P3-1B Linda Ace Started her own consulting firm, Modine Consulting, on May 1, 2008.

The
Trial balance at May 31 is as follows:

P3-1b Modine Consulting

Trial Balance
31-May-08 adjuste trial balance

Acct # Debit Credit Dr Adj Cr Adj DR

101 Cash 7,700 0 0 7,700
112 Accounts Receivable 4,000 7 1000 5,000
126 Supplies 1,500 1 500 1,000
130 Prepaid Insurance 4,800 3 200 4,600
149 Office Furniture 9,600 9,600
201 Accounts Payable 3,500
209 Unearned Service 3,000 4 2,000
301 L. Ace Capital 19,100
400 Service Revenue 6,000 4 .7 3000
726 Salaries Expense 3,000 5 840 3,840
729 Rent Expense 1,000 1,000
31,600 31,600 0
150 Accumulated Depreciation office Furn 6 160
229 Travel Payable 2 200
212 Salaries Payable 5 840
717 Depreciation Expense 6 160 160
722 Insurance Expense 3 200 200
736 Travel Expense 2 200 200
631 Supplies Expense 1 500 500

4900 4900 33,800

Other Datanet income
1 $500 of supplies have been used during the month
Supplies used is an expense the Supplies decrease as being used.
Supplies Expense 500
Supplies 500

2 Travel expense incurred but not paid on May 31, 2008, $200
The expense have been incurred expense increase by DR and the credit should
be accts payable because has not been paid.
Travel expense 200
Travel Payable 200

3 The insurance policy is for 2 years

The business began in may 2008 and the Prepaid insurance for 4,800 will last 24 month
4,800 / 24 = 200
The expense for insurance increase and the asset prepaid insurance decrease by credit
Insurance Expense 200
Prepaid Insurance 200
4 $1,000 of the balance in the unearned service revenue account remains unearned at
the end of the month
Unearned have a balance of 3,000 and now have left of $1,000 = 2000 ernead
The diference in unearned means that I have earned the $2,000
Unearned is a liablity and they decrease by Dr.
Revenue increase by CR
Unearned Service Revenue 2,000
Service Revenue 2,000

5 May 31 is a Wednesday and employees are paid on Fridays. Modine Consulting has
two employees, who are paid $700 each for a five day work week. (700 / 5) 140
At the end of the month the employee has worked only 3 days for two employee
140 X 3 days X 2 employee = 840 is the salary expense but not paid
140 3 2 840
Salary Expense 840
Salary Payable 840

6 The office furniture has a 5-year life with no salvage value. It is being depreciated
at $160 per month for 60 months.
The furnitures is being used and it depreciate or is value decrease as being used.
The expense is Depreciation Expense and the credit will be Accumulated Depreciation
We used acc. Dep instead of Decrease the Asset Furniture. The Accumulated Dep
will be attached to the asset account allways. It is an Contra-asset.

Depreciation Expense 160

Accumulated Depreciation- Furniture 160

7 Invoices representing $1,000 of services performed during the month have not been
recorded as of May 31.
The service perfomed => Service Revenue increase by Cr
The Accts Rec => Increase the asset with a DR
Accounts Receivable 1,000
Service Revenue 1000
adjuste trial balance Income Balance
Statement Sheet
CR DR CR DR CR
7,700
5,000
1,000
4,600
9,600
3,500 3,500
1,000 1,000
19,100 19,100
9,000 9,000
3,840
1,000

160 160
200 200
840 840
160
200
200
500
0
33,800 5900 9000 27900 24800
3100 3100
9000 9000 27900 27900
P3-6a
Givens Graphic Co. was organized on Jan 1, 2008 by sue Givens. At the end of the
first 6 months of operations, the trial balance contained the following:
DR CR adj Dr Adj Cr DR CR
Cash 9,500 9,500
Account Rec 14,000 2000 16,000
Equipment 45,000 45,000
Insurance Expense 1,800 1200 600
Salaries Expense 30,000 30,000
Supplies Expense 3,700 1,300 2,400
Advertising Expense 1,900 1,900
Rent Expense 1,500 1,500
Utilities Expense 1,700 1,700
Notes Payable 20,000 20,000
account Payable 9,000 9,000
Sue Givens Capital 22,000 22,000
Graphic Revenue 52,100 2000 54,100
Consulting Revenue 6,000 1500 4,500
Supplies Inventory 1,300 1,300
Interest Expense 750 750
Interest payable 750 750
prepaid insurance 1200 1200
Unearned Revenue 1500 1500
Depreciation Expense 1,000 1,000
Acc Depreciation Equip 1,000 1,000

