1.

) Determine if the following adjusting entries are

AE = Accrued expenses
PE = Prepaid expenses
AR = Accrued revenue
UR = Unearned revenue

Answers:
UR a.) Atlas Magazine was previously prepaid $400,000 by subscribers and has
UR b.) Hornsby Company agreed to provide 1,000 units of its product to Micha
AE c.) Nancy and Sons owes its employees $30,000 for work done over the pa
AE d.) Replay Inc. advertised on TV 44 during the month of April, but has not y
PE e.) Centurion Company paid Reliable Insurance Company $54,000 for insur
UR f.) Reliable Insurance Company received a payment of $54,000 for insuranc

2.) Determine if the following transactions for Marlin Corporation require an adjustmen

a.) At the bexginning

$90,000 in advanc
Adjustment is require

b.) Marlin pays its em

Adjustment required

c.) Marlin paid $300,

but only one mont
Adjustment required

d.) At the beginning o

yet paid any cash t
No adjustment neede
3.) Keating Inc. rents its headquarters from Starling Enterprises for $10,000 per month.

a.) Record the entry t

Prepaid rent incre
cash decreases

b.) Record the entry t

Cash Increases
Unearned revenue

c.) Record the adjusti

Pre Paid Rent Dec
Rent Expanses Increa

d.) Record the adjusti

Unearned Revenue
Rent Revenue increas

4.) Leon Jackson is ecstatic! First National Bank just approved a loan for Leon to start a
designing sites. During June, his first month of business, the following occur:

a.) Webworks signs a note at the bank and is given $10,000 cash.

b.) Leon deposits $2,000 of his own money into Webworks' checking accou

c.) Webworks purchases a new computer and additional equipment for $3,
d.) Webworks purchases supplies worth $200 on account that should last W

e.) Webworks hires Nancy Po to assist with administrative tasks. She will c
her assistance.

f.) Webworks begins working on his first two websites, one Juan Sanchez, a
Pauline Smith, a local businesswoman.
g.) Webworks completes the site for Mr. Sanchez and sends him a bill for $

h.) Webworks completes the site for Ms. Smith and sends her a bill for $45

i.) Webworks collects $600 in cash from Mr. Sanchez.

j.) Webworks pays Nancy $100 for her work on Mr. Sanchez' Web site.

k.) Webworks receives $500 in advance to work on a Website for a local res

l.) Webworks pay taxes of $200 in cash.

m.) Webworks owes Nancy $100 for her work on Ms. Smith's Web site.

n.) Leon's parents let him know that Webworks owes $80 toward
 o.) Webworks only used half of the supplies purchased in (d) above.

i.) Prepare journal entries for the above events, if

ii.) Prepare an unadjusted trial balance for Webw
iii.) Prepare adjusting entries for the following (it
iv.) Prepare an adjusted trial balance for Webwor

5.) Jan Haley owns and operates Haley's Dry Cleaners. The following occurred during D

a.) On Dec. 1, Haley prepaid rent on her store for December and January w

b.) On December 1, Haley purchased insurance with cash in the amount of

c.) Haley paid $900 of her accounts payable balance.

d.) Haley paid off all of her salaries payable balance.

e.) Haley purchased supplies on account in the amount of $2,400.

f.) Haley paid a salary to her assistant of $1,000 in cash for work done in th

g.) Haley dry-cleaned clothes for customers on account in the amount of $8

 h.) Haley collected $6,300 of her accounts receivable balance.

i.) Haley paid tax of $750 in cash.

i.) Prepare the journal entry for each transaction

ii.) Prepare a trial balance dated 12/31/XX
iii.) Make the following adjusting entries for the m
Rent Expe 1000 and post them to the
Prepaid Rent 1000

Insurance 2000
Prepaid Insurance 2000

salary exp 1000

salary payable 1000

supplies e 2000
supplies 2000

iv.) Prepare a balance sheet, income statement, s

6.) On January 1, Kevin Reynolds, a student at State U, decides to start a business. Kevi
need for mass produced copies of programs on CD's. While a lot of students have a
of CD's is needed.

