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Tutorial Test 3

Price Waterhouse Company provided accounting services and needed to prepare financial statements for 2021. They produced an unadjusted trial balance and were given adjustment information. They journalized adjusting entries, posted them to T-accounts to update account balances, and prepared an adjusted trial balance. This adjusted trial balance forms the basis for Price Waterhouse to then prepare key financial statements: the income statement, statement of owner's equity, and statement of financial position.

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351 views2 pages

Tutorial Test 3

Price Waterhouse Company provided accounting services and needed to prepare financial statements for 2021. They produced an unadjusted trial balance and were given adjustment information. They journalized adjusting entries, posted them to T-accounts to update account balances, and prepared an adjusted trial balance. This adjusted trial balance forms the basis for Price Waterhouse to then prepare key financial statements: the income statement, statement of owner's equity, and statement of financial position.

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© © All Rights Reserved
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TUTORIAL TEST 3

The unadjusted trial balance of Price Waterhouse Company at December 31, 2021, and
the data needed for the adjustments follow.
PRICE WATERHOUSE COMPANY
(Unadjusted) Trial Balance
December 31, 2021
Account Title Balance
Debit Credit
Cash $ 7,100
Accounts Receivable 19,100
Prepaid Rent 2,400
Office Supplies 1,400
Equipment 20,000
Accumulated Depreciation—Equipment $ 3,800
Accounts Payable 3,500
Salaries Payable 0
Unearned Revenue 2,700
Price, Capital 39,300
Price, Withdrawals 9,400
Service Revenue 15,900
Salaries Expense 3,900
Rent Expense 0
Depreciation Expense—Equipment 0
Advertising Expense 1,900
Supplies Expense 0
Total $ 65,200 $ 65,200
Adjustment data at December 31 follow:

a. On December 15, Price contracted to perform services for a client receiving $2,700 in
advance. Price recorded this receipt of cash as Unearned Revenue. As of December 31,
Price has completed $2,100 of the services.

b. Price prepaid two months of rent on December 1. (Assume the Prepaid Rent balance as
shown on the unadjusted trial balance represents the two months of rent prepaid on
December 1.)

c. Price used $750 of office supplies during the month.

d. Depreciation for the equipment is $800.

e. Price received a bill for December’s online advertising, $500. Price will not pay the bill
until January. (Use Accounts Payable.)

f. Price pays its employees weekly on Monday for the previous week’s wages. Its employees
earn $2,000 for a five-day workweek. December 31 falls on Wednesday this year.

g. On October 1, Price agreed to provide a four-month consulting service (beginning


October 1) for a customer for $2,800. Price has completed the consulting service every
month, but payment has not yet been received and no entries have been made.

Requirements

1. Journalize the adjusting entries on December 31.

2. Using the unadjusted trial balance, open the T-accounts with the unadjusted balances.
Post the adjusting entries to the T-accounts.

3. Prepare the adjusted trial balance.

4. How will Price Waterhouse Company use the adjusted trial balance?

5. Prepare the income statement, the statement of owner’s equity for the year ended
December 31, 2021 and the financial position as of December 31 2021 of Price
Waterhouse Company.

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