---------- ---------- ---------- ---------- ---------- ----------

109,100 109,100 7,750 7,750 112,850 112,850
Analysis reveals the following data:
1. the $3,700 balance in Supplies Expense represent supplies purchased in Jan. At June 30
the balance on hand is $1,300. 3,700 - 1,300 = 2400
The expense account have a debit of $3,700 but it should have only a debit of $2,400
That is why we should put a credit to the expense (expense decrease by credit)
for $1,300 and the balance should be $2,400
Supplies Inventory 1,300
Supplies Expense 1,300

2. The note payable was issued on Feb 1, It is a 9%, 6 month note.

Notes payable = $20,000
Interest 9%
6 month= 1/2 year = 6 /12
20,000 X 9% X 6/12 = 900
On june 30 the note is not paid but the interest should be recognized. For the 5 months
20,000 X 9% X 5/12 = 750
Interest Expense 750
Interest Payable or Accrued Interest 750
3. The balance in insurance expense is the premium on a one-year policy. Dated
march 1, 2008.
Insurance Expense 1,800
1,800 / 12 = 150 por mes
from march 1 to june 30 is equal to 4 months 4
The expense should be 4 months not a year at june 30 600
Balance of insurance expense = 1,800 - 600 = 1,200
The amount of prepaid insurance is $1,200 and the expense should be reduced (credit)
by 1,200
Pre-paid insurance (ASSET) 1,200
Insurance Expense 1,200

4. Consulting Fees are credited to Revenue when received. At june 30, consulting
fees of $1,500 are unearned.
The total amount credited to consulting revenue = 6,000 from which 1,500 are unearned
The consulting revenue should be decrease (DR) for $1,500 and unearned revenue
increase (CR)
Consulting Revenue 1,500
Unearned Revenue (liability) 1,500

5. Graphic Revenue earned but unrecorded at June 30 totals $2,000

Any revenue not recorded should be recorded.
Accts Rec or Cash should have a DR
In this case they have not paid. Then should use ACCTS REC

Accts Receivable 2,000

Graphic Revenue 2000

6. Depreciation is $2,000 per year.

Depreciation is how you expense an asset by its use.
Depre is for a year and I need it for just 6 months = 6/12 = 1/2 = .5
2,000 x .5 = 1,000
Depreciation Expense 1,000
Accumulated Depreciation-Equip 1,000
3-2b The elston Motel opened for business on May 1, 2008. Its trial balance adjustment on
May 31.
Elston Motel
Trial Balance
### 31-May-08 Adjustment Adjusted
Trial Balance
Acct # DR CR Adj Dr Adj Cr DR CR
101 cash 2,500 2,500
126 Supplies 1,900 2 1400 500
130 Prepaid Insurance 2,400 1 200 2,200
140 Land 15,000 15,000
141 Lodge 70,000 70,000
149 Furniture 16,800 16,800
201 Account Payable 5,300 5,300
208 Unearned Rent 3,600 5 2500 1,100
275 Mortgage Payable 40,000 40,000
301 Mary Lerner, Cap 55,000 55,000
429 Rent Revenue x 9,200 5 2500 11,700
610 Advertising Expense x 500 500
726 Salaries Expense x 3,000 6 800 3,800
732 Utilities Expense x 1,000 1,000
113,100 113,100
142 Accumulated Dep- Lodge 3a 300 300
150 Accumulated Dep- furniture 3b 250 250
212 Salaries Payable 6 800 800
230 Interest Payable 4 400 400
619 Depreciation Expense x 3a 300 300
621 Depreciation Expense-x 3b 250 250
631 Supplies Expense x 2 1400 1,400
718 Interest Expense x 4 400 400
722 Insurance Expense x 1 200 200
5850 5850 114,850 114850
net income
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 lodge and 3,000 on furniture 300 250
4 The Mortgage interest rate is 12%. (the mortgae was taken on may 1) 40,000 0.12
5 Unearned rent of $2,500 has been earned
6 Salaries of $800 are accrued and unpaid at May 31.