Kevin believes with a beginning investment in specialty equipment, he can provide a

Kopies." Of course, Kevin is very careful to ensure his customers have full ownership

The following occurs during January:

a.) Kevin deposits $500 of his own money into the company’s checking acc
cash 500
capital stock 500
b.) Kevin signs a note payable in the amount of $1,000 from Neighborhood
cash 1000
note payable 1000
c.) KKCDK (Kevin’s Kool CD Kopies) purchases a CD duplicator (a piece of eq
equipment 1300
cash 1300
d.) KKCDK purchases 500 blank CDs for $150 on account.
supplies 150
account payable 150
e.) KKCDK pays $20 cash for flyers to advertise.
prepaid advertising 20
cash 20
f.) KKCDK quickly catches on with the student groups on campus. KKCDK se
of the CD's and the student groups owe for another 100 CD's.
240
240

account receivable 80
sales revenue 80
g.) KKCDK pays $100 on its accounts payable.
accounts payable 100
cash 100
h.) KKCDK receives $40 in advance to copy 50 CDs for a student group. He w
unearned revenue 40
cash 40
i.) KKCDK incurs $40 in tax expense. The taxes will be paid in February.
tax expense 40
accounts payable 40
j.) Kevin’s roommate, Mark, helps with the CD copying and delivering. KKCD
salary expense 50
salary payable 50
k.) KKCDK incurs $10 in interest expense. The interest will be paid with the
cash 10
note payable 10
i.) Prepare journal entries for the above events if needed. ("a." th
ii.) Prepare an unadjusted trial balance for KKCDK for January.
iii.) Prepare adjusting entries for the following. ("j" and "k")

The following occurs during February:

l.) Kevin decides to expand outside the college. On the first day of the mon
during February and March.
prepaid avertisement 20
cash 20
m.) The student groups paid for the 100 CD's not paid in January.
cash 80
accoiunt receivable 80
n.) KKCDK paid off its remaining accounts payable, salaries payable, taxes p

o.) KKCDK purchases 450 CD's for $135 on account.

supplies 135
accounts payable 135
p.) KKCD sells 500 CD's during the month for $0.80 each. KKCDK receives c
cash 360
accounts rec 360

accounts rec 40
sales rev 40
q.) KKCDK comples and delivers the advanced order of 50 CD's described in
account rec 40
sales rev 40
s.) KKCDK incurs $80 in tax expense. The taxes will be paid in March.
tax expense 80
accounts payable 80
t.) Mark continues to earn his salary of $50 and will be paid on March 1.
salart expense 50
salary payable 50
u.) The advertisement in "l." has now been used so an adjustment needs to
advertisment expense 40
accounts payable 40
v.) KKCDK incurs $10 in interest expense. The interest will be paid with the
notes payable 20
cash 20
i.) Prepare journal entries for the above events if needed. ("l." thr
ii.) Prepare an unadjusted trial balance for KKCDK for February.
iii.) Prepare adjusting entries for the following. ("t" and "v")
by subscribers and has delivered half of the magazines ordered.
f its product to Michaels Inc. and has substantially completed the agreement.
ork done over the past two weeks.
of April, but has not yet made an entry to record the event.
any $54,000 for insurance for twelve months, six of which have passed.
f $54,000 for insurance for twelve months from Centurion Company and six months have passed

require an adjustment or not. If an adjusting entry is required, give the correct entry.

a.) At the bexginning of the month, Marline agreed to perform services for the next three mont
$90,000 in advance. One month has now passed.
Adjustment is required. It is needed to reduce Unearned Revenue and in crease revenue by 1/3

b.) Marlin pays its employees every two weeks. At the end of the month, Marlin owes its emplo
Adjustment required. Marlin should increase Salaries expense and increased Salaries payable.

c.) Marlin paid $300,000 for rent at the beginning of the month by debiting prepaid rent and cr
but only one month has passed.
Adjustment required. Marlin must decrease prepaid rent and increase rent expense by one mo

d.) At the beginning of the month, Marlin agreed to perform services for Ryland Company for $
yet paid any cash to Marlin and the work is not substantially complete.
No adjustment needed.
r $10,000 per month. On September 1, 20XX, Keating pays Starling $60,000 for six months wort

a.) Record the entry that Keating Inc would make on September 1 when they pay Starling.
Prepaid rent incre 60,000
cash decreases 60,000

b.) Record the entry that Starling Enterprises would make on September 1 when they receive th
Cash Increases 60,000
Unearned revenue 60,000

c.) Record the adjusting entry that Keating would make on December 31, 20XX, as the company
Pre Paid Rent Dec 20,000
Rent Expanses Increase 40,000

d.) Record the adjusting entry that Starling would make on December 31, 20XX, as the compan
Unearned Revenue 20,000
Rent Revenue increases 40,000

an for Leon to start a Web site design and maintenance business called Webworks. He is now re
wing occur:

