payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 Unearned client revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,600 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,400 Client revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,000 Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 Climbing supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400 Repairs expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800 Depreciation expense: climbing equipment . . . . . . . . . . . . . . . . . . . . . 13,200 Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,200 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,750 $328,000 $328,000 1. Cash 6. Climbing Equipment 10. Interest Payable 2. Accounts Receivable 7. Accumulated Depreciation: Climbing Equipment 11. Income Taxes Payable 3. Unexpired Insurance 12. Unearned Client 4. Prepaid Advertising 8. Sal

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Alpine Expeditions operates a mountain climbing school in Colorado. Some clients pay in advance for services; others are billed after services have been performed. Advance payments are credited to an account entitled Unearned Client Revenue. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31, 2011, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2011, but not for December.) 1. Accrued but unrecorded fees earned as of December 31 amount to $6,400. 2. Records show that $6,600 of cash receipts originally recorded as unearned client revenue had been earned as of December 31. 3. The company purchased a 12-month insurance policy on June 1, 2011, for $36,000. 4. On December 1, 2011, the company paid $2,200 for numerous advertisements in several climbing magazines. Half of these advertisements have appeared in print as of December 31. 5. Climbing supplies on hand at December 31 amount to $2,000. 6. All climbing equipment was purchased when the business first formed. The estimated life of the equipment at that time was four years (or 48 months). 7. On October 1, 2011, the company borrowed $10,000 by signing an eight-month, 9 percent note payable. The entire note, plus eight months’ accrued interest, is due on June 1, 2012. 8. Accrued but unrecorded salaries at December 31 amount to $3,100. 9. Estimated income taxes expense for the entire year totals $14,000. Taxes are due in the first quarter of 2012. Instructions a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation). b. Determine that amount at which each of the following accounts will be reported in the company’s balance sheet dated December 31, 2011: ALPINE EXPEDITIONS UNADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,900 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000 Unexpired insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Prepaid advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200 Climbing supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900 Climbing equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,600 Accumulated depreciation: climbing equipment . . . . . . . . . . . . . . . . . $ 38,400 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 Unearned client revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,600 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,400 Client revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,000 Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 Climbing supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400 Repairs expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800 Depreciation expense: climbing equipment . . . . . . . . . . . . . . . . . . . . . 13,200 Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,200 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,750 $328,000 $328,000 1. Cash 6. Climbing Equipment 10. Interest Payable 2. Accounts Receivable 7. Accumulated Depreciation: Climbing Equipment 11. Income Taxes Payable 3. Unexpired Insurance 12. Unearned Client 4. Prepaid Advertising 8. Salaries Payable Revenue 5. Climbing Supplies 9. Notes Payable c. Which of the accounts listed in part b represent deferred expenses? Explain.

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