Exercise Three:
Simon's geophysical Company adjusts and closes its accounts yearly. At December 31, 2020, the balances in the ledger accounts prior to making adjusting entries were as follows:
Simon’s Geophysical Company
Trial Balance
December 31, 2020
Account Title
Debit
Credit
Cash
$19,140
Supplies
1,300
Prepaid Office Rent
3,300
Prepaid Insurance
960
Equipment
60,000
Accumulated Depreciation Equipment
$1,800
Notes Payable
5,000
Unearned Service Revenue
35,650
Owner’s Capital
26,040
Service Revenue
120,860
Salaries Expense
86,900
Telephone Expense
4,950
Rent Expense
11,000
Depreciation Expense
1,800
Total
$189,350
$189,350
Other data:
1. The 3-months office rent contract was signed on December 1, 2020.
2. Accrued salaries by end of December were $950.
3. Supplies on hand on December 31, 2020, totaled $300.
4. The equipment purchased on January 1, 2020, depreciates $200 per month.
5. Accrued Interest at December 31, 2020 was $100.
6. Unearned services revenue earned by the end of December totals $32,550.
7. At December 31, services valued at $4,000 had been provided to clients but not yet billed or recorded.
Instructions: Prepare the adjusting entries on December 31, 2020 and the adjusted trial balance.
Date
Accounts
Ref
Debit
Credit
Account Title
Debit
Credit
Independent MCQs
A Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
o Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400
o Debit Office Supplies, $3,600; Credit Office Supplies Expense, $3,600
o Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600
o Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400
A Company purchased a computer for $4,800 on December 1. It is estimated that annual depreciation on the computer will be $960. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:
o Debit Depreciation Expense, $960; Credit Accumulated Depreciation, $960
o Debit Depreciation Expense, $80; Credit Accumulated Depreciation, $80
o Debit Depreciation Expense, $3,840; Credit Accumulated Depreciation, $3,840
o None of the above
At December 31, 2019, before any year-end adjustments, Karr Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be:
o $3,000
o $1,450
o $4,450
o None of the above
A Company purchased an 18-month insurance policy on May 31, 2019 for $3,600. The December 31, 2019 balance sheet would report Prepaid Insurance of:
o $0
o $1,400
o $2,200
o $3,600
A Company purchased a computer system for $3,600 on October 1, 2019. The company expects to use the computer system for 3 years. It has no salvage value. The depreciation expense of the year 2019 on the asset is:
o $100
o $300
o $1,200
o None of the above
A Company signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is:
o $240
o $60
o $720
o $80
At March 1, 2020, Candy Inc. had supplies on hand of $500. During the month, Candy purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a:
o Debit to the supplies account for $1,500
o Credit to the supplies account for $500
o Debit to the supplies account for $1,200
o Credit to the supplies account for $1,500
Maple Tree Inc. purchased a 12-month insurance policy on March 1, 2019 for $900. At December 31, 2019, the adjusting journal entry to record expiration of this asset will include a:
o Debit to Insurance Expense and a credit to Prepaid Insurance for $900
o Debit to Prepaid Insurance and a credit to Insurance Expense for $100
o Debit to Insurance Expense and a credit to Prepaid Insurance for $75
o None of the above
On July 1, Dexter Store paid $8,000 to ACE Company for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Dexter Store is:
o Debit Rent Expense, $8,000; Credit Prepaid Rent, $2,000
o Debit Rent Expense, $2,000; Credit Prepaid Rent, $2,000
o Debit Rent Expense, $8,000; Credit Prepaid Rent, $8,000
o None of the above
A Company collected $8,400 in October 1 of 2018 for 4 months of service which would take place from October of 2018 through January of 2019. The revenue reported from this transaction at the end of 2018 adjusting entry would be:
o $ 0
o $6,300
o $8,400
o $2,100
Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.
