A5 - Ch 4 Entries
Prepare adjusting journal entries for the situations given below. A few situations depict errors in the accounts. For those, please indicate the impact of the error as stated in the problem, rather than preparing an entry.
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- A $10,000 purchase of equipment on December 30 was erroneously debited to Long-Term Debt. The credit was correctly made to Cash. Indicate the account(s) that are affected by the error and for each account whether the account is overstated or understated. (Example: A company purchased $500 merchandise inventory on account and incorrectly debited supplies inventory. Answer: Merchandise inventory is understated by $500 and Supplies inventory is overstated by $500.)
- Machinery is repaired and maintained by an outside maintenance company on an annual fee basis, payable in advance. The $1,800 fee for the year beginning September 1 was paid on September 1, 2012, and charged to Repairs and Maintenance Expense. What adjustment is necessary on December 31, 2012?
- Hatfield uses the accrual basis of accounting and has a December 31st fiscal year end. Hatfield accepted an $8,000 note receivable from a client on October 1 for tax services she had performed. The note plus interest of 6% per year is due in 6 months. Hatfield increased Note Receivable and Fee Revenue by $8,000 on October 1. Prepare the December 31 adjusting entry for the interest.
- Hatfield uses the accrual basis of accounting and has a December 31st fiscal year end. As of December 31, Hatfiled had not recorded $800 of unpaid wages earned by her secredtary during late December. Prepare the December 31 adjusting entry.
- During November and December, Baker rendered services to a client, a utility company. She had intended to bill the company for $5,400 services through December 31, but failed to do so. Prepare the December 31 adjusting entry for Baker, if any.
- A French magazine company collects subscriptions in advance of delivery of its magazines. However, many magazines are delivered to magazine distributors for newsstand sales, and these distributors are billed and pay later. During the month of March, the French magazine company sold subscriptions on account for 80,000 euros. Prepare the journal entry.
- Columbia had loaned cash to several of its independent retail distributors. As of December 31, 012, the distributors owed $112 thousand of interest that had been unrecorded.
- During November and December, Baker rendered services to a client, a utility company. She had intended to bill the company for $5,400 services through December 31, but failed to do so. Prepare the December 31 adjusting entry for the utility company, if any.
- Recorded the entry for $500 depreciation on equipment for the current fiscal period.
- The firm recognized rent expense for November of $1,000. Rent had been paid in advance.
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