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Copy of Chap004 1.doc
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Copy of Chap004 1.doc-Chapter 04 - Adjustments, Fi...
Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
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Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Page 13
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
EXERCISES
E4–1.
Paige Consultants, Inc.
Unadjusted Trial Balance
At September 30, 2012
Debit
Credit
Cash
$
153,000
Accounts receivable
225,400
Supplies
12,200
Prepaid expenses
10,200
Investments
145,000
Buildings and equipment
323,040
Accumulated depreciation
$
18,100
Land
60,000
Accounts payable
96,830
Accrued expenses payable
25,650
Unearned consulting fees
32,500
Income taxes payable
3,030
Notes payable
160,000
Contributed capital
223,370
Retained earnings *
144,510
Consulting fees revenue
2,564,200
Investment income
10,800
Gain on sale of land
6,000
Wages and benefits expense
1,610,000
Utilities expense
25,230
Travel expense
23,990
Rent expense
152,080
Professional development expense
18,600
Other operating expenses
188,000
General and administrative expenses
321,050
Interest expense
17,200
Totals
$3,284,990
$3,284,990
*
Since debits are supposed to equal credits in a trial balance, the balance in Retained
Earnings is determined as the amount in the credit column necessary to make debits
equal credits (a “plugged” figure).
4-13
Page 14
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
E4–2.
Req. 1
Types
Accounts to be Adjusted
Deferred Revenues:
Deferred Revenue may need to be
adjusted for any revenue earned
during the period
Deferred Revenue (L) and Product
Revenue and/or Service
Revenue (R)
Accrued Revenues:
Interest may be earned on Short-term
Investments
Any unrecorded sales or services
provided will need to be recorded
Interest Receivable (A) and Interest
Revenue (R)
Accounts Receivable (A) and
Product Revenue and/or
Service Revenue (R)
Deferred Expenses:
Other Current Assets may include
supplies, prepaid rent, prepaid
insurance, or prepaid advertising
Any additional use of Property, Plant,
and Equipment during the period
will need to be recorded
Other Current Assets (A) and
Selling, General, and
Administrative Expense (E)
Accumulated Depreciation (XA) and
Cost of Products and/or Cost
of Services (E)
Accrued Expenses:
Interest incurred on Short-term Note
Payable and Long-term Debt will
need to be recorded
There are likely many other accrued
expenses to be recorded, including
wages, warranties, and utilities
Income taxes must be computed for
the period and accrued
Accrued Liabilities (L) and Interest
Expense (E)
Accrued Liabilities (L) and Selling,
General, and Administrative
Expenses (among other
expenses) (E)
Income Tax Payable (L) and
Income Tax Expense (E)
Req. 2
Temporary accounts that accumulate during the period are closed at the end of the
year to the permanent account Retained Earnings.
These include:
Product revenue,
service revenue, interest revenue, cost of products, cost of services, interest expense,
research and development expense, selling, general, and administrative expense, other
expenses, and income tax expense.
4-14
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