Adjusting Entries

Q1 Alta Sequoia Resort adjusts its accounts monthly and closes its account annually.
Most guests of the resort pay at the time they check out, and the amounts
collected are credited to Rental Revenue. A few guests pay in advance for rooms
and these amounts are credited to Unearned Rental Revenue at the time of receipt
The following information is available as a source for preparing adjusting entries
at December 31
a. Salaries earned by employees but not yet recorded or paid amount to $ 7,900
b. As of December 31, Alta Sequoia has earned $ 11,075 rental revenue from current
guests who will not be billed until they are ready to check out.
c. On November 1, a suite of rooms was rented to a corporation for six month at a
monthly rental of $ 3,200. Entire six months rent of $ 19,200 was collected in advance
d. A limousine to carry guests to and from the airport had been rented beginning
December 19 from Transport Rentals Inc, at a daily rate of $ 120. No rental payment
has been made. ( The Limousine has been rented for 13 days in December)
e. A six month loan in the amount of $ 30,000 had been obtained on December 1.
Interest is to be computed at a rate of 10% per year and is payable when the loan
is due. No interest has been paid and no interest expense has been recorded.
f. In December Alta Sequoia resort entered into an agreement to host the annual
symposium of ACE( American for a Clean Environment) in April of next year.
The resort expects to earn rental revenue of atleast $45,000
h. A one year fire insurance policy had been purchased on September 1. The premium
of $7,200 for the entire life of the policy had been paid on September 1 and recorded
as Unexpired insurance.
Instructions
i For each of the above lettered paragraphs, draft a separate adjusting entries
ii. As of December 31, how much of the $ 19,200 received on November 1 has been
earned by Alta Sequoia? Is this amount the same as the amount of revenue
recognized in your adjusting entry for item c? Explain

Q2 Silver Spur Ranch, a dude ranch and resort, adjusts its account monthly and closes
its accounts annually on December 31. Most of the guests of the ranch pay at the
time they check out, and the amounts collected are credited to Rental Revenue
The following information is available as a source for preparing adjusting entries
at December 31?
a. Among the assets owned by Silver Spur is an investment in government bonds in
the face amount of $ 175,000. Accrued interest receivable on the bonds at Dec 31
was computed to be $875. None of the interest has yet been received.
b. A 12 month bank loan in the amount of $ 90,000 had been obtained on Nov 1.
Interest is to be computed at an annual rate of 10% & payable when loan becomes due.
c. Management of the ranch signed an agreement on December 28 to lease a truck
from Ace Motors for a period of six month beginning January 1 at a rate of 20 cent
per mile, with a clause providing for a minimum monthly charge of $ 400
d. Salaries earned by employees but not yet paid amounted to $ 9,900 at end of year
e. As of December 31, Silver Spur has earned $ 12,500 rental revenue from current
guest who will not be billed until they are ready to check out.
f A portion of land owned by Silver Spur had been leased on August 1 of the current
year to a service station operator at a yearly rental rate of $ 18,000. Six months rent
was collected in advance at date of lease and credited to Unearned Rental Revenue
g A bus to carry guests to and from town and the airport had been rented early on
December 10 at a daily rate of $50. No rental payment has been made, although
Silver Spur has had use of bus for 22 days in December.
Required:
i. Pass necessary adjusting entries
ii. What is the amount of interest expense recognized during the year on the $ 90,000
bank loan obtained on November 1?

Q3 On April 1, Pat Hamilton an attorney, opened her own legal practice, to be

known as the Law Office of Pat Hamilton. The business adjusts its account
at the end of each month. The following trial balance was prepared at April 30,
after one month of operation

Law Office Of Pat Hamilton

Trial Balance
30-Apr
Cash $10,060
Legal Fees Receivable 0
Unexpired Insurance 3,000
Prepaid Office Rent 4,800
Office Supplies 1,460
Office Equipment 26,400
Accumulated Dep - Office Equipment
Notes Payable
Interest Payable
Salaries Payable
Unearned Retainer Fees
Pat Hamilton, Capital
Pat Hamilton, Drawing 4,000
Legal Fees Earned
Salaries Expense 2,680
Misc Expense 1,200
Office Rent Expense 0
Office Supplies Expense 0
Dep Expense - Office Equipment 0
Interest Expense 0
Insurance Expense 0

$53,600
 Other Data
a. No interest has yet been paid on the note payable. Accrued interest at April 30 amounts to $ 180
b. Salaries earned by the office staff but not yet recorded or paid amounted to $ 3,470 at April 30
c Many clients are asked to make an advance payment for the legal services to be rendered in future months. These
advance payments are credited to the Unearned retainer fee account.During April, $ 7,700 of these advances were
by the business
d. Some clients are not billed until all services relating to their matter have been rendered. As of April 30, services pric
at $ 4,780 had been rendered to these clients but had not yet been recorded in the accounting records
e. A professional liability insurance policy was purchased on April1. The premium of $ 3,000 for the first six months wa
and recorded as Unexpired Insurance.
f. The business rents an office at a monthly rate of $ 1,600. On April 1, three months rent was paid in advance and ch
the Prepaid Office Rent account
g. Office supplies on hand at April 30 amounted to $ 1,100
h. The office equipment was purchased on April 1 and is being depreciated over an estimated useful life of 10 years.
Required
Prepare the adjusting entries required at April 30

Q4. Nick Charles operate a private investigating business called Nick Charles Investigations. Some clients are required to
in advance for the company's services, while others are billed after the services have been rendered. Advance paym
are credited to an account entitled Unearned Retainer Fees, which represents unearned revenue. The business adju
accounts each month and closes its account at the end of each quarter. At March 31, the end of the first quarter, th
trial balance appeared as follows

Nick Charles Investigations

Trial Balance
31-Mar
Cash $17,150
Fees Receivable 37,800
Unexpired Insurance 1,600
Prepaid Rent 5,400
Office Supplies 1,050
Office Equipment 17,100
Accumulated Dep - Office Equipment
Account Payable
Unearned Retainer Fees
Nick Charles, Capital
Nick Charles, Drawing 3,200
Fees Earned
Depreciation Expense 570
Rent Expense 3,000
Office Supplies Expense 450
Ins Expense 800
Telephone Expense 1,200
 Travel Expense 3,400
Salaries Expense 19,500

$112,220

Other Data
a. The useful life of the office equipment was estimated at five years.
b. Fee of $ 8,400 were earned during the month from services performed for clients who had paid in advance.
c. Salaries earned by employees during the month but not yet recorded or paid amounted to $ 1,665
d On March 1, the business moved into a new office and paid the first three months rent in advance
e. Investigative services rendered during the month but not yet collected or billed to clients amounted to $ 3,900
f Office supplies on hand March 31 amounted to $ 700
g. On January 1, $ 2,400 was paid as the premium for six months liability insurance

Required
Prepare the adjusting entries required at March 31
 y.

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an

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31

mes due.
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enue
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16,000
0
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16,020
20,000

1,580

$53,600
 amounts to $ 180
3,470 at April 30
e rendered in future months. These
pril, $ 7,700 of these advances were earned

endered. As of April 30, services priced

the accounting records
of $ 3,000 for the first six months was paid

ths rent was paid in advance and charged to

n estimated useful life of 10 years.

gations. Some clients are required to pay

have been rendered. Advance payments
unearned revenue. The business adjusts its
ch 31, the end of the first quarter, the

ns

5,700
3,900
24,000
45,300

33,320
 $112,220

nts who had paid in advance.

mounted to $ 1,665
ths rent in advance
to clients amounted to $ 3,900