0,000 cash.

works' checking account

nal equipment for $3,000

ount that should last Webworks 2 months

ative tasks. She will charge $100 per Website for

s, one Juan Sanchez, a friend of his dad's and the other for

sends him a bill for $600

ends her a bill for $450

nchez' Web site.

Website for a local resturant. Work on the site will

not begin until July.

Smith's Web site.

orks owes $80 toward the electricity bill. Webworks will pay them in July.
d in (d) above.

or the above events, if needed (items "a" through "l")

rial balance for Webworks for June.
s for the following (items "m" through "o")
l balance for Webworks for June.

ng occurred during December:

ember and January with $2,000 cash

cash in the amount of $2,400 that will last six months

nt of $2,400.

h for work done in the first two weeks of December.

nt in the amount of $8,000.

 balance.

for each transaction ("a." through "i.")

ated 12/31/XX
sting entries for the month of December
and post them to the trial balance

, income statement, statement of retained earnings and statement of cashflow for December 31

start a business. Kevin has noticed that various student organizations around campus are havin
ot of students have a CD drive on their computers that can write to CD's, it is a slow process whe

ment, he can provide a valuable product to the college community. So on 1/1, Kevin officially beg
rs have full ownership rights to the material on their CD's.

mpany’s checking account.

0 from Neighborhood Bank. The note is due in one year.

plicator (a piece of equipment), which can copy 7 CD's at one time. The cost is $1,300 and he pa

on campus. KKCDK sells 400 CDs to various groups for $0.80 per CD. KKCDK receives cash paym
r 100 CD's.

a student group. He will not begin work on the project until February.

paid in February.

g and delivering. KKCDK pays Mark a salary of $50 per month. Mark will get his first check on Fe

t will be paid with the note.

nts if needed. ("a." through "i.")
KCDK for January.
ng. ("j" and "k")

he first day of the month, KKCDK pays $20 in advance for advertising in the local paper. The adve

d in January.

aries payable, taxes payable and interest payable.

ch. KKCDK receives cash for 450 of them and is owed for the remaining 50.

f 50 CD's described in "h."

paid in March.
e paid on March 1.

n adjustment needs to be made.

t will be paid with the note.

nts if needed. ("l." through "s.")

KCDK for February.
ng. ("t" and "v")
ix months have passed.

orrect entry.

or the next three months for Catsui Corp. for $30,000 per month. Catsui paid Marlin

crease revenue by 1/3 of the amount originally received

Marlin owes its employees $480,000, but will not pay them until the following week.
sed Salaries payable.

ng prepaid rent and crediting cash. The $300,000 covered six months of occupancy,

nt expense by one month's worth of he amount paid, or 50,000 (300000/6 months= 50,000 per

Ryland Company for $16,000 per month for the next six months. Ryland has not
00 for six months worth of rent.

hey pay Starling.

1 when they receive the rent payment from Keating.

20XX, as the company prepares its annual financial statements.

20XX, as the company prepares its annual financial statements.

ebworks. He is now ready to purchase his needed equipment, hire his administrative help, and b

Cash Accounts Payable

A. 10,000 C. 3,000 D. 200
B. 2,000 J. 100
I. 600 L. 200 $200.00
K. 500
Unearned Revenue
$9,800 K. 500
 Accounts Receivable $500.00
G. 600 I. 600
H. 450 Note Payable
A. 10,000
$450
$10,000
Supplies
D. 200 Capital Stock
B. 2,000
$200
$2,000
Equipment
C. 3,000

