Explanation Prepare an adjusted trial balance of FCM Company for the year ending December 31, 2016. FCM Company Adjusted Trial Balance December 31, 2016 Accounts Debit ($) Credit ($) Cash 1,200 - Office Supplies 1,100 - Prepaid Insurance 140 - Equipment 20,000 - Accumulated Depreciation - Equipment - 6,510 Accounts Payable - 2,200 Salaries Payable - 250 Unearned Revenue - 180 Common Stock - 8,100 Dividends 3,000 - Service Revenue - 17,420 Salaries Expense 6,250 - Supplies Expense 1,900 - Depreciation Expense - Equipment 510 - Insurance Expense 560 - Total 34,660 34,660 Table (1) Since all the assets, expenses, and dividends accounts have a normal debit balance, it has been recorded in the debit column of an adjusted trial balance. All liabilities, revenues, common stock accounts have a normal credit balance. Therefore, these accounts have been recorded in the credit column of an adjusted trial balance. Working notes: (a) Prepare adjusting entry to record the value of office supplies used. Date Accounts title and explanation Post Ref. Debit ($) Credit ($) December 31 Supplies Expense 1,900 Office Supplies 1,900 (To record the amount of office supplies used during the period.) Table (2) Deferred expenses Advance payment for future expenses is called as prepaid expenses. These prepaid expenses are considered as assets until they are expensed or used. For the portion of used assets, expenses would be recognized by way of passing an adjusting entry. Prepaid expenses are also known as deferred expenses, because at the time of making payment, expenses are not recognized but deferred until they are used up. For the portion of used office supplies, office supplies unadjusted balance (asset) would be reduced by way of passing an adjusting entry. Office supplies expense of $1,900 for the used supplies must be recognized. Debit to increase the Office supplies expense account (Increase in office supplies expense decreases stockholders’ equity account). Credit to increase the office supplies account (asset account). (b) Prepare adjusting entries to record the expired amount of prepaid insurance. Date Accounts title and explanation Debit ($) Credit ($) December 31 Insurance expense 560 Prepaid insurance 560 (To record the amount of accrued insurance expense) Table (3) Prepaid insurance is an insurance expense, which should be adjusted with the amount equal to the cost of the prepaid insurance expired at the end of the accounting year. Debit to increase the insurance expense account (Increase in insurance expense decreases stockholders’ equity account). Credit to increase the prepaid insurance account (asset account). (c) Prepare adjusting entries to record the depreciation expense on equipment. Date Accounts title and explanation Debit ($) Credit ($) December 31 Depreciation expense -Equipment 510 Accumulated depreciation - Equipment 510 (To record the amount of depreciation) Table (4) Depreciation expense is the written down value of the tangible asset at the end of each accounting year. Accumulated Depreciation is a contra-asset account which is used to accumulate the depreciation expense amount on the related tangible asset, and which is deducted from the cost of the asset to show the real worth of the asset at the end of the each accounting period. Depreciation expense is an expense account. There is an increase in the expenses, and hence it is debited. Accumulated Depreciation is a contra-asset account. There is a decrease in assets, and hence, it is credited. (d) Prepare adjusting entries to record the accrued salaries expense. Date Accounts title and explanation Debit ($) Credit ($) December 31 Salaries expense 250 Salaries payable 250 (To record the accrued salaries expenses) Table (5) Accrued expenses: Accrued expenses are the expenses that have been incurred but have not been paid yet. These accrued expenses create accrued liabilities. For the portion of payment made, accrued liabilities would be reduced by way of passing an adjusting entry. Salaries expense of $250 owed to employees, this accrued salaries expenses creates salaries payable. Debit to increase the salaries expense account (Increase in salaries expense decreases stockholders’ equity account). Credit to increase the salaries payable account (liability account). (e) Prepare adjusting entries to record the earned unearned service revenue. Date Accounts title and explanation Debit ($) Credit ($) December 31 Unearned Revenue 420 Service Revenue 420 (To record the amount of service revenue earned for which collection was made in advance) Table (6) Deferred revenues: Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. Earned service revenue of $420 must be recognized by decreasing the unearned service revenue (liability account) and by increasing the service revenue (revenue account). Debit to decrease the unearned revenue account (liability account). Credit to increase the service revenue account (stockholders’ equity account). Now post the above adjustments to the respective T-account. Cash Account Date Details Debit ($) Date Details Credit ($) Balance 1,200 Closing balance 1,200 Total 1,200 Total 1,200 Opening Balance 1,200 Table (7) Office Supplies Account Date Details Debit ($) Date Details Credit ($) Balance 3,000 a. Supplies Expense 1,900 Closing balance 1,100 Total 3,000 Total 3,000 Opening Balance 1,100 Table (8) Prepaid Insurance Account Date Details Debit ($) Date Details Credit ($) Balance 700 b. Insurance Expense 560 Closing balance 140 Total 700 Total 700 Opening balance 140 Table (9) Equipment Account Date Details Debit ($) Date Details Credit ($) a...

Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)

5th Edition

ISBN: 9780134078939

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Chapter 3, Problem 3.26E

To determine

Adjusted trial balance:

Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Prepare an adjusted trial balance.

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Chapter 3, Problem 3.25E

Chapter 3, Problem 3.27E

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Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)

Ch. 3 - Which of the following is true of accrual basis...Ch. 3 - Get Fit Now gains a client who prepays 540 for a...Ch. 3 - The revenue recognition principle requires a. time...Ch. 3 - Adjusting the accounts is the process of a....Ch. 3 - Which of the following is an example of a deferral...Ch. 3 - Assume that the weekly payroll of In the Woods...Ch. 3 - The adjusted trial balance shows a. amounts that...Ch. 3 - A D Window Cleaning performed 450 of services but...Ch. 3 - A worksheet a. is a journal used to record...Ch. 3 - On February 1, Clovis Wilson Law Firm contracted...

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Adjusted trial balance : Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period. Prepare an adjusted trial balance.

Solution Summary: The author explains how to prepare an adjusted trial balance for the year ending December 31, 2016.

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Adjusted trial balance:

Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Prepare an adjusted trial balance.

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Chapter 3 Solutions

Adjusted trial balance : Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period. Prepare an adjusted trial balance.

Solution Summary: The author explains how to prepare an adjusted trial balance for the year ending December 31, 2016.

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Adjusted trial balance: Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period. Prepare an adjusted trial balance.

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Chapter 3 Solutions

Adjusted trial balance:

Adjusted trial balance is that statement which contains complete list of accounts with their adjusted balances, after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Prepare an adjusted trial balance.