Q34PSA - Horngren'S Financial And Managerial Accounting

Question

The unadjusted trial balance and adjustment data of Martha’s Motors at December 31, 2018, follow: Adjustment data at December 31, 2018: a. Depreciation on equipment, \(2,100. b. Accrued Wages Expense, \)1,100. c. Office Supplies on hand, \(500. d. Prepaid Insurance expired during December, \)600. e. Unearned Revenue earned during December, \(4,800. f. Accrued Service Revenue, \)1,300. 2019 transactions: a. On January 4, Martha’s Motors paid wages of \(1,900. Of this, \)1,100 related to the accrued wages recorded on December 31. b. On January 10, Martha’s Motors received \(1,500 for Service Revenue. Of this, \)1,300 is related to the accrued Service Revenue recorded on December 31. Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Unearned Revenue Common Stock Dividends Service Revenue Depreciation Expense—Equipment Wages Expense Insurance Expense Utilities Expense Balance \( 4,200 \) 93,200 \( 93,200 15,000 \) 34,600 52,400 7,900 3,100 18,500 17,200 1,600 27,200 1,000 2,400 1,300 Supplies Expense Total  Requirements 1. Journalize adjusting entries. 2. Journalize reversing entries for the appropriate adjusting entries. 3. Refer to the 2019 data. Journalize the cash payment and the cash receipt that occurred in 2019.

Step-by-Step Solution

Answer

(1) Adjusting entries are mentioned in Step 1. 

(2) Reversing entries are mentioned in Step 2. 

(3) Journal entries are mentioned in Step 3.

Step-by-Step-Solution Step 1: Adjusting entries

Adjusting entries are as follows:

	Date	Accounts and Explanation	Debit	Credit
(a)	Dec. 31, 2018	Depreciation Expense-Equipment	$2,100
		Accumulated Depreciation—Equipment		$2,100
		To record depreciation on equipment
(b)	Dec. 31, 2018	Wages Expense	$1,100
		Wages Payable		$1,100
		To record accrued wages expense
(c)	Dec. 31, 2018	Supplies Expense	$500
		Office Supplies		$500
		To record supplies expense  ($1,000-$500)
(d)	Dec. 31, 2018	Insurance Expense	$600
		Prepaid Insurance		$600
		To record expired insurance expense
(e)	Dec. 31, 2018	Unearned Revenue	$4,800
		Service Revenue		$4,800
		To record earned service revenue
(f)	Dec. 31, 2018	Accounts Receivable	$1,300
		Service Revenue		$1,300
		To record accrued service revenue

 

Step 2: Reversing entries

Reversing entries are as follows: 

	Date	Accounts and Explanation	Debit	Credit
(a)	Jan. 1, 2019	Wages Payable	$1,100
		Wages Expense		$1,100
		To reverse the wages adjusting entry.
(b)	Jan. 1, 2019	Service Revenue	$1,300
		Accounts Receivable		$1,300
		To reverse the accrued revenue adjusting entry.

Step 3: Journal entries

Journal entries are as follows:

	Date	Accounts and Explanation	Debit	Credit
(a)	Jan. 4, 2019	Wages Expense	$1,900
		Cash		$1,900
		To record payment of wages.
(b)	Jan. 10, 2019	Cash	$1,500
		Service Revenue		$1,500
		To record receipt of service revenue