$3,000

Webworks Accoutnt Title

Unadjusted Trail Balance Cash
30-Jun Accounts Receivable
Supplies
Account Title Debits Credits Equipment
Cash $9,800 Accounts Payable
Accounts Receivable 450 SalariesPayable
Supplies 200 Unearned Revenue
Equipment 3,000 Note Payable
Accounts Payable $200 Capital Stock
Unearned Revenue 500 Retained Earnings, 6/1
Note Payable 10,000 Revenue
Capital Stock 2,000 Cost of Goods Sold
Retained Earnings, 6/1 0 Salaries Expense
Revenue 1,050 Tax Expense
Salaries Expense 100 Utilities Expense
Tax Expense 200 Supplies Expense
Totals $13,750 $13,750
Total

Cash Accounts Payable

A. 10,000 C. 3,000 D. 200
B. 2,000 J. 100 N. 80
I. 600 L. 200
K. 500 $280.00

$9,800 Salaries Payable

M. 100
Accounts Receivable
G. 600 I. 600 $100.00
H. 450
Unearned Revenue
$450 K. 500

Supplies $500
D. 200 O. 100
Note Payable
$100 A. 10,000

Equipment $10,000
C. 3,000

$3,000

Cash Accounts Receivable Prepaid Rent

5,000 A. 2,000 6,500 H. 6,300 0
H. 6,300 B. 2,400 G. 8,000 A. 2,000
C. 900
D. 1,000 $8,200 $2,000
 F. 1,000
I. 750

$3,250

Accounts Payable Salaries Payable Note Payable

C. 900 1,200 D. 1,000 1,000
E.2,400
0 $4,000
$2,700
Retained Earnings Revenue Supplies Expenses
2,300 0 0
G. 8,000
$2,300 0
$8,000
Rent Expense Tax Expense
0 Insurance Expense 0
0 I. 750
0
0 $750
hflow for December 31, 20XX

und campus are having more and more

t is a slow process when a high volume

1/1, Kevin officially begins "Kevin's Kool CD

Cash
500 1300
1000 100
240
40
 20
10

ost is $1,300 and he pays cash.

Accounts Payable
100 150
40

$90

Unearned Revenue
DK receives cash payment for 300 40

$40

Cash
500 1300
1000 100
et his first check on Feb. 1st. 240 10
40 20
20
80
 $360
40
Accounts Payable
100 150
40
90-90=0
e local paper. The advertisements will run 135
80
Unearned Revenue
40

$40
d Marlin

ing week.

cupancy,

months= 50,000 per month)

nistrative help, and begin

Retained Earnings
0

Sales Revenue
G. 600
H. 450
 $1,050

Salaries Expense
J. 100

$100

Tax Expense
L. 200

$200

Webworks
Adjusted Trial Balance
30-Jun
Debits Credits
$9,800
s Receivable 450
100
3,000
s Payable $280
Payable 100
ed Revenue 500
10,000
2,000
d Earnings, 6/1 0
1,050
Goods Sold
Expense 200
200
Expense 80
s Expense 100
 $13,930 $13,930

Capital Stock Utilities Expense

B. 2,000 N. 80

$2,000 $80

Retained Earnings Supplies Expense

0 O. 100

0 $100

Sales Revenue
G. 600
H. 450

$1,050

Salaries Expense
J. 100
M. 100
$200

Tax Expense
L. 200

$200
Prepaid Rent Prepaid Insurance Supplies
0 0
A. 2,000 B. 2,400 E. 2,400

$2,000 $2,400 $2,400

 Note Payable Capital Stock
4,000 3,000

$4,000 $3,000

Supplies Expenses Salaries Expense

0
F. 1,000
0
$1,000
Tax Expense

$750

Accounts Receivable Equipment

80 1300

$80 $1,300
 Salaries Payable Note Payable Capital Stock
50 1,000
10
50 $1,010 $500

Revenue Salaries Expense

240 Tax Expense 50
80 40
320 50
40

Accounts Receivable advert Equipment

80 20 1300
80
40
40 $1,300
Salaries Payable Note Payable Capital Stock
50 1,000
50 1000
50 $0 $500

Revenue Salaries Expense

240 Tax Expense 50
80 40 50
360 40
$40 80
 Haley's Dry Cleaners Cash
Unadjusted Trial Balance 5,000
31-Dec H. 6,300

Account Title Debits Credits

 Cash $3,250
Accounts Receivable 8,200
Prepaid Rent 2,000
Prepaid Insurance 2,400 $3,250
Supplies 2,400
Accounts Payable $2,700 Accounts Payable
Note Payable 4,000 C. 900
Capital Stock 3,000
Retained Earnings, 12/1 2,300
Revenue 8,000 $2,700
Salaries Expense 1,000
Tax Expense 750 Retained Earnings
### $20,000

