f. The company has earned (but not recorded) $750 of interest from investments in CDs for the year ended December 31, The interest revenue will be received on Jan. 10, g. The company has a bank loan and has incurred (but not recorded) interest expense of $3,500 for the year ended December 31, The company must pay the interest on January 2, 2012.

4. Adjusting Entries

5. Adjusting Entries
Beginning balance………….$ Purchases…………………… 5,349 Total available…………….…$ 5,829 Less: Ending inventory…… (587) Supplies consumed………...$ 5,242

6. Adjusting Entries
Beginning balance……………...$ 5,000 Less: Unexpired insurance…… (2,200) Insurance expired……………….$ 2,800

7. Adjusting Entries

8. Adjusting Entries In-Class Exercise: Exercise No. Page
Adjusting & paying accrued wages

9. Adjusting Entries
Pablo Management has five part-time employees, each of whom earns $100 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, The next week, the five employees worked only four days because New Year’s Day was an unpaid holiday.
(a) Prepare the adjusting entry that would be recorded on Monday, December 31, (b) Prepare the journal entry that would be made to record payment of the employees’ wages on Friday, January 4, 2012

10. Adjusting Entries
5 workers x $100 x 1 day = $500

11. Adjusting Entries Last Payday
S M T W T F S
New Year’s Holiday
End of year

12. Adjusting Entries
5 employees x $100 x 3 days = $1,500

13. Adjusting Entries