BA 99.

1 EXERCISES: ADJUSTING THE ACCOUNTS

E3.2 (Weygandt et al., 2015)

Grollo Concepts accumulates the following adjustment data at December 31. Indicate (a) the type of
adjustment (prepaid expense, unearned revenue, accrued expense, accrued revenue), and (b) status of
accounts before adjustment (for example, “assets understated, and revenue understated”).

Account Type of Adjustment Accounts before

adjustment
1 Supplies of €150 are on hand.

2 Services performed but not recorded total

€900.
3 Interest of €200 has accumulated on a note
payable.
4 Rent collected in advance totaling €850 has
been earned.

E3.4 modified (Weygandt et al., 2019)

Yilmaz A.S. encountered the following situations:

1. Yilmaz collected $1,300 from a customer in 2020. 75% of services was performed by the end of
2020.
2. Yilmaz paid $2,800 rent on December 1 for the 4 months starting December 1.
3. Yilmaz’s employees worked 4 days by the end of 2020 but will only be paid in 2021. The total 5-
day work week pay amounts to $1,200.
4. Yilmaz performed consulting services for a client in December 2020. On December 31, it had not
billed the client for services provided of $1,200.
5. Yilmaz purchased $900 of supplies in 2020; at year-ed, $400 of supplies remain unused.
6. Yilmaz purchased equipment amounting $4,200 on August 1, 2020. The equipment is estimated
to be used over 5 years.
7. Yilmaz borrowed $12,000 on October 1, 2020, signing an 8% one-year note payable.

Use the chart of accounts below:

YILMAZ A.S.
Chart of Accounts

Assets Owner’s Equity

101 Cash 301 S. Yilmaz, Capital
102 Accounts Receivable 306 S. Yilmaz, Drawings
110 Supplies 350 Income Summary
122 Prepaid Rent Revenue
157 Equipment 400 Service Revenue
158 Accumulated Depreciation – Equipment Expenses
Liabilities 631 Supplies Expense
201 Accounts Payable 711 Depreciation Expense
203 Salaries Payable 726 Salaries Expense
204 Interest Payable 729 Rent Expense
BA 99.1 EXERCISES: ADJUSTING THE ACCOUNTS

210 Unearned Service Revenue 810 Utilities Expense

250 Notes Payable 851 Interest Expense

Required:
a. Journalize adjusting entries (omit explanations).
b. Journalize adjusting entries assuming alternative treatment of prepayments was used.

E 3.15 (Weygandt et al., 2019)

Action Quest Games adjusts its accounts annually. The following information is available for the year
ended December 31, 2020.

1. Purchased a 1-year insurance policy on June 1, for $1,800 cash.

2. Paid $6,500 on August 31, for 5-months’ rent in advance.
3. On September 4, received $3,600 cash in advance from a company to sponsor a game each
month (starting September) for a total of 9 months for the most improved students at a local
school.
4. Signed a contract for cleaning services starting December 1 for $1,000 per month. Paid for the
first 2 months on November 30.
5. On December 5, received $1,500 in advance from a gaming club. Determined that on December
31, $475 of these games had not yet been played.

Use the chart of accounts below:

ACTION QUEST GAMES
Chart of Accounts

Assets Owner’s Equity

101 Cash 301 R. Tendo, Capital
102 Accounts Receivable 306 R. Tendo, Drawings
122 Prepaid Rent 350 Income Summary
123 Prepaid Cleaning Revenue
127 Prepaid Insurance 400 Service Revenue
157 Equipment Expenses
158 Accumulated Depreciation – Equipment 631 Supplies Expense
Liabilities 711 Depreciation Expense
201 Accounts Payable 726 Salaries Expense
203 Salaries Payable 729 Rent Expense
204 Interest Payable 732 Insurance Expense
210 Unearned Service Revenue 735 Repairs and Maintenance Expense
250 Notes Payable 810 Utilities Expense
851 Interest Expense

Required: For each of the above transactions,

a. Prepare the journal entry to record the initial transaction.
b. Prepare the adjusting entry that is required on December 31. (Note: Use the account Service
Revenue for item 3 and Repairs and Maintenance Expense for item 4)
c. Post the journal entries to T-accounts and determining the final balance in each account (Note:
Posting to the Cash account is not required)
BA 99.1 EXERCISES: ADJUSTING THE ACCOUNTS

P3.1 modified (Weygandt et al., 2019)

Sadie Cuono started her own consulting firm, Cuono Consulting, on May 1, 2020. The trial balance at
May 31 is as follows:

CUONO CONSULTING
Trial Balance
May 31 2020
Debit Credit
101 Cash € 3,500
112 Accounts receivable 6,000
126 Supplies 1,900
130 Prepaid Insurance 3,600
149 Equipment 11,400
150 Accumulated Depreciation - Equipment € -
201 Accounts payable 4,500
209 Unearned Service Revenue 2,000
212 Salaries and Wages Payable -
301 S. Cuono, Capital 18,700
302 S. Cuono, Drawings 1,000
400 Service Revenue 9,500
631 Supplies Expense -
717 Depreciation Expense -
722 Insurance Expense -
726 Salaries and Wages Expense 6,400
729 Rent Expense 900
732 Utilities Expense - _________
34,700 34,700

Other data:
1. € 900 of supplies have been used during the month.
2. Utilities expense incurred but not paid on May 31, 2020, € 250.
3. The insurance policy is for 2 years.
4. € 400 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. Cuono Consulting has two
employees who are paid € 920 each for a 5-day work week.
6. The equipment has a 5-year life with no residual value. It is depreciated at € 190 per month for
60 months.
7. Invoice representing € 1,700 of services performed during the month has not been recorded as
of May 31.

Required:
a. Prepare the adjusting entries for the month of May.
b. Prepare the adjusted trial balance.
c. Prepare the income statement for the month ending May 31, 2020.