Required:
Journalize the adjusting entries on May 31
Prepare a ledger
Prepare an adjusted trial balance on May 31
Prepare an income statement
 Adjusting Entries
1 Insurance Expense 200
Prepaid Insurance 200

2 Supplies Expense 1400

Supplies 1400

3 Depreciation Expense- Lodge 300

Accumulated Dep- Lodge 300

3 Depreciation Expense- Furniture 250

Accumulated Dep- furniture 250

4 Interest Expense x 400

Interest Payable 400

5 Unearned Rent 2500

Rent Revenue 2500

6 Salaries Expense 800

Salaries Payable 800

CLOSING ENTRIES Cerrar las cuentas del Income Statement contra Income Summary y luego contra Capital

Rent Revenue 11,700

Income Summary 11,700

Income Summary 7,850

Advertising Expense 500
Salaries Expense 3,800
Utilities Expense 1,000
Depreciation Expense- Lodge 300
Depreciation Expense- Furniture 250
Supplies Expense 1,400
Interest Expense 400
Insurance Expense 200

Income Summary 3,850

Capital jUan 3,850

Juna Capital x
Juan Drawing x
Income statement
Balance Sheet
DR CR DR CR
2,500
500
2,200
15,000
70,000
16,800
5,300
1,100
40,000
55,000
11,700
500
3,800
1,000

300
250
800
400
300
250
1,400
400
200
7850 11700 107000 103150
3,850 3,850
11,700 11,700 107,000 107,000

4800 / 12 meses 400

E3-3
Conan Industries collected $100,000 from customer in 2008. Of the amount collected $25,000
was from revenue earned on account in 2007. In addition, Conan earned $40,000 of revenue
in 2008, which will not be collected until 2009.
Conan Ind. Also paid $70,000 for expense in 2008. Of the amount paid, $30,000 was for expense
incurred on account 2007. In addition, Conan incurred $42,000 of expenses in 2008 which will
not be paid until 2009.
Required:
a. Compute 2008 cash basis net income.
In cash basis Income is recognized when received. Expense is recognized when paid.
cobro 2008 100,000
acct rec 25,000
75,000
Revenue acct rec a c t s p a y able
dr cr dr cr dr cr
75000 25000 30,000 42000
40,000 40,000 12000
115,000 15,000

cash cash expense expense

dr cr dr cr income statement
100,000 70,000 40,000 ingresos 115,000
30000 42000 gastos 82,000
82,000 net income 33,000

Revenue (Ingresos) 100,000

Expense (Gastos) 70,000
Net Income (Ganancia Neta) 30,000

B. Compute 2008 Accrual-basis net income

Accrual :=> Revenue is recognized when realized not when paid.
Expense is recognized when realized or incurred not when paid.
Exp Paid Exp Not Paid Total
Revenue (Ingresos) 75,000 40,000 115,000
Expense (Gastos) 40,000 42,000 82,000
Net Income (Ganancia Neta) 33,000

RECEIVED 100,000

Cash 100,000
Revenue 75,000
Acct Rec 25,000

Acct Rec 40,000

Revenue 40,000
Expense Account 40,000
Accts Payable 30,000
Cash 70,000

Expense Account 42,000

Acct Payable 42,000
E3-4
1. Emeril collect 1,000 from customer in 2008 for services to be performed in 2009.
Cash 1,000
Unearned Revenue (Liability) 1,000

2. Emeril incurs utility expense which is not yet paid in cash or recorded.
Utility Expense xx
Accts Payable xx

3. Emeril's employees worked 3 days in 2008, but will not be paid until 2009.
Salary Expense X
Salary Payable X

4. Emeril earned service revenue but has not yet received cash or recorded the transaction
Accts Receivable YY
Service Revenue YY

5 Emeril paid $2,000 rent on Dec 1 for the 4 months starting Dec 1.
2,000 / 4 = 500
Alt 1 Pre-paid Rent 2,000
cash 2,000
Alt 1 Rent Expense 500
Pre-paid Rent 500

Alt 2 Rent Expense 2,000

Cash 2000
Alt 2 Pre-paid Rent 1,500
Rent Expense 1,500

6. Emeril Received cash for future services and recorde a liability until revenue was earned.
Cash XX
Un-earned Revenue XX

7 Emeril performed consulting services for a client in Dec 2008. On Dec 31 it billed for $1,200
Accts Receivable 1,200
Service Revenue 1,200

8. Emeril paid cash for an expense and recorded an assets unit the item was used up.
Pre-paid Expense xx
Cash xx

9. Emeril purchase $900 of supplies in 2008. at year end $400 of supplies remains unused.
Supplies Inventory 900
cash / Acct Pay 900
Adj Supplies Expense 500
Supplies Inventory 500
10 Emeril Purchased equipment on Jan 1 , 2008, the equipment will be used for 5 year
Equipment xx
Cash xx
adjustment of depreciation
Depreciation Expense - Equipment yy
Accumulated Depreciation- Equipment yy

