1. 1 The Adjusting Process 3 Student Version

2. 1-2 3-2 2 Describe the nature of the adjusting process. 1 3-2

3. 1-3 3-3 3 Prepaid expenses are the advance payment of future expenses and are recorded as assets when cash is paid. 1 Types of Accounts Requiring Adjustment

4. 1-4 3-4 4 Unearned revenues are the advance receipt of future revenues and are recorded as liabilities when cash is received. Types of Accounts Requiring Adjustment 1

5. 1-5 3-5 5 Accrued revenues are unrecorded revenues that have been earned and for which cash has yet to be received. 1 Types of Accounts Requiring Adjustment

6. 1-6 3-6 6 Accrued expenses are unrecorded expenses that have been incurred and for which cash has not been paid. 1 Types of Accounts Requiring Adjustment

7. 1-7 3-7 7 Journalize entries for accounts requiring adjustment. 2 3-7

8. 1-8 3-8 Summary of Basic Adjustments

9. 1-9 3-9 9 NetSolutions’ Supplies account has a balance of $2,000 in the unadjusted trial balance. Some of these supplies have been used. On December 31, a count reveals that $760 of supplies are on hand. Prepaid Expenses 2 Supplies (balance on trial balance) $2,000 Supplies on hand, December 31 – 760 Supplies used $1,240

10. 1-10 3-10 10 Dec. 311,240 Supplies Bal.2,000 Supplies Expense Bal.800 14 55 2,040 760 2

11. 1-11 3-11 Effect of Omitting Adjustment

12. 1-12 3-12 12 The debit balance of $2,400 in NetSolutions’ Prepaid Insurance account represents the December 1 prepayment of insurance for 12 months. Prepaid Expenses 2

13. 1-13 3-13 13 Dec. 31 200 Prepaid Insurance Bal.2,400 Insurance Expense 15 56 2,200 2 Dec. 31200

14. 1-14 3-14 14 The December 31 unadjusted trial balance of NetSolutions indicates a balance in the unearned rent account of $360. Unearned Revenues 2

15. 1-15 3-15 15 Dec. 31120 Unearned Rent Bal.360 Rent Revenue 23 42 2

16. 1-16 3-16 16 Rent Revenue 42 Dec. 31120 Unearned Rent Bal.360 23 240 Bal. Dec. 31120 2

17. 1-17 3-17 Effect of Omitting Adjustment

18. 1-18 3-18 18 NetSolutions signed an agreement with Danker Co. on December 15 to provide services at $20 per hour. As of December 31, NetSolutions had provided 25 hours of assistance. Accrued Revenues 2

19. 1-19 3-19 19 Dec. 31500 Accounts Receivable Bal.16,340 Fees Earned 12 41 Bal.2,220 2,720 Bal. 2

20. 1-20 3-20 20 Dec. 31500 Accounts Receivable Bal.16,340 Fees Earned 12 41 Bal.2,220 2,720 Bal. 16,840 Bal. 2

21. 1-21 3-21 Effect of Omitting Adjustment

22. 1-22 3-22 22 NetSolutions pays it employees biweekly. During December, NetSolutions paid wages of $950 on December 13 and $1,200 on December 27. As of December 31, NetSolutions owes $250 of wages to employees for Monday and Tuesday. Accrued Expenses 2

23. 1-23 3-23 23 Dec. 31250 Wages Payable Bal.4,275 Wages Expense 22 51 Bal.4,525 2

24. 1-24 3-24 24 Dec. 31250 Wages Payable Bal.4,275 Wages Expense 22 51 Bal.4,525 2

25. 1-25 3-25 25 The journal entry for the payment of wages on January 10 is shown below. 2 After posting

26. 1-26 3-26 Effect of Omitting Adjustment

27. 1-27 3-27 27 NetSolutions estimates the depreciation on its office equipment to be $50 for the month of December. 2

28. 1-28 3-28 28 Dec. 3150 Depreciation ExpenseAccum. Depr.—Office Equip. 19 53 2

29. 1-29 3-29 29 Dec. 3150 Depreciation Expense Dec. 3150 Accum. Depr.—Office Equip. 19 53 2

30. 1-30 3-30 30 NetSolutions’ balance sheet would show office equipment at cost, less accumulated depreciation. Office equipment$1,800 Less accumulated depreciation 50$1,750 Book value 2

31. 1-31 3-31 31 Summarize the adjustment process. 3 3-26

32. 1-32 3-32 32 3 (continued) Exhibit 7 Adjusting Entries—NetSolutions

33. 1-33 3-33 33 3. Exhibit 7Adjusting Entries—NetSolutions (continued)

34. 1-34 3-34 34 Prepare an adjusted trial balance. 4 3-29

35. 1-35 3-35 35 4 Exhibit 9Adjusted Trial Balance—NetSolutions

36. 1-36 3-36 36