Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 3, Problem 64BPSB
Problem 3-64B Identification and Preparation of Entries
Morgan Dance Inc. provides ballet, tap, and jazz dancing instruction to promising young dancers. Morgan began operations in January 2020 and is preparing its monthly financial statements. The following items describe Morgan’s transactions in January 2020:
- Morgan requires that dance instruction be paid in advance-either monthly or quarterly.
- On January 1, Morgan received $4,125 for dance instruction to be provided during 2020.
- On January 31, Morgan noted that $825 of dance instruction revenue is still unearned.
- On January 20, Morgan’s hourly employees were paid $1,415 for work performed in January.
- Morgan’s insurance policy requires semiannual premium payments. Morgan paid the $3,000 insurance policy which covered the first half of 2020 in December 2019.
- When there are no scheduled dance classes, Morgan rents its dance studio for birthday parties for $100 per two-hour party. Four birthday parties were held during January. Morgan will not bill the parents until February.
- Morgan purchased $350 of office supplies on January 10.
- On January 31, Morgan determined that Office supplies of $770 were unused.
- Morgan received a January utility bill for S770. The bill will not be paid until it is due in February.
Required:
- Identify whether each transaction is an
adjusting entry or a regularjournal entry . If the entry is an adjusting entry, identify it as an accrued revenue, accrued expense, deferred revenue, or deferred expense. - Prepare the entries necessary to record the transactions above and on the previous page.
Expert Solution
To determine
Concept Introduction:
Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.
The business activity for each type of adjusting entry is explained as follows:
- Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
- Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
- Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
- Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
- Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period. Requirement-1:
To Indicate:
If the given transactions is regular or adjusting journal entry and type of adjusting journal entry, if any.
Answer to Problem 64BPSB
The given transactions are regular or adjusting journal entry and type of adjusting journal entry, if any as follows:
| Morgan Dance Inc. | |||||||||
| Transaction | Type of entry | Type of adjusting entry | |||||||
| a. | Regular Journal Entry | NA | |||||||
| b. | Adjusting entry | Accrued Revenue | |||||||
| c. | Regular Journal Entry | NA | |||||||
| d. | Regular Journal Entry | NA | |||||||
| e. | Adjusting entry | Accrued Revenue | |||||||
| f. | Regular Journal Entry | NA | |||||||
| g. | Adjusting entry | Accrued Expense | |||||||
| h. | Adjusting entry | Accrued Expense | |||||||
Explanation of Solution
Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period.
The given transactions are regular or adjusting journal entry and type of adjusting journal entry, if any as follows:
| Morgan Dance Inc. | |||||||||
| Transaction | Type of entry | Type of adjusting entry | |||||||
| a. | Regular Journal Entry | NA | |||||||
| b. | Adjusting entry | Accrued Revenue | |||||||
| c. | Regular Journal Entry | NA | |||||||
| d. | Regular Journal Entry | NA | |||||||
| e. | Adjusting entry | Accrued Revenue | |||||||
| f. | Regular Journal Entry | NA | |||||||
| g. | Adjusting entry | Accrued Expense | |||||||
| h. | Adjusting entry | Accrued Expense | |||||||
Expert Solution
To determine
Concept Introduction:
Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.
The business activity for each type of adjusting entry is explained as follows:
- Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
- Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
- Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
- Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
- Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period. Requirement-2:
To Prepare The journal entries for the given transactions.
Answer to Problem 64BPSB
The journal entries for the given transactions are as follows:
| Morgan Dance Inc. | |||||||||
| Adjusting entries | |||||||||
| # | Date | Account Title | Debit | Credit | |||||
| a | Jan. 1 | Cash | $ 4,125 | ||||||
| Unearned Service Revenue | $ 4,125 | ||||||||
| b | Jan. 31 | Unearned Service Revenue | $ 3,300 | ||||||
| Service Revenue | $ 3,300 | ||||||||
| c. | Jan. 20 | Salaries Expense | $ 1,415 | ||||||
| Cash | $ 1,415 | ||||||||
| d. | Prepaid Insurance | $ 3,000 | |||||||
| Cash | $ 3,000 | ||||||||
| e. | Jan. 31 | Accounts Receivable | $ 400 | ||||||
| Service Revenue | $ 400 | ||||||||
| f. | Jan. 10 | Office Supplies | $ 350 | ||||||
| Cash | $ 350 | ||||||||
| g. | Jan. 31 | Office Supplies Expense | $ 265 | ||||||
| Office Supplies | $ 265 | ||||||||
| h. | Jan. 31 | Utilities Expense | $ 770 | ||||||
| Utilities Payable | $ 770 | ||||||||
Explanation of Solution
Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period.
The journal entries for the given transactions are as follows:
| Morgan Dance Inc. | |||||||||
| Adjusting entries | |||||||||
| # | Date | Account Title | Debit | Credit | |||||
| a | Jan. 1 | Cash | $ 4,125 | ||||||
| Unearned Service Revenue | $ 4,125 | ||||||||
| (Being amount received in advance) | |||||||||
| b | Jan. 31 | Unearned Service Revenue | $ 3,300 | ||||||
| Service Revenue (4125-825) | $ 3,300 | ||||||||
| (Being revenue accrued) | |||||||||
| c. | Jan. 20 | Salaries Expense | $ 1,415 | ||||||
| Cash | $ 1,415 | ||||||||
| (Being expense paid in cash) | |||||||||
| d. | Prepaid Insurance | $ 3,000 | |||||||
| Cash | $ 3,000 | ||||||||
| (Being amount paid in advance ) | |||||||||
| e. | Jan. 31 | Accounts Receivable | $ 400 | ||||||
| Service Revenue (100*4) | $ 400 | ||||||||
| (Being revenue accrued) | |||||||||
| f. | Jan. 10 | Office Supplies | $ 350 | ||||||
| Cash | $ 350 | ||||||||
| (Being supplies purchased ) | |||||||||
| g. | Jan. 31 | Office Supplies Expense (350-85) | $ 265 | ||||||
| Office Supplies | $ 265 | ||||||||
| (Being expense accrued) | |||||||||
| h. | Jan. 31 | Utilities Expense | $ 770 | ||||||
| Utilities Payable | $ 770 | ||||||||
| (Being expense accrued) | |||||||||
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Managerial Accounting
Instructions
General Journal
Balance Sheet
On August 1, 2019, Pereira Corporation has sold 1,500 Wiglows to Mendez Company at $420 each. Mendez also purchased a 1-
1. Prepare the necessary journal entries to record:
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Balance Sheet Instruction
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General Journal Instructions
2
PAGE 1
GENERAL JOURNAL…
Chapter 3 Solutions
Cornerstones of Financial Accounting
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