Exercises 1

Beverly Crusher is a licensed CPA.
During the first month of operation of her business (a sole

proprietorship), the following events and transaction occurred.
April
2 Invested $ 32,000 cash and equipment valued at $ 14,000 in the business.

2 Hired a secretary- receptionist at a salary of $ 290 per week payable monthly.
3 Purchased supplies on account $ 700)
7 Paid office rent of $ 600 for the month.
11 Completed a tax assignment and billed Clint $ 1,100 for services rendered
12 Received $ 3,200 advance on a management consulting engagement.
17 Received cash of $ 2,300 for services completed for foreign Co.
21 Paid insurance expense $ 110
30 Paid secretary- receptionist $ 1,160 for the month.
30 A cont of supplies indicated that $ 120 of supplies had been used.
30 Purchased a new computer for $ 6,100 with personal fund. (The computer will be
used exclusively for business purposes.)
Listed below are the transactions of Isao Aoki, D.D.S., for the month of September.
Sept. 1 Isao Aoki begins practice as a dentist and invests $20,000 cash.
2 Purchases furniture and dental equipment on account from Green Jacket Co. for $17,280.
4 Pays rent for office space, $680 for the month.
4 Employs a receptionist, Michael Bradley.
5 Purchases dental supplies for cash, $942.
8 Receives cash of $1,690 from patients for services performed.
10 Pays miscellaneous office expenses, $430.
14 Bills patients $5,120 for services performed.
18 Pays Green Jacket Co. on account, $3,600.
19 Withdraws $3,000 cash from the business for personal use.
20 Receives $980 from patients on account.
25 Bills patients $2,110 for services performed.
30 Pays the following expenses in cash: office salaries $1,400; miscellaneous office
expenses $85.
30 Dental supplies used during September, $330.
BE3-3 On July 1, 2005, Blair Co. pays $18,000 to Hindi Insurance Co. for a 3-year insurance
contract. Both companies have fiscal years ending December 31. For Blair Co. journalize the
entry on July 1 and the adjusting entry on December 31.
BE3-4 Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on
December 31 for Hindi Insurance Co. Hindi use the accounts Unearned Insurance Revenue
and Insurance Revenue.
BE3-5 On August 1, George Bell Company paid $8,400 in advance for 2 years insurance
coverage. Prepare Bells August 1 journal entry and the annual adjusting entry on December
31.
BE3-6 Mogilny Corporation owns a warehouse. On November 1, it rented storage space to a

lessee (tenant) for 3 months for a total cash payment of $2,700 received in advance. Prepare
Mogilnys November 1 journal entry and the December 31 annual adjusting entry.
BE3-7 Catherine Janeway Companys weekly payroll, paid on Fridays, totals $6,000.
Employees work a 5-day week. Prepare Janeways adjusting entry on Wednesday,
December 31, and the journal entry to record the $6,000 cash payment on Friday, January 2.
BE3-8 Included in Martinez Companys December 31 trial balance is a note receivable of

$10,000. The note is a 4-month, 12% note dated October 1. Prepare Martinezs December
31 adjusting entry to record $300 of accrued interest, and the February 1 journal entry to
record receipt of $10,400 from the borrower.
BE3-9 Prepare the following adjusting entries at December 31 for DeGads Co.
(a) Interest on notes payable of $400 is accrued.
(b) Fees earned but unbilled total $1,400.
(c) Salaries earned by employees of $700 have not been recorded.
(d) Bad debt expense for year is $900.
Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense,
Interest Payable, Salaries Expense, Salaries Payable, Allowance for Doubtful Accounts, and
Bad Debt Expense.
BE3-10 At the end of its first year of operations, the trial balance of Rafael Company shows
Equipment $30,000 and zero balances in Accumulated DepreciationEquipment and
Depreciation Expense. Depreciation for the year is estimated to be $3,000. Prepare the
adjusting entry for depreciation at December 31, and indicate the balance sheet presentation
for the equipment at December 31.
BE3-11 Willis Corporation has beginning inventory $81,000; Purchases $540,000; Freight-in
$16,200; Purchase Returns $5,800; Purchase Discounts $5,000; and ending inventory
$70,200. Compute cost of goods sold.
BE3-12 Karen Sepaniak has year-end account balances of Sales $828,900; Interest
Revenue $13,500; Cost of Goods Sold $556,200; Operating Expenses $189,000; Income
Tax Expense $35,100; and Dividends $18,900.
Prepare the year-end closing entries.
*BE3-13 Smith Company had cash receipts from customers in 2005 of $152,000. Cash
payments for operating expenses were $97,000. Smith has determined that at January 1,
accounts receivable was $13,000, and prepaid expenses were $17,500. At December 31,
accounts receivable was $18,600, and prepaid expenses were $23,200. Compute
(a) Service revenue and (b) operating expenses.
*BE3-14 Pelican Company made a December 31 adjusting entry to debit Salaries Expense
and credit Salaries Payable for $3,600. On January 2, Pelican paid the weekly payroll of
$6,000. Prepare Pelicans
(a) January 1 reversing entry; (b) January 2 entry (assuming the reversing entry was
prepared); and
(c) January 2 entry (assuming the reversing entry was not prepared).
Question 1
The trial balance of Wanda Landowska Company shown below does not balance. Your
review of the ledger reveals the following:
1. Each account had a normal balance.
2. The debit footings in Prepaid Insurance, Accounts Payable, and Property Tax Expense
were each understated $100.
3. A transposition error was made in Accounts Receivable; the correct balances for
accounts Receivable and Service Revenue are $2,750 and $6,690, respectively.
4. A debit posting to Advertising Expense of $300 was omitted.
5. A $1,500 cash drawing by the owner was debited to Wanda Landowska, Capital, and
credited to Cash.
WANDA LANDOWSKA COMPANY
TRIAL BALANCE
APRIL 30, 2005
Debit
Cash
Accounts Receivable
Prepaid Insurance
Equipment $
Accounts Payable
Property Tax Payable
Wanda Landowska, Capital
Service Revenue
Salaries Expense
Advertising Expense
Property Tax Expense
$ 4,800
2,570
700
8,000
4,500
560
11,200
6,960
4,200
1,100
800
$20,890
Prepare a correct trial balance.
Question 2
Credit
$24,500
(Corrected Trial Balance) The trial balance of Antoine Watteau Co. shown below does not
balance.
BLUES TRAVELER CORPORATION
TRIAL BALANCE
APRIL 30, 2005
Debit
Cash
Accounts Receivable
Supplies on Hand
Furniture and Equipment
Accounts Payable
Common Stock
Retained Earnings
Service Revenue
Office Expense
Credit
$ 5,912
5,240
2,967
6,100
$7,044
8,000
2,000
5,200
4,320
$24,539
$22,244
An examination of the ledger shows these errors.

