Accounting Exercise 3.3 (Accounting for Deferrals)
Required:
Each of the following independent transactions requires a year-end adjusting entry. Record the impact of each transaction and related adjusting entry on the accounting equation in the template provided below. Assume December 31 as accounting period end. The first transaction is solved for you as an example:
| Event / |
Total Assets |
|
|
|
Equity |
||||
| Asset 1 |
+ |
Asset 2 |
= |
Liabilities |
+ |
Contributed |
+ |
Retained |
|
| 1 |
(2,400) |
|
2,400 |
|
n/a |
|
n/a |
|
n/a |
| 1 - Adj. |
n/a |
|
(1,400) |
|
n/a |
|
n/a |
|
(1,400) |
1) On May 31 paid $2,400 cash in advance for a one-year office rent.
Hint for adjusting entry - record rent expense.
2) Purchased supplies for $1,000. At year end, $300 of supplies remained
on hand. Hint for adjusting entry - record supplies expense.
3) On November 1, paid $5,000 cash for office equipment that is expected
to have a useful life of 5 years and salvage value of $1,000. The company
uses the straight-line depreciation method. Hint for adjusting entry -
record depreciation expense.
4) On March 31, the company borrowed $10,000 from a bank issuing a note
with a one-year term and 7% interest rate. Hint for adjusting entry -
record interest payable and expense.
5) Received an $3,000 cash advance for services to be performed in the
future. The contract required a one-year commitment, starting June 1.
Hint for adjusting entry - record revenue earned.
6) On October 31, invested $15,000 cash in a certificate of deposit that
paid 5% annual interest. The certificate of deposit had a one-year maturity
term. Hint for adjusting entry - record interest receivable and revenue.
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