Question 1

Using the information presented below, prepare an income statement, owner's equity and balance
sheet from the adjusted trial balance of Hanson Storage. Ms. Hanson's capital account balance of
$40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment during the
current year.

   
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Question 2

The unadjusted trial balance and the adjustment data for Harris Training Institute are given
below along with adjusting entry information. If these adjustments are not recorded, what is the
impact on net income? Show calculation for net income without the adjustments and net income
with the adjustments. Which one gives the most accurate net income? What accounting
principles are being violated if the adjustments are not made?

   
Additional information items:
a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the
insurance invoice indicates that one half of the policy has expired by the end of the December 31
year-end.
b. A cash payment for space sublet for 8 months was received on July 1 and was credited to
Unearned Rent.
c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid. 

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Question 3
The adjusted trial balance of Sara's Web Services follows:

   
(a) Prepare the closing entries for Sara's Web Services.
(b) What is the balance of Sara's capital account after the closing entries are posted?
(c) Prepare a post-closing trail balance?

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Question 4
Following are selected accounts and their balances for a company after the adjustments as of
May 31, the end of its fiscal year. (All accounts have normal balances.)

   

Prepare all the necessary closing entries for this company.  

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Question 5
The adjusted trial balance of the Thomas Company follows:

   
(a) Prepare the closing entries for Thomas Company.
(b) Prepare a post-closing trail balance?
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Question 6
Multiple choice Questions:
1. Adjusting entries are
a. Not necessary if the accounting system is operating properly.
b. Usually required before financial statements are prepared.
c. Made whenever management desires to change an account balance.
d. Made to balance sheet accounts only.

2. Expenses incurred but not yet paid or recorded are called

a. Prepaid expenses.
b. Accrued expenses.
c. Interim expenses.
d. Unearned expenses.

3. A law firm received $2,000 cash for legal services to be rendered in the future. The full
amount was credited to the liability account Unearned Legal Fees. If the legal services have
been rendered at the end of the accounting period and no adjusting entry is made, this
would cause
a. Expenses to be overstated.
b. Net income to be overstated.
c. Liabilities to be understated.
d. Revenues to be understated.

4. Adjusting entries can be classified as

a. Postponements and advances.
b. Accruals and prepayments.
c. Prepayments and postponements.
d. Accruals and advances.

5. Accrued revenues are

a. Received and recorded as liabilities before they are earned.
b. Earned and recorded as liabilities before they are received.
c. Earned but not yet received or recorded.
d. Earned and already received and recorded.

6. Prepaid expenses are

a. Paid and recorded in an asset account before they are used or consumed.
b. Paid and recorded in an asset account after they are used or consumed.
c. Incurred but not yet paid or recorded.
d. Incurred and already paid or recorded.

7. Accrued expenses are

a. Paid and recorded in an asset account before they are used or consumed.
b. Paid and recorded in an asset account after they are used or consumed.
c. Incurred but not yet paid or recorded.
d. Incurred and already paid or recorded.
8. Unearned revenues are
a. Received and recorded as liabilities before they are earned.
b. Earned and recorded as liabilities before they are received.
c. Earned but not yet received or recorded.
d. Earned and already received and recorded.
9. A liability—revenue relationship exists with
a. Prepaid expense adjusting entries.
b. Accrued expense adjusting entries.
c. Unearned revenue adjusting entries.
d. Accrued revenue adjusting entries.

10. An account consists of

a. A title, a debit balance, and a credit balance.
b. A title, a left side, and a debit balance.
c. A title, a debit side, and a credit side.
d. A title, a right side, and a debit balance.

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Question 7
The Anniston Motel opened for business on May 1, 2010. Its trial balance before
adjustment on May 31 is as follows.
Anniston Motel
Trial Balance
May 31, 2010
Debit Credit
Cash $ 2,500
Supplies 1,900
Prepaid Insurance 2,400
Land 15,000
Equipment 70,000
Furniture 16,800
Accounts Payable $ 5,300
Unearned Rent 3,600
Mortgage Payable 40,000
Capital 55,000
Rent Revenue 9,200
Advertising Expense 500
Salaries Expense 3,000
Utilities Expense 1,000
$113,100 $113,100
Other data:
1. Insurance expires at the rate of $200 per month.
2. A count of supplies shows $500 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the equipment and $3,000 on furniture.
4. The mortgage interest rate is 12% per year. (The loan taken on May 1)
5. Unearned rent of $2,500 has been earned.
6. Salaries of $800 are accrued and unpaid at May 31.
Required:
(a) Journalize the adjusting entries on May 31.
(b) Prepare an adjusted trial balance on May 31.
(c) Prepare an income statement and an owner’s equity statement and a balance sheet at May 31.
Question 8
Bella Beauty Salon's unadjusted trial balance for the current year follows:

   
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation on shop equipment, $350 per month.
d. Depreciation on the building, $2,220 per month.
e. There are $200 of accrued revenues was unrecorded at the time the trial balance was
prepared.
f. $800 of the unearned rent account balance was earned by year-end.
g. $200 wages expense incurred but has not been paid yet and not recorded.
h. Property taxes expenses, totaling $450, have accrued. This amount of property taxes expense
has not been recorded.
i. Interest expense on the note payable $600, has accrued but is unrecorded.

Required:
(a) Journalize the adjusting entries on December 31.
(b) Prepare an adjusted trial balance on December 31.
(c) Prepare an income statement and an owner’s equity statement and a balance sheet at
December 31.
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Question 9
The following information is available for Juxton Company for the year ended December
31, 2014:
Accounts payable $ 2,700 Accounts receivable $1,500
Accumulated depreciation, equipment 4,000 Cash 2,600
Juxton, Capital 7,800 Short-term investments 1,000
Intangible assets 2,500 Equipment 7,500
Notes payable (due in 5 years) 7,500 Long-term stock investments 6,900
Real estate investment 10,000 Salaries payable 7,000
Interest payable 8,000 Inventories 5,000

Required:
Use the above information to prepare a classified balance sheet for the year ended
December 31, 2014.

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