# 1

On June 1, 2019, Cain Company, a new firm, paid \$8,400 rent in advance for a seven-month period. The \$8,400 was debited to thePrepaid Rent account.

On June 1, 2019, the firm bought supplies for \$10,250. The \$10,250 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing \$5,960 were on hand.

On June 1, 2019, the firm bought equipment costing \$72,900. The equipment has an expected useful life of 9 years and no salvage value. The firm will use the straight-line method of depreciation.

Prepare end-of-June adjusting entries for Cain Company.
Explanation

(\$8,400 ÷ 7 months = \$1,200 per month)

(\$10,250 − \$5,960 = \$4,290)

(\$72,900 ÷ 108 months = \$675)

# 2

The completed worksheet for Cantu Corporation as of December 31, 2019, after the company had completed the first month of operation, appears below.

Account Name   Debit     Credit     Debit     Credit     Debit     Credit     Debit     Credit     Debit     Credit
Cash   39,100                       39,100                       39,100
Accounts Receivable   6,500                       6,500                       6,500
Supplies   6,050                 3,500     6,050                       2,550
Prepaid Advertising   10,200                 1,700     10,200                       8,500
Equipment   42,500                       42,500                       42,500
Accumulated Depreciation—Equipment                     850           850                       850
Accounts Payable         6,500                       6,500                       6,500
Selena Cantu, Capital         54,500                       54,500                       54,500
Selena Cantu, Drawing   4,100                       4,100                       4,100
Fees Income         57,750                       57,750           57,750
Supplies Expense               3,500           3,500           3,500
Depreciation Expense-Equipment               850           850           850
Salaries Expense   8,900                       8,900           8,900
Utilities Expense   1,400                       1,400           1,400
Totals   118,750     118,750     6,050     6,050     119,600     119,600     16,350     57,750     103,250     61,850
Net Income                                       41,400                 41,400
57,750     57,750     103,250     103,250

Required:

Prepare an income statement.

Prepare a statement of owner’s equity. The owner made no additional investments during the month.

Prepare a balance sheet.

Analyze:

# 3

Assume that a firm reports net income of \$45,000 prior to making adjusting entries for the following items: expired rent, \$3,500; depreciation expense, \$4,100; and supplies used, \$1,800.

Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

Explanation

  Net Income Before Adjustments Less Adjustments: Rent Expense \$ 45,000 \$ 3,500 4,100 1,800 9,400 \$ 35,600

If the adjusting entries are not made, total expenses will be understated by \$9,400.
Net income will be overstated by \$9,400.

# 4

Desoto Company must make three adjusting entries on December 31, 2019.

Supplies used, \$5,500 (supplies totaling \$9,000 were purchased on December 1, 2019, and debited to the Supplies account).

Expired insurance, \$4,100; on December 1, 2019, the firm paid \$24,600 for six months’ insurance coverage in advance and debitedPrepaid Insurance for this amount.

Depreciation expense for equipment, \$2,900.

Required:
Prepare the journal entries for these adjustments and post the entries to the general ledger accounts

# 5

The adjusted trial balance of University Book Store as of November 30, 2019, after the firm’s first month of operations, appears below.

Supplies used during the month, \$2,900.

Expired rent for the month, \$3,500.

Depreciation expense for the month, \$950.

Account Name   Debit     Credit
Cash \$ 23,075
Accounts Receivable   3,812
Supplies   4,600
Prepaid Rent   21,000
Equipment   27,500
Accumulated Depreciation-Equipment       \$ 950
Accounts Payable         9,000
Ruby Darbandi, Capital         41,837
Ruby Darbandi, Drawing   4,000
Fees Income         48,550
Depreciation Expense-Equipment   950
Rent Expense   3,500
Salaries Expense   8,500
Supplies Expense   2,900
Utilities Expense   500
Totals \$ 100,337   \$ 100,337

Required:

Complete the Trial Balance columns of the worksheet prior to making the adjusting entries.

Analyze:
What was the balance of Prepaid Rent prior to the adjusting entry for expired rent?

# 6

On January 31, 2019, the general ledger of Palmer Company showed the following account balances.

ACCOUNTS 31,500 11,250 4,500 4,100 45,750 0 8,350 40,975 58,500 0 0 5,300 5,425 0

Supplies used during January totaled \$2,850.

Expired insurance totaled \$1,025.

Depreciation expense for the month was \$925.

