CHAPTER 3

PROBLEMS: SET C
P3-1C Andrea Altom started her own consulting firm, Consulting, on May 1, 2017. The Prepare adjusting entries,
trial balance at May 31 is as follows. post to ledger accounts, and
prepare an adjusted trial
balance.
(LO 2, 3, 4)

ALTOM CONSULTING
Trial Balance
May 31, 2017
Account
Number Debit Credit
101 Cash $ 7,700
112 Accounts Receivable 4,000
126 Supplies 1,500
130 Prepaid Insurance 4,800
149 Equipment 9,600
201 Accounts Payable $ 3,500
209 Unearned Service Revenue 3,000
301 Owner’s Capital 19,100
400 Service Revenue 6,000
726 Salaries and Wages Expense 3,000
729 Rent Expense 1,000
$31,600 $31,600

In addition to those accounts listed on the trial balance, the chart of accounts for Altom
Consulting also contains the following accounts and account numbers: No. 150 Accumu-
lated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 631 Supplies
Expense, No. 717 Depreciation Expense, No. 722 Insurance Expense, and No. 736 Utilities
Expense.

Other data:
1. $500 of supplies have been used during the month.
2. Utilities expense incurred but not paid on May 31, 2017, $200.
3. The insurance policy is for 2 years.
4. $1,000 of the balance in the unearned service revenue account remains unearned at the
end of the month.
5. May 31 is a Wednesday, and employees are paid on Fridays. Altom Consulting has two
employees, who are paid $700 each for a 5-day work week.
6. The equipment has a 5-year life with no salvage value. It is being depreciated at $160
per month for 60 months.
7. Invoices representing $1,000 of services performed during the month have not been
recorded as of May 31.

Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for
your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance
as beginning account balances and place a check mark in the posting reference
column.
(c) Prepare an adjusted trial balance at May 31, 2017. (c) Adj. trial balance $33,800
2 3 Adjusting the Accounts

Prepare adjusting entries, P3-2C The Collison Motel opened for business on May 1, 2014. Its trial balance before
post, and prepare adjusted adjustment on May 31 is as follows.
trial balance, and financial
statements.
(LO 2, 3, 4)

COLLISON MOTEL
Trial Balance
May 31, 2017
Account
Number Debit Credit
101 Cash $ 2,500
126 Supplies 1,900
130 Prepaid Insurance 2,400
140 Land 15,000
141 Buildings 70,000
149 Equipment 16,800
201 Accounts Payable $ 5,300
208 Unearned Rent Revenue 3,600
275 Mortgage Payable 40,000
301 Owner’s Capital 55,000
429 Rent Revenue 9,200
610 Advertising Expense 500
726 Salaries and Wages Expense 3,000
732 Utilities Expense 1,000
$113,100 $113,100

In addition to those accounts listed on the trial balance, the chart of accounts for
Collison Motel also contains the following accounts and account numbers: No. 142
Accumulated Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment,
No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation
Expense No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance
Expense.

Other data:
1. Insurance expires at the rate of $200 per month.
2. A count of supplies shows $300 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the buildings and $3,000 on equipment.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. One third of the unearned rent revenue has been earned.
6. Salaries of $800 are accrued and unpaid at May 31.

(c) Adj. trial balance $114,850
(d) Net income $2,350
Ending capital balance
$57,350
Total assets $106,250
Instructions
(a) Journalize the adjusting entries on May 31.
(b) Prepare a ledger using the three-column form of account. Enter the trial balance
amounts and post the adjusting entries. (Use J1 as the posting reference.)
(c) Prepare an adjusted trial balance on May 31.
(d) Prepare an income statement and an owner’s equity statement for the month of May
and a balance sheet at May 31.