1. Cash received from a customer on account was recorded (both debit and credit) as $1,380
instead of $1,830.
2. The purchase on account of a computer costing $3,200 was recorded as a debit to Office
Expense and a credit to Accounts Payable.
3. Services were performed on account for a client, $2,250, for which Accounts Receivable
was debited $2,250 and Service Revenue, was credited $225.
4. A payment of $95 for telephone charges was entered as a debit to Office Expenses and a
debit to Cash.
5. The Service Revenue account was totaled at $5,200 instead of $5,280.
Instructions
From this information prepare a corrected trial balance.
Question 3
ANTOINE WATTEAU CO.
TRIAL BALANCE
JUNE 30, 2005
Debit
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Unearned Service Revenue
Common Stock
Retained Earnings
Service Revenue
Wages Expense
Office Expense
Credit
$ 2,870
$ 3,231
800
3,800
2,666
1,200
6,000
3,000
2,380
3,400
940
$13,371
$16,916
Each of the listed accounts has a normal balance per the general ledger. An examination of
the ledger and journal reveals the following errors.
1. Cash received from a customer on account was debited for $570, and Accounts
Receivable was credited for the same amount. The actual collection was for $750.
2. The purchase of a computer printer on account for $500 was recorded as a debit to
Supplies for $500 and a credit to Accounts Payable for $500.
3. Services were performed on account for a client for $890. Accounts Receivable was
debited for $890 and Service Revenue was credited for $89.
4. A payment of $65 for telephone charges was recorded as a debit to Office Expense for $65
and a debit to Cash for $65.
5. When the Unearned Service Revenue account was reviewed, it was found that $325 of the
balance was earned prior to June 30.
6. A debit posting to Wages Expense of $670 was omitted.
7. A payment on account for $206 was credited to Cash for $206 and credited to Accounts
Payable for $260.
8. A dividend of $575 was debited to Wages Expense for $575 and credited to Cash for $575.
Instructions
Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to
the trial balance.)
Question 4
The ledger of Duggan Rental Agency on March 31 of the current year includes the following
selected accounts before adjusting entries have been prepared.
Prepaid Insurance
Supplies
Equipment
Accumulated DepreciationEquipment
Notes Payable
Unearned Rent Revenue
Rent Revenue
Interest Expense
Wage Expense
Debit
$ 3,600
2,800
25,000
Credit
$ 8,400
20,000
9,300
60,000
0
14,000
An analysis of the accounts shows the following.

1. The equipment depreciates $250 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 $850.
5. Insurance expires at the rate of $300 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.
Question 5
Karen Weller, D.D.S., opened a dental practice on January 1, 2005. During the first month of
operations the following transactions occurred.
1. Performed services for patients who had dental plan insurance. At January 31, $750 of
such services was earned but not yet billed to the insurance companies.
2. Utility expenses incurred but not paid prior to January 31 totaled $520.
3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and
signing a $60,000, 3-year note payable. The equipment depreciates $400 per month. Interest
is $500 per month.
4. Purchased a one-year malpractice insurance policy on January 1 for $12,000.
5. Purchased $1,600 of dental supplies. On January 31, determined that $500 of supplies
were on hand.
Instructions
Prepare the adjusting entries on January 31. Account titles are: Accumulated Depreciation
Dental Equipment; Depreciation Expense; Service Revenue; Accounts Receivable; Insurance
Expense; Interest Expense; Interest Payable; Prepaid Insurance; Supplies; Supplies
Expense; Utilities Expense; and Utilities Payable.

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Exercises 1

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What transactions occurred in the first month of Beverly Crusher's business?

What transactions occurred for Isao Aoki, D.D.S., for the month of September?

Beverly Crusher is a licensed CPA.

During the first month of operation of her business (a sole

2 Invested $ 32,000 cash and equipment valued at $ 14,000 in the business.

BE3-6 Mogilny Corporation owns a warehouse. On November 1, it rented storage space to a

BE3-8 Included in Martinez Companys December 31 trial balance is a note receivable of

Prepare a correct trial balance.

An examination of the ledger shows these errors.

An analysis of the accounts shows the following.

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