Q46CP - Horngren'S Financial And Managerial Accounting

Question

This problem continues the Canyon Canoe Company situation from Chapter 2. You will need to use the unadjusted trial balance and posted T-accounts that you prepared in Chapter 2.

 

At December 31, the business gathers the following information for the adjusting entries:

a. Office supplies on hand, \(165

b. Rent of one month has been used. (Hint: See Dec. 1 transaction from Chapter 2)

c. Determine the depreciation on the building using straight-line depreciation.

Assume the useful life of the building is five years and the residual value is \)5,000. (Hint: The building was purchased on December 1.)

d. \(400 of unearned revenue has now been earned.

e. The employee who has been working the rental booth has earned \)1,250 in wages that will be paid January 15, 2019.

f. Canyon Canoes has earned \(1,850 of canoe rental revenue that has not been recorded or received.

g. Determine the depreciation on the canoes purchased on November 3 using straight-line depreciation. Assume the useful life of the canoes is 4 years and the residual value is \)0.

h. Determine the depreciation on the canoes purchased on December 2 using straight-line depreciation. Assume the useful life of the canoes is 4 years and the residual value is \(0.

i. Interest expense accrued on the notes payable, \)50.

 

Requirements

1. Journalize and post the adjusting entries using the T-accounts that you completed in Chapter 2. In the T-accounts, denote each adjusting amount as Adj. and an account balance as Balance.

 

2. Prepare an adjusted trial balance as of December 31, 2018.

Step-by-Step Solution

Answer

Adjusted trial balance matches at $164,020

Step 1: Recording and posting of journal entry

Date	Particular	Debit	Credit
a.	Supplies Expense	$  1,085
	Office supplies		$  1,085
	Being supplies expense incurred
b.	Rent Expense	1,000
	Prepaid Rent		1,000
	Being rent incurred for one month
c.	Depreciation Expense – Building	500
	Accumulated Depreciation – Building		500
	Being depreciation incurred on building
d.	Unearned Revenue	400
	Service Revenue		400
	Being Unearned revenue has been earned
e.	Salary Expense	1,250
	Outstanding Salary		1,250
	Being salary outstanding to be paid in Jan
f.	Accounts Receivables	1,850
	Rental Revenue		1,850
	Being rental revenue has been earned but not received
g.	Depreciation Expense – Canoes	200
	Accumulated Depreciation – Canoes		200
	Being depreciation incurred on canoes for two months
h.	Depreciation Expense – Canoes	150
	Accumulated Depreciation – Canoes		150
	Being depreciation incurred on canoes for two months
i.	Interest Expense	50
	Accrued Interest		50
	Being interest due on notes payable
	Total	$  6,485	$  6,485

 

 

Step 2: Preparation of adjusting entry

CANYON CANOE COMPANY
Adjusted Trial Balance
December 31, 2018
Account Title	Debit ($)	Credit ($)
Cash	$ 12,125
Accounts Receivables	7,600
Office Supplies	165
Prepaid Rent	2,000
Land	85,000
Building	35,000
Accumulated Depreciation – Building		$ 500
Canoes	12,000
Accumulated Depreciation – Canoes		350
Accounts Payable		3,050
Utilities Payable		295
Telephone Payable		325
Unearned Revenue		350
Notes Payable		7,200
Wilson, Capital		136,000
Wilson, Withdrawals	450
Canoe Rental Revenue		14,250
Rent Expense	2,200
Wages Expense	3,300
Utilities Expense	445
Telephone Expense	500
Service Revenue		400
Salary Expense	1,250
Outstanding Salary		1,250
Depreciation Expense – Building	500
Depreciation Expense – Canoes	350
Interest Expense	50
Accrued Interest		50
Supplies Expense	1,085
Total	$164,020	$164,020