Generally Accepted Accounting Principles and Trial Balance

Topics: Generally Accepted Accounting Principles, Accounts receivable, Balance sheet Pages: 10 (1514 words) Published: January 8, 2014
Problem set C
PROBLEM 3-1C
For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.)
A.To record receipt of unearned revenue.
B.To record this period’s earning of prior unearned revenue.
C.To record payment of an accrued expense.
D.To record receipt of an accrued revenue.
E.To record an accrued expense.
F. To record an accrued revenue
G.To record this period’s use of a prepaid expense.
H.To record payment of a prepaid expense.
I.To record this period’s depreciation expense.

______  1.Interest Expense 600
    Interest Payable 600
______  2.Interest Payable 600
    Cash 600
______  3.Interest Receivable 1,400
    Interest Earned 1,400
______  4.Cash 1,400 Interest Receivable 1,400
______  5.Depreciation Expense 1,600
    Accumulated Depreciation 1,600
______  6.Supplies 1,200
    Cash 1,200
______  7.Supplies Expense 400
    Supplies 400 ______  8.Cash 2,000
    Unearned Service Fees 2,000 ______  9.Unearned Service Fees 1,000
    Service Fees Earned 1,000
______ 10.Salaries Expense 800
    Salaries Payable 800
______ 11.Salaries Payable 800
    Cash 800
______ 12.Accounts Receivable 600
    Service Fees Earned 600

PROBLEM 3-2C
Gary Company follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts. Gary’s annual accounting period ends on December 31, 2008 The following information concerns the adjusting entries to be recorded as of that date:

a.The Office Supplies account started this year with a $4,000 balance. During 2008, the company purchased supplies for $8,400 which was added to the Office Supplies account. The inventory of supplies available at December 31, 2008 totaled $1,800.

b. An analysis of the company's insurance policies provided these facts:
PolicyDate of PurchaseMonths of CoverageCost
A January 1, 2007 24 $4,800 B April 1, 2008 36 $3,600 C July1, 2008 12 $5,400 The total premium for each policy was paid in full (for all months) at the purchase date. and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) c. The company has 20 employees, who earn a total of $3,200 in salaries each working day. They are paid each Monday for their work in the five-day work week ending on the previous Friday. Assume that December 31, 2008 is a Tuesday, and all 20 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2009.

d. The company purchased a building on January 1, 2008. It cost $785,000 and is expected to have $35,000 salvage value at the end of its predicted 25-year life. Annual depreciation Is $30,000.

e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $2,400 per month, starting on October 1, 2008. The rent was paid on time on October 1, and November 1, and the amount received was...
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