1How do the adjusting entries differ from other journal entries?
A) Adjusting entries always include debits or credits to at least one income statement account and at least one balance sheet account.
B) Adjusting entries are made only at the end of the period.
C) Adjusting entries never affect cash.
D) All of the above are true.
2Blum Services, Inc. has the following unadjusted balances at year-end.
Cash$12,900
Prepaid insurance2,000
Office supplies1,300
Office equipment10,500
Accumulated depreciation—office equipment3,500
Accounts payable2,900
Salaries payable-0-
Unearned service revenue4,500
Common stock10,000
Retained earnings1,750
Dividends paid5,600
Service revenue13,350
Salary expense3,700
Depreciation expense-0-
Supplies expense-0-
Insurance expense-0-
The following information is available to use in making adjusting entries.
a.Office supplies on hand at year-end: $250
b.Prepaid insurance expired during the year: $325
c.Unearned revenue remaining at year-end $2,500
d.Depreciation expense for the year $1,800
e.Accrued salaries at year-end $900
Using the work sheet below, prepare the trial balance, the adjustments and the adjusted trial balance for Blum Services, Inc.
Blum Services, Inc.
Work Sheet
December 31, 2012
AccountsTrial balanceAdjustmentsAdjusted trial
balance
DebitCreditDebitCreditDebitCredit
Cash
Prepaid insurance
Office supplies
Office equipment
Accumulated depreciation—
office equipment
Accounts payable
Salaries payable
Unearned service revenue
Common stock
Retained earnings
Dividends paid
Service revenue
Salaries expense
Depreciation expense
Supplies expense
Insurance expense
Totals
3The adjusted trial balance for McAfee Consulting Services, Inc. is presented below. Prepare an income statement, statement of retained earnings, and balance sheet.
McAfee Consulting Services, Inc.
Adjusted Trial Balance
December 31, 2012
AccountsTrial BalanceAdjustmentsAdjusted Trial
Balance
DebitCreditDebitCreditDebitCredit
Cash$11,000$11,000
Prepaid insurance1,200b$400800
Office supplies800a600200
Office equipment12,00012,000
Accumulated depreciation$2,000d1,000$3,000
Accounts payable3,0003,000
Salaries payablee900900
Unearned service revenue5,000c$2,0003,000
Common stock10,00010,000
Retained earnings4,0004,000
Dividends paid5,0005,000
Service revenue13,000c2,00015,000
Salaries expense7,000e9007,900
Depreciation expensed1,0001,000
Supplies expensea600600
Insurance expenseb400400
Totals$37,000$37,000$4,900$4,900$38,900$38,900
9,100
Less: Dividends(5,000)
Retained earnings, December 31, 2012$4,100
McAfee Consulting Services, Inc.
Balance Sheet
December 31, 2012
AssetsLiabilities
Cash$11,000 Accounts payable$3,000
Prepaid insurance800 Salaries payable900
Office supplies200 Unearned service revenue 3,000
Office equipment$12,000 Total liabilities6,900
Less: Accumulated
depreciation
3,000
9,000
Stockholders’ Equity
Common stock10,000