answer questions 1 and 2 please CHAPTER 4 Adjustments, Financial Statements, and
ID: 2526598 • Letter: A
Question
answer questions 1 and 2 please
CHAPTER 4 Adjustments, Financial Statements, and the Quality of Earnings E4-9 LO4-1 Recording Seven Typical Adjusting Entries Joh n's Boat Yard, Inc., repairs, stores, and cleans boats for customers. It is completing the accountin e following data with respect to adjusting entries at year-end are available: process f and posted. Th or the year just ended on November 30. The transactions for the past year have been journalized a. John' s winterized (cleaned and covered) three boats for customers at the end of November but did not record the service for $3,300. b. On October 1, John's paid S2,200 to the local newspaper for an advertisement to run every Thursday for 12 weeks. A Il ads have been run except for three Thursdays in December to complete the 12-week contract. c. John's borrowed $300,000 at an 11 percent annual interest rate on April 1 of the current year to expand its boat storage facility. The loan requires John's to pay the interest quarterly until the note is repaid in three years. John's paid quarterly interest on July 1 and October. d. The Johnson family paid John's $4,500 on November 1 to store its sailboat for the winter until May 1 of the next fiscal year. John's credited the full amount to Unearned Storage Revenue on November 1. e. John's used boat-lifting equipment that cost $180,000; $18,000 was the estimated depreciation for the current year f Boat repair supplies on hand at the beginning of the current year totaled $18,900. Repair supplies purchased and debited to Supplies during the year amounted to $45,200. The year-end count showed $15,600 of the supplies on hand. g. Wages of $5,600 earned by employees during November were unpaid and unrecorded at November 30. The next payroll date will be December 5 of the next fiscal year. Required 1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense. 2. Prepare the adjusting entries that should be recorded for John's at November 30, end of the current yearExplanation / Answer
Date
Account Titles and Explanation
Debit
Credit
a.
Accrued Revenue
30-Nov
Accounts Receivable
$3,300
Service Revenue
$3,300
b.
Deferred Expense
30-Nov
Advertising Expenses
$1,650
Pre-paid Advertising
$1,650
c.
Accrued Expense
30-Nov
Interest Expense
$5,500
Interest Payable
$5,500
d.
Deferred Revenue
30-Nov
Unearned Storage Revenue
$750
Service Revenue
$750
e.
Deferred Expense
30-Nov
Depreciation Expense - Buildings
$18,000
Accumulated depreciation
$18,000
f.
Deferred Expense
30-Nov
Supplies Expense
$48,500
Supplies
$48,500
f.
Accrued Expense
30-Nov
Wages Expense
$5,600
Wages Payable
$5,600
Notes:
Ads are not run for 3 weeks
Ads run = 9 weeks
Hence, expensed advertising = 2,200 x 9/12 = $1,650
$300,000 x 11% x 2/12 = $5,500
The interest is due for the months of October and November.
$4,500 paid on Nov 1 for usage of storage for up to May 1.
Hence advance is for 6 months.
On Nov 30, one month Storage Revenue has been earned.
= $4,500 x 1/6 = $750
= 18,900 + 45,200 – 15,600 = $48,500
Date
Account Titles and Explanation
Debit
Credit
a.
Accrued Revenue
30-Nov
Accounts Receivable
$3,300
Service Revenue
$3,300
b.
Deferred Expense
30-Nov
Advertising Expenses
$1,650
Pre-paid Advertising
$1,650
c.
Accrued Expense
30-Nov
Interest Expense
$5,500
Interest Payable
$5,500
d.
Deferred Revenue
30-Nov
Unearned Storage Revenue
$750
Service Revenue
$750
e.
Deferred Expense
30-Nov
Depreciation Expense - Buildings
$18,000
Accumulated depreciation
$18,000
f.
Deferred Expense
30-Nov
Supplies Expense
$48,500
Supplies
$48,500
f.
Accrued Expense
30-Nov
Wages Expense
$5,600
Wages Payable
$5,600
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