PAGE 12 TERM EXAM PROBLEMEXERCISE 5 TEN POINTS ADJUSTING ENT

PAGE 12 TERM EXAM PROBLEM/EXERCISE #5 TEN POINTS ADJUSTING ENTRIES 1. George Grace Inc has a balance of $2,945 in the Supplies (asset) account. A physical count indicates $999 of supplies on hand at the end of the fiscal period. Journalize the required adjustment for supplies. 2. MNO Company paid $3,600 for a two-year insurance policy on January 1 of the current year. Prepare the required adjustment for the expired insurance at the end of the current year Journalize the required adjustment for supplies. 3. Fallon Company has a $10,000 note payable due March 15 of next year. The note originated on July 1 of the current year and bears interest at the rate of 5%. Prepare the required journal entry to recognize interest expense. 4. Leno Company received $36,000 on January 1 of the current year for a project to be completed over the next two years. Journalize the adjustment to recognize the income earned on this project at the end of the current year. 5. Tucker Company has performed $12,000 of services that have not been billed as of fiscal year-end. Prepare the adjusting entry to record the fees earned. EXPLANATIONS REQUIRED NO JOURNAL REFERENCES OR DATES NECESSARY

Solution

GEORGE GRACE INC. Event Account Title Debit Credit 1 Supplies Expense 1946 Suppplies 1946 (Supplies used during the period) MNO COMPANY Event Account Title Debit Credit 2 Insurance Expense 1800 Prepaid Insurance 1800 (Insurance expired during the year) FALLON COMPANY Event Account Title Debit Credit 3 Interest Expense 250 Interest Payable 250 (Interest at 5% on $10,000 for six months) LENON COMPANY Event Account Title Debit Credit 4 Unearned Revenue 18000 Service Revenue 18000 (Revenue earned during the year 36,000 / 2) TUCKER COMPANY Event Account Title Debit Credit 5 Accounts Receivable 12000 Service Revenue 12000 (Revenue not billed at the end of the year) Date Details Units Price Value May.1 Beginning inventory 800 $24.00 $19,200.00 May.6 Purchases 300 $26.00 $7,800.00 May.13 Purchases 400 $28.00 $11,200.00 May.20 Purchases 500 $30.00 $15,000.00 May.27 Purchases 200 $32.00 $6,400.00 Goods available for sale 2200 $59,600.00 Sales 1000 Ending Inventory 1200 $29,800.00 (800x24+300x26+100x28) Cost of goods sold 1000 $29,800.00