11. Emeril borrowed $10,000 on Oct 1, 2008. signing an 8% one year note payable
Oct 1 - Dec31 3 meses de interes a pagar

10,000 X .08 X 3/12 =

800 x 0.25 = 200

Interest Expense 200

Accrued Interest Or Interest Payable 200
Assets Assets Liability Liability Capital Capital Expense Expense Revenue Revenue
DR CR DR CR DR CR DR CR DR CR
+ - - + - + + - - +

E3-5 Drew Carey Co. has the following balances in selected accounts on Dec 31, 2008
DR CR Adj Dr Adj CR
Accts Receivable 0 0
Acc Depreciation Equipment 0 0
Equipment 7,000 7,000
Interest Payable 0 0 400
Notes Payable 10,000 10,000
Pre paid Insurance 2,100 2,100
Salaries Payable 0 0
Supplies 2,450 2,450
Un earned consulting revenue 40,000 40,000

All the accounts have normal balances .

The information below has been gathered at Dec 31, 2008
1. Drew Carey Co. borrowed $10,000 by a 12%, one year note on Sep 1 , 2008
2. A count of supplies on Dec 31, 2008 indicate supplies on hand are $800
3. Depreciation on the equipment for 2008 is 1,000
4. Dre care Co. paid $2,100 for 12 month on insurance on June 1, 2008
5. On Dec 1, collected $40,00 for consulting services to be performed from dec 1 - March 31 2009
6. Dred Care Co. performed consulting services for a client on Dec 2008 the client will be billed 4,200
7. Paid it employee total salaries of $9,000 every Monday for the preceding 5 day week.
On Monday , Dec 29, employees were paid for the week ending Dec 26. All employee worked the
last 3 days of 2008.
Principal Interest Time
1 10,000 x 0.12 x 4 / 12 = 400
Interest expense is recoginzed by the time
Interest Expense 400
Accrued Interest (Interest Payable) 400

2. A count of supplies on Dec 31, 2008 indicate supplies on hand are $800
Init Balance ending Bal expense
Supplies 2,450 - 800 = 1,650
Supplies Expense 1,650
Supplies 1,650

3. Depreciation on the equipment for 2008 is $1,000

Depreciation Expense 1,000

Acc Depreciation Equipment 1,000
4. Drew Carey Co. paid $2,100 for 12 months on insurance on June 1, 2008
seguro
2,100 / 12 = 175 gasto mensual
175 x 7 months used = 1,225.00 Expense

Insurance Expense 1,225

Pre Paid Insurance 1,225

5. On Dec 1, collected $40,00 for consulting services to be performed from dec 1 - March 31 2009
40,000 / 4 meses de servicios = 10000
Un earned consulting revenue 40,000 40,000
cash 40,000
Un earned Revenue 40,000

Un earned Revenue 10000

Revenue 10,000

6. Dred Care Co. performed consulting services for a client on Dec 2008 the client will be billed 4,200
Accts Receivable 4,200
Revenue 4,200

7. Paid it employee total salaries of $9,000 every Monday for the preceding 5 day week.
On Monday , Dec 29, employees were paid for the week ending Dec 26. All employee worked the
last 3 days of 2008. 9,000 / 5 = 1800 per day
1800 X 3 days worked = 5400 salary expense

Salary Expense 5400

Salary Payable (ACCRUED SALARY) 5400
Revenue
The ABC

Prepaid Insurance 3600

Supplies 2800
Equipment 25000
Acc Dep Equipment 8400
Notes Payable 20,000
Unearned Rent Revenue 9,300
Rent Revenue 60,000
Interest Expense 14000

a. Equipment depreciates $250 per month -350 exp $350 per month
Depreciation Exp 750 1050
Acc Dep Equipment 750 1050

b. On third of the unearned rent was earned

9,300 / 3 3100
18,600 / 3 6200
Unearned Revenue 3,100 6,200
Rent Revenue 3,100 6,200

c. Interest of $500 ( $800) is accrued on the notes payable

Interest Expense 500 800
Interest Payable (accrued Interest) 500 800

d. Supplies on hand total $850 of $2,800 ($1,050 of 5,600)

Balance Final Expense Balance Final Expense

2800 850 1950 5600 1050 4550

Supplies Expense 1950 4550

Supplies 1950 4550

e Insurance expires at the rate of $300 per month ( 600 per month)
300 x 3 900 600 x 3 1800

Insurance Expense 900 1800

Prepaid Insurance 900 1800