revenue and (b) operating expenses.

*BE3.13 (LO7) Assume that GlaxoSmithKline (GBR) made a December 31

adjusting entry to debit Salaries and Wages Expense and credit Salaries
and Wages Payable for £4,200 for one of its departments. On January 2,
Glaxo paid the weekly payroll of £7,000. Prepare Glaxo's (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).

Exercises

E3.1 (LO2) (Transaction Analysis—Service Company) Kai Edo is a

licensed public accountant. During the first month of operations of her
business (a sole proprietorship), the following events and transactions
occurred (amounts in thousands).
April 2 Invested ¥30,000 cash and equipment valued at ¥14,000 in the
business.
2 Hired administrative assistant at a salary of ¥290 per week payable
monthly.
3 Purchased supplies on account ¥700. (Debit an asset account.)
7 Paid office rent of ¥600 for the month.
11 Completed a tax assignment and billed client ¥1,100 for services
rendered. (Use Service Revenue account.)
12 Received ¥3,200 advance on a management consulting
engagement.
17 Received cash of ¥2,300 for services completed for Ferengi Co.
21 Paid insurance expense ¥110.
30 Paid administrative assistant ¥1,160 for the month.
30 A count of supplies indicated that ¥120 of supplies had been used.
30 Purchased a new computer for ¥5,100 with personal funds. (The
computer will be used exclusively for business purposes.)
Instructions

Journalize the transactions in the general journal. (Omit explanations.)

E3.2 (LO2) (Corrected Trial Balance) The following trial balance of
 Geronimo AG does not balance. Your review of the ledger reveals the
following. (a) Each account had a normal balance. (b) The debit footings in
Prepaid Insurance, Accounts Payable, and Property Tax Expense were
each understated €1,000. (c) A transposition error was made in Accounts
Receivable and Service Revenue; the correct balances for Accounts
Receivable and Service Revenue are €2,750 and €6,690, respectively. (d) A
debit posting to Advertising Expense of €300 was omitted. (e) A €3,200
cash drawing by the owner was debited to Geronimo, Capital, and credited
to Cash.

Geronimo Company
Trial Balance
April 30, 2019

Debit Credit
Cash € 2,100
Accounts Receivable 2,570
Prepaid Insurance 700
Equipment € 8,000
Accounts Payable 4,500
Property Taxes Payable 560
Geronimo, Capital 11,200
Service Revenue 6,960
Salaries and Wages Expense 4,200
Advertising Expense 1,100
Property Tax Expense 800
€18,190 €24,500

Instructions

Prepare a correct trial balance.

E3.3 (LO2) (Corrected Trial Balance) The following trial balance of Scarlatti
Corporation does not balance.

Scarlatti Corporation
 Trial Balance
April 30, 2019

Debit Credit
Cash $ 5,912
Accounts Receivable 5,240
Supplies 2,967
Equipment 6,100
Accounts Payable $ 7,044
Share Capital—Ordinary 8,000
Retained Earnings 2,000
Service Revenue 5,200
Office Expense 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 $1,580 instead of $1,850.
2. The purchase on account of a computer costing $1,900 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
Expense 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.

E3.4 (LO2) (Corrected Trial Balance) The following trial balance of Oakley
NV does not balance.

Oakley NV
 Trial Balance
June 30, 2019

Debit Credit
Cash € 2,870
Accounts Receivable € 3,231
Supplies 800
Equipment 3,800
Accounts Payable 2,666
Unearned Service Revenue 1,200
Share Capital—Ordinary 6,000
Retained Earnings 3,000
Service Revenue 2,380
Salaries and Wages Expense 3,400
Office Expense 940
€13,371 €16,916

Each of the listed accounts should have 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 €370, and
Accounts Receivable was credited for the same amount. The actual
collection was for €730.
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 service revenue amounting to €225 was performed prior to June 30.
6. A debit posting to Salaries and 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 Salaries and 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.)
E3.5 (LO3) (Adjusting Entries) The ledger of Chopin 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 Revenue 6,300
Rent Revenue 60,000
Interest Expense –0–
Salaries and Wages Expense 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 €650.
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. (Omit explanations.)
E3.6 (LO3) (Adjusting Entries) Stephen King, D.D.S., opened a dental
 practice on January 1, 2019. 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 performed but not yet billed to the insurance
companies.
1. Utility expenses incurred but not paid prior to January 31 totaled $520.
1. 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.
1. Purchased a 1-year malpractice insurance policy on January 1 for $15,000.
1. Purchased $1,600 of dental supplies. On January 31, determined that $400
of supplies were on hand.
Instructions

Prepare the adjusting entries on January 31. (Omit explanations.) Account

titles are Accumulated Depreciation—Equipment, Depreciation Expense,
Service Revenue, Accounts Receivable, Insurance Expense, Interest
Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense,
Utilities Expense, and Accounts Payable.
E3.7 (LO5) (Analyze Adjusted Data) A partial adjusted trial balance of Safin
plc at January 31, 2019, shows the following.

Safin plc
Adjusted Trial Balance
January 31, 2019
Debit Credit
Supplies £ 900
Prepaid Insurance 2,400
Salaries and Wages Payable £ 800
Unearned Service Revenue 750
Supplies Expense 950
Insurance Expense 400
Salaries and Wages Expense 1,800
 Service Revenue 2,000
Instructions

Answer the following questions, assuming the year begins January 1.

a. If the amount in Supplies Expense is the January 31 adjusting entry
and £850 of supplies was purchased in January, what was the balance
in Supplies on January 1?
b. If the amount in Insurance Expense is the January 31 adjusting entry
and the original insurance premium was for 1 year, what was the total
premium and when was the policy purchased?
c. If £2,700 of salaries and wages were paid in January, what was the
balance in Salaries and Wages Payable at December 31, 2018?
d. If £1,600 was received in January for services performed in January,
what was the balance in Unearned Service Revenue at December 31,
2018?
E3.8 (LO3) (Adjusting Entries) William Bryant is the new owner of Ace
Computer Services. At the end of August 2019, his first month of ownership,
Bryant is trying to prepare monthly financial statements. Below is some
information related to unrecorded expenses that the business incurred
during August.
1. At August 31, Bryant owed his employees $2,900 in salaries and wages
that will be paid on September 1.
2. At the end of the month, he had not yet received the month's utility bill.
Based on past experience, he estimated the bill would be approximately
$600.
3. On August 1, Bryant borrowed $60,000 from a local bank on a 15-year
mortgage. The annual interest rate is 8%.
4. A telephone bill in the amount of $117 covering August charges is unpaid at
August 31 (use Telephone and Internet Expense account).
Instructions

Prepare the adjusting journal entries as of August 31, 2019, suggested by the
information provided.
E3.9 (LO2,3) (Adjusting Entries) Selected accounts of Leno Company are
shown below.
 Supplies Accounts Receivable
Beg. Bal. 800 10/31 470 10/17 2,100

10/31 1,650

Salaries and Wages Expense Salaries and Wages Payable

10/15 800 10/31 600
10/31 600
Unearned Service Revenue Supplies Expense
10/31 400 10/20 650 10/31 470
Service Revenue
10/17 2,100
10/31 1,650
10/31 400
Instructions

From an analysis of the T-accounts, reconstruct (a) the October transaction

entries, and (b) the adjusting journal entries that were made on October 31,
2019. Prepare explanations for each journal entry.
E3.10 (LO3) (Adjusting Entries) Uhura Resort opened for business on June
1 with eight air-conditioned units. Its trial balance on August 31 is as follows
(in thousands).

Uhura Resort
Trial Balance
August 31, 2019
Debit Credit
Cash ¥ 19,600
Prepaid Insurance 4,500
Supplies 2,600
Land 20,000
 Buildings 120,000
Equipment 16,000
Accounts Payable ¥ 4,500
Unearned Rent Revenue 4,600
Mortgage Payable 50,000
Share Capital—Ordinary 100,000
Retained Earnings 0
Dividends 5,000
Rent Revenue 86,200
Salaries and Wages Expense 44,800
Utilities Expense 9,200
Maintenance and Repairs Expense 3,600
¥245,300 ¥245,300

Other data:
1. The balance in prepaid insurance is a 1-year premium paid on June 1,
2019.
2. An inventory count on August 31 shows ¥650 of supplies on hand.
3. Annual depreciation rates are buildings (4%) and equipment (10%).
Residual value is estimated to be 10% of cost.
4. Unearned rent revenue of ¥3,800 should be recognized as revenue prior to
August 31.
5. Salaries and wages of ¥375 were unpaid at August 31.
6. Rentals of ¥800 were due from tenants at August 31.
7. The mortgage note is dated 1/1/2019. The mortgage interest rate is 8% per
year.
Instructions

a. Journalize the adjusting entries on August 31 for the 3-month period

June 1–August 31. (Omit explanations.)
b. Prepare an adjusted trial balance on August 31.
E3.11 (LO4) (Prepare Financial Statements) The adjusted trial balance of
 Cavamanlis Co. as of December 31, 2019, contains the following.

Cavamanlis Co.
Adjusted Trial Balance
December 31, 2019

Account Titles Dr. Cr.

Cash $18,972
Accounts Receivable 6,920
Prepaid Rent 2,280
Equipment 18,050
Accumulated Depreciation—Equipment $ 4,895
Notes Payable 5,700
Accounts Payable 4,472
Share Capital—Ordinary 20,000
Retained Earnings 11,310
Dividends 3,000
Service Revenue 12,590
Salaries and Wages Expense 6,840
Rent Expense 2,760
Depreciation Expense 145
Interest Expense 83
Interest Payable 83
$59,050 $59,050
Instructions

a. Prepare an income statement.

b. Prepare a retained earnings statement.
c. Prepare a classified statement of financial position.
E3.12 (LO4) (Prepare Financial Statements) Flynn Design was founded by
Kevin Flynn in January 2014. Presented below is the adjusted trial balance
as of December 31, 2019.
 Flynn Design
Adjusted Trial Balance
December 31, 2019

Dr. Cr.
Cash € 10,000

Accounts Receivable 21,500

Supplies 5,000
Prepaid Insurance 2,500
Equipment 60,000
Accumulated Depreciation—Equipment € 35,000
Accounts Payable 8,000
Interest Payable 150
Notes Payable 5,000
Unearned Service Revenue 5,600
Salaries and Wages Payable 1,300
Share Capital—Ordinary 10,000
Retained Earnings 3,500
Service Revenue 58,500
Salaries and Wages Expense 12,300
Insurance Expense 850
Interest Expense 500
Depreciation Expense 7,000
Supplies Expense 3,400
Rent Expense 4,000
€127,050 €127,050
Instructions

a. Prepare an income statement and a retained earnings statement for

the year ending December 31, 2019, and an unclassified statement of
 financial position at December 31.
b. Answer the following questions.
1. If the note has been outstanding 6 months, what is the annual interest
rate on that note?
2. If the company paid €17,500 in salaries and wages in 2019, what was
the balance in Salaries and Wages Payable on December 31, 2018?
E3.13 (LO5) (Closing Entries) The adjusted trial balance of Faulk Ltd. shows
the following data pertaining to sales at the end of its fiscal year, October
31, 2019: Sales Revenue £800,000; Delivery Expense £12,000; Sales
Returns and Allowances £24,000; and Sales Discounts £12,000.
Instructions

a. Prepare the revenues section of the income statement.

b. Prepare separate closing entries for (1) sales revenue and (2) the
contra accounts to sales revenue.
E3.14 (LO5) (Closing Entries) Presented below is information related to
Russell AG for the month of January 2019.

Cost of goods sold €202,000 Salaries and wages expense € 61,000

Delivery expense 7,000 Sales discounts 8,000
Insurance expense 12,000 Sales returns and allowances 13,000
Rent expense 20,000 Sales revenue 340,000
Instructions

Prepare the necessary closing entries.

E3.15 (LO5) (Closing Entries) Presented below is financial information for
two different companies.
Shabbona Company Jenkins Company
Sales revenue $90,000 (d)
Sales returns and allowances (a) $ 5,000
Net sales 85,000 90,000
Cost of goods sold 56,000 (e)
Gross profit (b) 38,000
 Operating expenses 15,000 23,000
Net income (c) 15,000
Instructions

Compute the missing amounts.

E3.16 (LO5) (Closing Entries) Presented below are selected account
balances for Alistair Co. as of December 31, 2019.

Inventory 12/31/19 $ 60,000 Cost of Goods Sold $235,700

Share Capital—Ordinary 75,000 Selling Expenses 16,000
Retained Earnings 45,000 Administrative Expenses 38,000
Dividends 18,000 Income Tax Expense 30,000
Sales Returns and Allowances 12,000
Sales Discounts 15,000
Sales Revenue 390,000
Instructions

Prepare closing entries for Alistair Co. on December 31, 2019. (Omit
explanations.)
E3.17 (LO2) (Transactions of a Company, Including Investment and
Dividend) Snyder Miniature Golf and Driving Range plc was opened on
March 1 by Mickey Snyder. The following selected events and transactions
occurred during March.

Mar. 1 Invested £60,000 cash in the business in exchange for ordinary

shares.
3 Purchased Michelle Wie's Golf Land for £38,000 cash. The price
consists of land £10,000, building £22,000, and equipment £6,000.
(Make one compound entry.)
5 Advertised the opening of the driving range and miniature golf
course, paying advertising expenses of £1,600.
6 Paid cash £1,480 for a 1-year insurance policy.
10 Purchased golf equipment for £2,500 from Young Company, payable
in 30 days.
18 Received golf fees of £1,200 in cash.
 25 Declared and paid a £1,000 cash dividend.
30 Paid salaries and wages of £900.
30 Paid Young Company in full.
31 Received £750 of fees in cash.
Snyder uses the following accounts: Cash, Prepaid Insurance, Land,
Buildings, Equipment, Accounts Payable, Share Capital—Ordinary, Dividends,
Service Revenue, Advertising Expense, and Salaries and Wages Expense.
Instructions

Journalize the March transactions. (Provide explanations for the journal

entries.)
*E3.18 (LO6) (Cash to Accrual Basis) Corinne Dunbar, M.D., maintains the
accounting records of Dunbar Clinic on a cash basis. During 2019, Dr.
Dunbar collected €142,600 from her patients and paid €60,470 in expenses.
At January 1, 2019, and December 31, 2019, she had accounts receivable,
unearned service revenue, accrued expenses, and prepaid expenses as
follows. (All long-lived assets are rented.)

January 1, 2019 December 31, 2019

Accounts receivable €11,250 €15,927
Unearned service revenue 2,840 4,111
Accrued expenses 3,435 2,108
Prepaid expenses 1,917 3,232
Instructions

Prepare a schedule that converts Dr. Dunbar's “excess of cash collected over
cash disbursed” for the year 2019 to net income on an accrual basis for the
year 2019.
*E3.19 (LO6) (Cash and Accrual Basis) Butler Corp. maintains its financial
records on the cash basis of accounting. Interested in securing a long-term
loan from its regular bank, Butler Corp. requests you to convert its cash-
basis income statement data to the accrual basis. You are provided with the
following summarized data covering 2018, 2019, and 2020.
2018 2019 2020
Cash receipts from sales:
 On 2018 sales $290,000 $160,000 $ 30,000
On 2019 sales –0– 355,000 90,000
On 2020 sales 408,000
Cash payments for expenses:
On 2018 expenses 185,000 67,000 25,000

On 2019 expenses 40,000a 170,000 55,000

On 2020 expenses 45,000b 218,000
a Prepayments of 2019 expenses.

b Prepayments of 2020 expenses.

Instructions

a. Using the data above, prepare abbreviated income statements for the
years 2018 and 2019 on the cash basis.
b. Using the data above, prepare abbreviated income statements for the
years 2018 and 2019 on the accrual basis.
*E3.20 (LO3,7) (Adjusting and Reversing Entries) When the accounts of
Constantine A.Ş. are examined, the adjusting data listed below are
uncovered on December 31, the end of an annual fiscal period.
1. The prepaid insurance account shows a debit of 6,000, representing the
cost of a 2-year fire insurance policy dated August 1 of the current year.
2. On November 1, Rent Revenue was credited for 2,400, representing
revenue from a subrental for a 3-month period beginning on that date.
3. Purchase of advertising materials for 800 during the year was recorded in
the Supplies Expense account. On December 31, advertising materials of
290 are on hand.
4. Interest of 770 has accrued on notes payable.
Instructions

Prepare the following in general journal form.

a. The adjusting entry for each item.
b. The reversing entry for each item where appropriate.
*E3.21 (LO8) (Worksheet) Presented below are selected accounts for
 Acevedo Company as reported in the worksheet at the end of May 2019.

Instructions

Complete the worksheet by extending amounts reported in the adjusted trial

balance to the appropriate columns in the worksheet. Do not total individual
columns.
*E3.22 (LO8) (Worksheet and Statement of Financial Position
Presentation) The adjusted trial balance for Madrasah SE (in euros) is
presented in the following worksheet for the month ended April 30, 2019.

Instructions
Complete the worksheet and prepare a classified statement of financial
position.
*E3.23 (LO8) (Partial Worksheet Preparation) Letterman AG prepares
monthly financial statements from a worksheet. Selected portions of the
January worksheet showed the following data.

During February, no events occurred that affected these accounts. But at the
end of February, the following information was available.

(a) Supplies on hand €515

(b) Monthly depreciation €257
(c) Accrued interest € 50
Instructions

Reproduce the data that would appear in the February worksheet and indicate
the amounts that would be shown in the February income statement.

Problems

P3.1 (LO2,3,4,5) (Transactions, Financial Statements—Service Company)

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the
month of September (amounts in thousands).
Sept. 1 Kawabata begins practice as a dentist and invests ¥20,000 cash.
2 Purchases 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 ¥5,820 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 ¥1,800;
miscellaneous office expenses ¥85.
30 Dental supplies used during September, ¥330.

Instructions

a. Enter the transactions shown above in appropriate general ledger

accounts (use T-accounts). Use the following ledger accounts: Cash;
Accounts Receivable; Supplies; Equipment; Accumulated Depreciation
—Equipment; Accounts Payable; Yasunari Kawabata, Capital; Service
Revenue; Rent Expense; Office Expense; Salaries and Wages
Expense; Supplies Expense; Depreciation Expense; and Income
Summary. Allow 10 lines for the Cash and Income Summary accounts,
and 5 lines for each of the other accounts needed. Record depreciation
using a 5-year life on the equipment, the straight-line method, and no
residual value. Do not use a drawing account.
b. Prepare a trial balance.
c. Prepare an income statement, a statement of owner's equity, and an
unclassified statement of financial position.
d. Close the ledger.
e. Prepare a post-closing trial balance.
P3.2 (LO3,4) (Adjusting Entries and Financial Statements) Mason
Advertising Agency was founded in January 2015. Presented below are
adjusted and unadjusted trial balances as of December 31, 2019.

Mason Advertising Agency

Trial Balance
December 31, 2019

Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash € 11,000 € 11,000
Accounts Receivable 20,000 23,500
Supplies 8,400 3,000
Prepaid Insurance 3,350 2,500
Equipment 60,000 60,000
Accumulated Depreciation— € € 33,000
Equipment 28,000
Accounts Payable 5,000 5,000
Interest Payable –0– 150
Notes Payable 5,000 5,000
Unearned Service Revenue 7,000 5,600
Salaries and Wages Payable –0– 1,300
Share Capital—Ordinary 10,000 10,000
Retained Earnings 3,500 3,500
Service Revenue 58,600 63,500
Salaries and Wages Expense 10,000 11,300
Insurance Expense 850
Interest Expense 350 500
Depreciation Expense 5,000
Supplies Expense 5,400
Rent Expense 4,000 4,000
€117,100 €117,100 €127,050 €127,050

Instructions

a. Journalize the annual adjusting entries that were made. (Omit

explanations.)
 b. Prepare an income statement and a retained earnings statement for
the year ending December 31, 2019, and an unclassified statement of
financial position at December 31.
c. Answer the following questions.
1. If the note has been outstanding 3 months, what is the annual
interest rate on that note?
2. If the company paid €12,500 in salaries in 2019, what was the
balance in Salaries and Wages Payable on December 31, 2018?
P3.3 (LO3) (Adjusting Entries) A review of the ledger of Baylor Company at
December 31, 2019, produces the following data pertaining to the
preparation of annual adjusting entries.
1. Salaries and Wages Payable $0. There are 8 employees. Salaries and
wages are paid every Friday for the current week. Five employees receive
$700 each per week, and 3 employees earn $600 each per week.
December 31 is a Tuesday. Employees do not work weekends. All
employees worked the last 2 days of December.
2. Unearned Rent Revenue $429,000. The company began subleasing office
space in its new building on November 1. Each tenant is required to make a
$5,000 security deposit that is not refundable until occupancy is terminated.
At December 31, the company had the following rental contracts that are
paid in full for the entire term of the lease.

Date Term (in months) Monthly Rent Number of Leases

Nov. 1 6 $6,000 5
Dec. 1 6 $8,500 4
3. Prepaid Advertising $13,200. This balance consists of payments on two
advertising contracts. The contracts provide for monthly advertising in two
trade magazines. The terms of the contracts are as shown below.

Contract Date Amount Number of Magazine Issues

A650 May 1 $6,000 12
B974 Oct. 1 $7,200 24
The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $60,000. This balance consists of a note for one year at an
annual interest rate of 12%, dated June 1.
Instructions

Prepare the adjusting entries at December 31, 2019. (Show all computations.)
P3.4 (LO2,3,4,5) (Financial Statements, Adjusting and Closing Entries)
The trial balance of Bellemy Fashion Center contained the following
accounts at November 30, the end of the company's fiscal year.

Bellemy Fashion Center

Trial Balance
November 30, 2019

Debit Credit
Cash € 28,700
Accounts Receivable 33,700
Inventory 45,000
Supplies 5,500
Equipment 133,000
Accumulated Depreciation—Equipment € 24,000
Notes Payable 51,000
Accounts Payable 48,500
Share Capital—Ordinary 90,000
Retained Earnings 8,000
Sales Revenue 757,200
Sales Returns and Allowances 4,200
Cost of Goods Sold 495,400
Salaries and Wages Expense 140,000
Advertising Expense 26,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Delivery Expense 16,700
Rent Expense 24,000
€978,700 €978,700
Adjustment data:
1. Supplies on hand totaled €1,500.
2. Depreciation is €15,000 on the equipment.
3 Interest of €11,000 is accrued on notes payable at November 30.
Other data:
1. Salaries and wages expense is 70% selling and 30% administrative.
2. Rent expense and utilities expense are 80% selling and 20%
administrative.
3. €30,000 of notes payable are due for payment next year.
4. Maintenance and repairs expense is 100% administrative.
Instructions

a. Journalize the adjusting entries.

b. Prepare an adjusted trial balance.
c. Prepare an income statement and retained earnings statement for the
year and a classified statement of financial position as of November 30,
2019.
d. Journalize the closing entries.
e. Prepare a post-closing trial balance.
P3.5 (LO3) (Adjusting Entries) The accounts listed below appeared in the
December 31 trial balance of the Savard Theater.

Debit Credit
Equipment €192,000
Accumulated Depreciation—Equipment € 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries and Wages Expense 57,600
Interest Expense 1,400
Instructions

a. From the account balances listed above and the information given
below, prepare the annual adjusting entries necessary on December
 31. (Omit explanations.)
1. The equipment has an estimated life of 16 years and a residual
value of €24,000 at the end of that time. (Use straight-line
method.)
2. The note payable is a 90-day note given to the bank October 20
and bearing interest at 8%. (Use 360 days for denominator.)
3. In December, 2,000 coupon admission books were sold at €30
each. They could be used for admission any time after January 1.
The proceeds were recorded as Admissions Revenue.
4. Advertising expense paid in advance and included in Advertising
Expense €1,100.
5. Salaries and wages accrued but unpaid €4,700.
b. What amounts should be shown for each of the following on the
income statement for the year?
1. Interest expense.
2. Admissions revenue.
3. Advertising expense.
4. Salaries and wages expense.
P3.6 (LO3,4) (Adjusting Entries and Financial Statements) The following
are the trial balance and other information related to Yorkis Perez, a
consulting engineer.

Yorkis Perez, Consulting Engineer

Trial Balance
December 31, 2019
Debit Credit
Cash R$ 29,500
Accounts Receivable 49,600
Allowance for Doubtful Accounts R$ 750
Supplies 1,960
Prepaid Insurance 1,100
Equipment 25,000
 Accumulated Depreciation—Equipment 6,250
Notes Payable 7,200
Yorkis Perez, Capital 35,010
Service Revenue 100,000
Rent Expense 9,750
Salaries and Wages Expense 30,500
Utilities Expense 1,080
Office Expense 720
R$149,210 R$149,210

1. Fees received in advance from clients R$6,000.

2. Services performed for clients that were not recorded by December 31,
R$4,900.
3. Bad debt expense for the year is R$1,430.
4. Insurance expired during the year R$480.
5. Equipment is being depreciated at 10% per year.
6. Yorkis Perez gave the bank a 90-day, 10% note for R$7,200 on December
1, 2019.
7. Rent of the building is R$750 per month. The rent for 2019 has been paid,
as has that for January 2020.
8. Salaries and wages earned but unpaid December 31, 2019, R$2,510.
Instructions

a. From the trial balance and other information given, prepare annual
adjusting entries as of December 31, 2019. (Omit explanations.)
b. Prepare an income statement for 2019, a statement of owner's equity,
and a classified statement of financial position. Yorkis Perez withdrew
R$17,000 cash for personal use during the year.
P3.7 (LO3,4) (Adjusting Entries and Financial Statements) Sorenstam
Advertising AG was founded in January 2015. The following are the
adjusted and unadjusted trial balances as of December 31, 2019.

Sorenstam Advertising AG
Trial Balance
December 31, 2019

Unadjusted Adjusted

Dr. Cr. Dr. Cr.

Cash € 7,000 € 7,000
Accounts Receivable 19,000 20,000
Supplies 8,500 3,500
Prepaid Insurance 3,250 2,500
Equipment 60,000 60,000
Accumulated Depreciation— € € 35,750
Equipment 27,000
Accounts Payable 5,000 5,000
Interest Payable 150
Notes Payable 5,000 5,000
Unearned Service Revenue 7,000 5,600
Salaries and Wages Payable 1,500
Share Capital—Ordinary 10,000 10,000
Retained Earnings 4,500 4,500
Service Revenue 58,600 61,000
Salaries and Wages Expense 10,000 11,500
Insurance Expense 750
Interest Expense 350 500
Depreciation Expense 8,750
Supplies Expense 5,000 10,000
Rent Expense 4,000 4,000
€117,100 €117,100 €128,500 €128,500

Instructions

a. Journalize the annual adjusting entries that were made. (Omit

explanations.)
 b. Prepare an income statement and a retained earnings statement for
the year ending December 31, 2019, and an unclassified statement of
financial position at December 31, 2019.
c. Answer the following questions.
1. If the useful life of equipment is 6 years, what is the expected
residual value?
2. If the note has been outstanding 3 months, what is the annual
interest rate on that note?
3. If the company paid €12,500 in salaries and wages in 2019, what
was the balance in Salaries and Wages Payable on December 31,
2018?
P3.8 (LO3,4) (Adjusting and Closing) Presented below is the trial balance of
the Ko Golf Club, Inc. as of December 31. The books are closed annually
on December 31.

Ko Golf Club
Trial Balance
December 31

Debit Credit
Cash £ 15,000
Accounts Receivable 13,000
Allowance for Doubtful Accounts £ 1,100
Prepaid Insurance 9,000
Land 350,000
Buildings 120,000
Accumulated Depreciation—Buildings 38,400
Equipment 150,000
Accumulated Depreciation—Equipment 70,000
Share Capital—Ordinary 400,000
Retained Earnings 82,000
Dues Revenue 200,000
Green Fees Revenue 5,900
 Rent Revenue 17,600
Utilities Expense 54,000
Salaries and Wages Expense 80,000
Maintenance and Repairs Expense 24,000
£815,000 £815,000

Instructions

a. Enter the balances in ledger accounts. Allow five lines for each
account.
b. From the trial balance and the information given below, prepare annual
adjusting entries and post to the ledger accounts. (Omit explanations.)
1. The buildings have an estimated life of 30 years with no residual
value (straight-line method).
2. The equipment is depreciated at 10% per year.
3. Insurance expired during the year £3,500.
4. The rent revenue represents the amount received for 11 months
for dining facilities. The December rent has not yet been received.
5. It is estimated that 12% of the accounts receivable will be
uncollectible.
6. Salaries and wages earned but not paid by December 31, £3,600.
7. Dues received in advance from members £8,900.
c. Prepare an adjusted trial balance.
d. Prepare closing entries and post.
P3.9 (LO3,5) (Adjusting and Closing) The following is the December 31 trial
balance of New York Boutique.

New York Boutique

Trial Balance
December 31

Debit Credit
Cash € 18,500
 Accounts Receivable 32,000
Allowance for Doubtful Accounts € 700
Inventory, December 31 80,000
Prepaid Insurance 5,100
Equipment 84,000

Accumulated Depreciation—Equipment 35,000

Notes Payable 28,000
Share Capital—Ordinary 80,600
Retained Earnings 10,000
Sales Revenue 600,000
Cost of Goods Sold 408,000
Salaries and Wages Expense 115,000
Advertising Expense 6,700
Office Expense 5,000
€754,300 €754,300

Instructions

a. Construct T-accounts and enter the balances shown.

b. Prepare adjusting journal entries for the following and post to the T-
accounts. (Omit explanations.) Open additional T-accounts as
necessary. (The books are closed yearly on December 31.)
1. Bad debt expense is estimated to be €1,400.
2. Equipment is depreciated based on a 7-year life (no residual
value).
3. Insurance expired during the year €2,550.
4. Interest accrued on notes payable €3,360.
5. Salaries and wages earned but not paid €2,400.
6. Advertising paid in advance €700.
7. Office supplies on hand €1,500, charged to Office Expense when
purchased.