Prepare adjusting entries and P3-3C Renn Co. was organized on July 1, 2017. Quarterly financial statements are
financial statements. prepared. The unadjusted and adjusted trial balances as of September 30 are shown
(LO 2, 3, 4) below.
 Problems: Set C 3

RENN CO.
Trial Balance
September 30, 2017
Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash $ 6,700 $ 6,700
Accounts Receivable 400 900
Supplies 1,200 1,000
Prepaid Rent 1,500 900
Equipment 15,000 15,000
Accumulated Depreciation—Equipment $ 350
Notes Payable $ 5,000 5,000
Accounts Payable 1,510 1,510
Salaries and Wages Payable 600
Interest Payable 50
Unearned Rent Revenue 900 500
Owner’s Capital 14,000 14,000
Owner’s Drawings 600 600
Service Revenue 14,000 14,500
Rent Revenue 400 800
Salaries and Wages Expense 9,000 9,600
Rent Expense 900 1,500
Depreciation Expense 350
Supplies Expense 200
Utilities Expense 510 510
Interest Expense 50
$35,810 $35,810 $37,310 $37,310

Instructions
(a) Journalize the adjusting entries that were made.
(b) Prepare an income statement and an owner’s equity statement for the 3 months ending (b) Net income $3,090
September 30 and a balance sheet at September 30. Ending capital $16,490
(c) If the note bears interest at 12%, how many months has it been outstanding? Total assets $24,150

P3-4C A review of the ledger of Lohmeyer Company at December 31, 2017, produces the Prepare adjusting entries
following data pertaining to the preparation of annual adjusting entries. (LO 2, 3)
1. Prepaid Insurance $9,200. The company has separate insurance policies on its build- 1. Insurance expense $4,100
ings and its motor vehicles. Policy B4564 on the building was purchased on July 1,
2016, for $6,000. The policy has a term of 3 years. Policy A2958 on the vehicles was
purchased on January 1, 2017, for $4,200. This policy has a term of 2 years.
2. Unearned Rent Revenue $429,000. The company began subleasing office space in its 2. Rent revenue $84,000
new building on November 1. At December 31, the company had the following rental
contracts that are paid in full for the entire term of the lease.

Term Number of
Date (in months) Monthly Rent Leases
Nov. 1 9 $5,000 5
Dec. 1 6 8,500 4

3. Notes Payable $60,000. This balance consists of a note for 6 months at an annual interest 3. Interest expense $1,800
rate of 9%, dated September 1.
4. Salaries and Wages Payable $0. There are eight salaried employees. Salaries are paid 4. Salaries and Wages
every Friday for the current week. Five employees receive a salary of $600 each per expense $3,150
week, and three employees earn $750 each per week. Assume December 31 is a
Wednesday. Employees do not work weekends. All employees worked the last 3 days of
December.
4 3 Adjusting the Accounts

Instructions
Prepare the adjusting entries at December 31, 2017.

Journalize transactions and P3-5C On November 1, 2017, the account balances of Pine Equipment Repair were as
follow through accounting follows.
cycle to preparation of
financial statements. No. Debits No. Credits
(SO 2, 3, 4) 101 Cash $ 2,790 154 Accumulated Depr.—Equip. $ 500
112 Accounts Receivable 2,510 201 Accounts Payable 2,100
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Equipment 10,000 212 Salaries and Wages Payable 500
301 Owner’s Capital 12,800
$17,300 $17,300

During November the following summary transactions were completed.

Nov. 8 Paid $1,100 for salaries due employees, of which $600 is for November Salaries.
10 Received $1,200 cash from customers on account.
12 Received $1,400 cash for services performed in November.
15 Purchased equipment on account $3,000.
17 Purchased supplies on account $500.
20 Paid creditors on account $2,500.
22 Paid November rent $300.
25 Paid salaries $1,300.
27 Performed services on account and billed customers for services provided $900.
29 Received $550 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,000.
2. Accrued salaries payable $500.
3. Depreciation for the month is $100.
4. Unearned service revenue of $1,150 is earned.

(d) Trial balance $20,650
(f) Adj. trial balance $21,250
(g) Net loss ($850); Ending
capital $11,950;
Total assets $16,350
Instructions
(a) Enter the November 1 balances in the ledger accounts.
(b) Journalize the November transactions.
(c) Post to the ledger accounts. Use J1 for the posting reference. Use the following
accounts: No. 400 Service Revenue, No. 615 Depreciation Expense, No. 631 Supplies
Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.
(d) Prepare a trial balance at November 30.
(e) Journalize and post adjusting entries.
(f) Prepare an adjusted trial balance.
(g) Prepare an income statement and an owner’s equity statement for November and a
balance sheet at November 30.