Chapter 4, Problem 4.11E

Exercise 4.11

LO 2. 6, 7

Record transactions and adjustments Enter the following column headings across the top of a sheet of paper:

Transaction/ Stockholders’ Net

Adjustment Assets Liabilities Equity Income

Enter the transaction/adjustment letter in the first column and show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the amount and indicating whether it is an addition (+) or a subtraction (-). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders’ equity. In some cases, only one column may be affected because all the specific accounts affected by the transaction are included in that category. Transaction a has been completed as an illustration.

(Note: As an alternative to using the columns, you may write the journal entry for each transaction or adjustment.)

1. Provided services to a client on account; revenues totaled $1,100.
2. Paid an insurance premium of $720 for the coming year. An asset, Prepaid Insurance, was debited.
3. Recognized insurance expense for one month from the premium transaction in b via a reclassification adjusting entry.
4. Paid $ 1,600 of wages accrued at the end of the prior month.
5. Paid $5,200 of wages for the current month.
6. Accrued $1,200 of wages at the end of the current month.
7. Received cash of $3,000 on accounts receivable accrued at the end of the prior month.

Transaction/	Stockholders’	Net
Adjustment	Assets LiabilitiesEquity	Income
a.	+1,100	+1,100