$2,300

Rent Expense
0
J. 1,000
$1,000

Equipment Supplies Kevin's Kool CD Kopies

150 Unadjusted Trial Balanc
31-Jan
150
$1,300 Account Title
 Cash
Accounts Receivable
Equipment
advert
Supplies
Capital Stock Accounts Payable
500 Note Payable
Salaries Payable
$500 Capital Stock
Unearned Revenue
Revenue
Salaries Expense
Salaries Expense
Tax Expense
50

Kevin's Kool CD Kopies

Equipment Supplies Adjusted Trial Balance
150 31-Jan
135
Account Title
$1,300 Cash
Accounts Receivable
Equipment
 advertising Expense
Supplies
Accounts Payable
Capital Stock note expense Note Payable
500 10 10 Salaries Payable
10 Capital Stock
$500 Unearned Revenue
Revenue
Salaries Expense
Salaries Expense Tax Expense
Cash Accounts Receivable Prepaid Rent Prepaid Insurance
A. 2,000 6,500 H. 6,300 J. 1,000
B. 2,400 G. 8,000 A. 2,000 B. 2,400
C. 900
D. 1,000 $8,200 $1,000 $2,000
 F. 1,000
I. 750

$3,250

counts Payable Salaries Payable Note Payable Capital Stock

1,200 D. 1,000 1,000 4,000
E.2,400 L. 1,000
$1,000 $4,000 $3,000
$2,700
ained Earnings Revenue Supplies Expenses Salaries Expense
2,300 0 0 0
G. 8,000 M. 2,000 F. 1,000
$2,300 $2,000 L. 1,000
$8,000 $2,000
ent Expense Tax Expense
Insurance Expense 0
0 I. 750
$1,000 K. 400
$400 $750

evin's Kool CD Kopies

adjusted Trial Balance
31-Jan

Debits Credits
 $360
80
1,300
20
150
$90
1,010
50
500
40
320

50
$40

2000 20000

evin's Kool CD Kopies

djusted Trial Balance
31-Jan

Debits Credits
$850
0
1,300
 20
285
$215
20
50
500
0
720
100
$80
2635

2150 2150
paid Insurance Supplies Haley's Dry Cleaners
K. 400 M. 2,000 Adjusted Trial Balance
E. 2,400 31-Dec

$2,000 $400 Account Title Debits

 Cash $3,250
Accounts Receivable 8,200
Prepaid Rent 1,000
Prepaid Insurance 2,000
Supplies 400
apital Stock Accounts Payable
3,000 Salaries Payable
Note Payable
$3,000 Capital Stock
Retained Earnings, 12/1
Revenue
aries Expense Supplies Expense 2,000
Salaries Expense $2,000
Rent Expense 1,000
Insurance Expense 400
$2,000 Tax Expense 750
$21,000
 Haley's Dry Cleaners
Income Statement
As of December 31, Year Two

Credits Recvenue $8,000

 Expenses:
Supplies $2,000
Salaries 2,000
Rent 1,000
Insurance 400 5,400
$2,700 Income before taxes 2,600
1,000 Taxes 750
4,000 Net Income $1,850
3,000
2,300
8,000 Haley's Dry Cleaners
Statement of Retained Earnings
As of December 31, Year Two
Retained Earnings, December 1 $2,300
New Income 1,850
Retained Earnings, December 31 $4,150
$21,000
 Haley's Dry Cleaners
Balance Statement
December 31, Year Two

Assets:
 Current:
Cash $3,250
Accounts Receivable 8,200
Prepaid Rent 1,000
Prepaid Insurance 2,000
Supplies 400
Total Current Assets $14,850

Liabilities:
Current:
Accounts Payable $2,700
Salaries Payable 1,000
Toal Current Liabilities $3,700

Noncurrent:
Notes Payable $ 4,000
Total Liabilities $7,700

Stockholders' Equity:
Capital Stock $3,000
Retained Earnings 4,150
Total Stockholders' Equity 7,150
Total Assets $14,850

Total Liabilities and Stockholders' Equity $14,850