Complete the worksheet through the Adjusted Trial Balance section. Assume that every account has the normal debit or credit balance. The worksheet covers the month of January.

# 1

On January 31, 2019, the general ledger of Palmer Company showed the following account balances.

ACCOUNTS 31,500 11,250 4,500 4,100 45,750 0 8,350 40,975 58,500 0 0 5,300 5,425 0

Supplies used during January totaled \$2,850.

Expired insurance totaled \$1,025.

Depreciation expense for the month was \$925.

Complete the worksheet through the Adjusted Trial Balance section. Assume that every account has the normal debit or credit balance. The worksheet covers the month of January.

# 2

Desoto Company must make three adjusting entries on December 31, 2019.

Supplies used, \$5,500 (supplies totaling \$9,000 were purchased on December 1, 2019, and debited to the Supplies account).

Expired insurance, \$4,100; on December 1, 2019, the firm paid \$24,600 for six months’ insurance coverage in advance and debitedPrepaid Insurance for this amount.

Depreciation expense for equipment, \$2,900.

Required:
Prepare the journal entries for these adjustments and post the entries to the general ledger accounts

# 3

Assume that a firm reports net income of \$45,000 prior to making adjusting entries for the following items: expired rent, \$3,500; depreciation expense, \$4,100; and supplies used, \$1,800.

Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

## Explanation

  Net Income Before Adjustments Less Adjustments: Rent Expense \$ 45,000 \$ 3,500 4,100 1,800 9,400 \$ 35,600

If the adjusting entries are not made, total expenses will be understated by \$9,400.
Net income will be overstated by \$9,400.

# 4

On June 1, 2019, Cain Company, a new firm, paid \$8,400 rent in advance for a seven-month period. The \$8,400 was debited to thePrepaid Rent account.

On June 1, 2019, the firm bought supplies for \$10,250. The \$10,250 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing \$5,960 were on hand.

On June 1, 2019, the firm bought equipment costing \$72,900. The equipment has an expected useful life of 9 years and no salvage value. The firm will use the straight-line method of depreciation.

Prepare end-of-June adjusting entries for Cain Company.

Explanation

(\$8,400 ÷ 7 months = \$1,200 per month)

(\$10,250 − \$5,960 = \$4,290)

(\$72,900 ÷ 108 months = \$675)

# 5

The completed worksheet for Cantu Corporation as of December 31, 2019, after the company had completed the first month of operation, appears below.

Account Name   Debit     Credit     Debit     Credit     Debit     Credit     Debit     Credit     Debit     Credit
Cash   39,100                       39,100                       39,100
Accounts Receivable   6,500                       6,500                       6,500
Supplies   6,050                 3,500     6,050                       2,550
Prepaid Advertising   10,200                 1,700     10,200                       8,500
Equipment   42,500                       42,500                       42,500
Accumulated Depreciation—Equipment                     850           850                       850
Accounts Payable         6,500                       6,500                       6,500
Selena Cantu, Capital         54,500                       54,500                       54,500
Selena Cantu, Drawing   4,100                       4,100                       4,100
Fees Income         57,750                       57,750           57,750
Supplies Expense               3,500           3,500           3,500
Depreciation Expense-Equipment               850           850           850
Salaries Expense   8,900                       8,900           8,900
Utilities Expense   1,400                       1,400           1,400
Totals   118,750     118,750     6,050     6,050     119,600     119,600     16,350     57,750     103,250     61,850
Net Income                                       41,400                 41,400
57,750     57,750     103,250     103,250

Required:

Prepare an income statement.

Prepare a statement of owner’s equity. The owner made no additional investments during the month.

Prepare a balance sheet.

Analyze:

# 6

The adjusted trial balance of University Book Store as of November 30, 2019, after the firm’s first month of operations, appears below.

Supplies used during the month, \$2,900.

Expired rent for the month, \$3,500.

Depreciation expense for the month, \$950.

Account Name   Debit     Credit
Cash \$ 23,075
Accounts Receivable   3,812
Supplies   4,600
Prepaid Rent   21,000
Equipment   27,500
Accumulated Depreciation-Equipment       \$ 950
Accounts Payable         9,000
Ruby Darbandi, Capital         41,837
Ruby Darbandi, Drawing   4,000
Fees Income         48,550
Depreciation Expense-Equipment   950
Rent Expense   3,500
Salaries Expense   8,500
Supplies Expense   2,900
Utilities Expense   500
Totals \$ 100,337   \$ 100,337

Required: