Exercise 3-6 Preparing adjusting entries - accrued revenues and expenses LO P1

Exercise 3-6 Preparing adjusting entries - accrued revenues and expenses LO P1

    M&R company provided $2,800 in services to customers that are expected to pay the company sometime in January following the company’s year-end.

    Wage expenses of $1,800 have been incurred but are not paid as of December 31.
    M&R company has a $5,800 bank loan and has incurred (but not recorded) 6% interest expense of $348 for the year ended December 31. The company will pay the $348 interest in cash on January 2 following the company’s year-end.
    M&R Company hired a firm to provide lawn services at a monthly fee of $580 with payment occurring on the 15th of the following month. Payment for December services will occur on January 15 following the company’s year-end.

    M&R company has earned $280 in interest revenue from investments for the year ended December 31. The interest revenue will be received on January 15 following the company’s year-end.

    Salary expenses of $980 have been earned by supervisors but not paid as of December 31.

 

Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the above separate cases.

 

 

Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries.

Exercise 3-5 Analyzing and preparing adjusting entries LO P1, P3

Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the eight adjusting entries a through g (the balance sheet part of the entries is not shown here).



Analyze the statements and prepare the eight adjusting entries a through g that likely were recorded. Note: Answer for a has two entries 30% of (i) the $4,800 adjustment for Fees Earned has been earned but not billed, and (ii) the other 70% has been earned by performing services that were paid for in advance.



Explanation

a1.
To record earned but unbilled fees.
Fees earned = (30% × $4,800) = $1,440
 
a2.
To record earned fees collected in advance.
Fees earned = (70% × $4,800) = $3,360