Q40PSB - Horngren'S Financial And Managerial Accounting

Question

The unadjusted trial balance and adjustment data of Myla’s Motors at December 31, 2018, follow: Adjustment data at December 31, 2018: a. Depreciation on equipment, \(1,700. b. Accrued Wages Expense, \)1,300. c. Office Supplies on hand, \(400. d. Prepaid Insurance expired during December, \)250. Learning Objective 7 Appendix 4A Account Title Office Supplies Cash Debit Credit Accounts Receivable Prepaid Insurance Equiment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Unearned Revenue Dividends Common Stock Service Revenue Depreciation Expense—Equipment Wages Expense Insurance Expense Utilities Expense Supplies Expense Total Balance \( 4,500 \) 90,900 5,700 4,300 19,300 17,200 26,100 1,000 1,500 \( 35,000 13,700 50,500 1,200 1,800 MYLA’S MOTORS Unadjusted Trial Balance December 31, 2018 \) 90, e. Unearned Revenue earned during December, \(4,200. f. Accrued Service Revenue, \)1,000. 2019 transactions: a. On January 4, Myla’s Motors paid wages of \(1,900. Of this, \)1,300 related to the accrued wages recorded on December 31. b. On January 10, Myla’s Motors received \(1,700 for Service Revenue. Of this, \)1,000 related to the accrued Service Revenue recorded on December 31. 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	$1,700
		Accumulated Depreciation—Equipment		$1,700
		To record depreciation on equipment
(b)	Dec. 31, 2018	Wages Expense	$1,300
		Wages Payable		$1,300
		To record accrued wages expense
(c)	Dec. 31, 2018	Supplies Expense	$600
		Office Supplies		$600
		To record supplies expense  ($1,000-$400)
(d)	Dec. 31, 2018	Insurance Expense	$250
		Prepaid Insurance		$250
		To record expired insurance expense
(e)	Dec. 31, 2018	Unearned Revenue	$4,200
		Service Revenue		$4,200
		To record earned service revenue
(f)	Dec. 31, 2018	Accounts Receivable	$1,000
		Service Revenue		$1,000
		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	$1,300
		Wages Expense		$1,300
		To reverse the wages adjusting entry.
(b)	Jan. 1, 2019	Service Revenue	$1,000
		Accounts Receivable		$1,000
		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	$1,700
		Service Revenue		$1,700
		To record receipt of service revenue