PROBLEM 4.6A Preparing Adjusting Entries and Determining Account Balances 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. Below is an unadjusted trial balance dated December 31 of the current year. (Bear in mind that adjusting entries have already been made for the first 11 months, but not for December.) ALPINE EXPEDITIONS UNADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR 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 Other Data 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 of the current year for $36,000. 4. On December 1 of the current year 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 of the current year the company borrowed $10,000 by signing an 8- month, 9 percent note payable. The entire note, plus 8 months’ accrued interest, is due on June 1 of the upcoming year. 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 the upcoming year. Instructions - Take note that I have modified the instructions compared to the textbook. 1. For each of the numbered paragraphs, prepare the necessary adjusting entry (omit explanation). 2. Using T accounts, determine the new balances of the accounts affected by the adjusting journal entries. 3. Prepare the adjusted trial balance in good form (TIP: using the new account balances).
PROBLEM 4.6A Preparing
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. Below is an unadjusted
year. (Bear in mind that adjusting entries have already been made for the first 11 months, but
not for December.)
ALPINE EXPEDITIONS
UNADJUSTED TRIAL BALANCE
DECEMBER 31, CURRENT YEAR
Cash $13,900
Accounts receivable 78,000
Unexpired insurance 18,000
Prepaid advertising 2,200
Climbing supplies 4,900
Climbing equipment 57,600
Accumulated
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
Other Data
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 of the current year for
$36,000.
4. On December 1 of the current year 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 of the current year the company borrowed $10,000 by signing an 8-
month, 9 percent note payable. The entire note, plus 8 months’ accrued interest, is due
on June 1 of the upcoming year.
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 the upcoming year.
Instructions - Take note that I have modified the instructions compared to the textbook.
1. For each of the numbered paragraphs, prepare the necessary adjusting entry (omit
explanation).
2. Using T accounts, determine the new balances of the accounts affected by the
adjusting journal entries.
3. Prepare the adjusted trial balance in good form (TIP: using the new account balances).
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
