The document discusses adjusting entries for accounting transactions. It provides examples of adjusting entries for depreciation, supplies, prepaid rent, and unearned revenue. It also calculates book value of equipment and the adjusting entry needed for earned revenue that was initially recorded as unearned. Exercises are included for students to practice preparing adjusting entries.

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3. Principles Of Accounting (1)Chapter 3Adjusting the AccountsMohamed Mahmoudmmahmoud@eelu.edu.egTel: (+202) 33318449

5. Exercises

6. 1.Trail Balance

7. Exercise 1Prepare journal entries for each of the following transactions.Performed services for customers on account $5,000.Purchased $20,000 of equipment on account.Received $3,000 from customers in transaction 1.The owner, Mohammad Obayd, withdrew $1,000 cash for personal use.

8. a.Accounts Receivable.................................................................. 5,000 Service Revenue......................................................................... 5,000Equipment................................................................................ 20,000 Accounts Payable......................................................................... 20,000Cash .......................................................................................... 3,000 Accounts Receivable................................................................... 3,000Mohamed, Drawings ..…………………………….…………………………….1,000 Cash……………………………………………….....………………………………………1,000

9. Exercise 1 (Continued)The ledger account balances for Elnoory Company are listed below.Accounts Payable $ 8,000 Accounts Receivable 7,000Cash 13,000 Elnoory, Capital 11,000Elnoory, Drawing 4,000 Repair Revenue 40,000Salaries Expense 25,000 Unearned Revenue 2,000Utilities Expense 12,000Instructions:-Prepare a trial balance in proper form for Elnoory at December 31, 2009.

10. b.El-Noory CompanyTrial BalanceDecember 31, 2009 Debit CreditCash $13,000Accounts Receivable 7,000Accounts Payable $ 8,000Unearned Revenue 2,000Elnoory, Capital 11,000Elnoory, Drawing 4,000Repair Revenue 40,000Salaries Expense 25,000Utilities Expense 12,000 _______ $61,000 $61,000

11. Exercise 2

12. AnswersCashAccount ReceivableSupplies

13. Answers (Continued)Accounts PayableUnearned RevenueJane Kent, Capital

14. Answers (Continued)Service RevenueSalaries ExpenseRent Expense

15. Answers (Continued)JANE KENT, CPATrial Balance May 31, 2009___________________________ ___ ___________DebitCreditCash $25,800Accounts Receivable 2,100Supplies 2,500Accounts Payable $ 1,500Unearned Revenue 3,500Jane Kent, Capital 25,000Service Revenue 3,300Salaries Expense 2,000Rent Expense 900 $33,300$33,300

16. 2.Adjusting EntriesDeferralsAccruals1.Prepaid Expenses.Expenses paid in cash and recorded as assets before they are used or consumed.3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned.

17. 2.Adjusting Entries (Continued)

18. Exercise 3Prepare adjusting entries for the following transactions. Omit explanationsDepreciation on equipment is $800 for the accounting period.There was no beginning balance of supplies and purchased $500 of office supplies during the period. At the end of the period $80 of supplies were on hand.Prepaid rent had a $1,000 normal balance prior to adjustment. By year end $600 was unexpired.

19. AnswersDepreciation Expense...................................................................... 800 Accumulated Depreciation—Equipment.................................. 800Supplies Expense ............................................................................ 420 Supplies .................................................................................. 420 ($500 – $80)Rent Expense................................................................................... 400 Prepaid Rent ........................................................................... 400 ($1,000 – $600)

20. Exercise 3 (Continued)Hans Albert Enterprises purchased computer equipment on May 1, 2009 for $4,500. The company expects to use the equipment for 3 years. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1,500)? What is the book value of the equipment at May 31, 2009?

21. AnswersDepreciation Expense ........................................................... 125 Accumulated Depreciation............................................... 125 2. Cost $4,500 Accumulated Depreciation (125)Book value$4,375

22. Exercise 4On January 1, Anita received a $9,000 cash retainer for legal services The full amount was credited to the liability account: Unearned Revenue. Assuming that the revenue is earned ratably over the 3-month period, what adjustingjournal entry should be made at January 31?

23. AnswerFees earned per month= $9,000/3 = $3,000Unearned Revenue.................................................. 3,000 Fees Earned..................................................................... 3,000