ACC280 Week 2 Q5, 11, 15, & 17 E3-5 E3-12

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Resource: Ch. 3 of Financial Accounting

Prepare written answers to the following assignments from Ch. 3 of Financial Accounting:

·       Questions 5, 11, 15, & 17

·       Exercise E3-5  

·       Exercise E3-12

5. In completing the engagement in question 3, Marsh pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?

11. Explain the differences between depreciation expense and accumulated depreciation

15. A company fails to recognize an expense incurred but not paid. Indicate which of the following accounts is debited and which is credited in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense.

17. On January 9, a company pays $5,000 for salaries, of which $2,000 was reported as Salaries Payable on December 31. Give the entry to record the payment.

E3-5 Drew Carey Company has the following balances in selected accounts on December 31,

2008.

Accounts Receivable $ -0-

Accumulated Depreciation—Equipment -0-

Equipment 7,000

Interest Payable -0-

Notes Payable 10,000

Prepaid Insurance 2,100

Salaries Payable -0-

Supplies 2,450

Unearned Consulting Revenue 40,000

All the accounts have normal balances.The information below has been gathered at December

31, 2008.

1. Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1,

2008.

2. A count of supplies on December 31, 2008, indicates that supplies of $800 are on hand.

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

4. Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2008.

5. On December 1, 2008, Drew Carey collected $40,000 for consulting services to be performed

from December 1, 2008, through March 31, 2009.

6. Drew Carey performed consulting services for a client in December 2008. The client will be

billed $4,200.

7. Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding

5-day week (Monday through Friday). On Monday, December 29, employees were

paid for the week ending December 26. All employees worked the last 3 days of 2008.

Instructions

Prepare adjusting entries for the seven items described on page 124.

E3-7 The ledger of Piper Rental Agency on March 31 of the current year includes the following

selected accounts before adjusting entries have been prepared.

Debit Credit

Prepaid Insurance $ 3,600

Supplies 2,800

Equipment 25,000

Accumulated

Depreciation—Equipment $ 8,400

Notes Payable 20,000

Unearned Rent 9,900

Rent Revenue 60,000

Interest Expense –0–

Wages Expense 14,000

An analysis of the accounts shows the following.

1. The equipment depreciates $400 per month.

2. One-third of the unearned rent was earned during the quarter.

3. Interest of $500 is accrued on the notes payable.

4. Supplies on hand total $700.

5. Insurance expires at the rate of $200 per month.

Instructions

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.

Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and

Supplies Expense.