Lesson FA-10-020-03 Financial Accounting...

File: FA-10-020-03-Workbook.pdf

Title: Financial Acctng Fundamentals – Acctng Cycle and Adjusting Journal Entries – Part 3

_____________________________________________________________________________________________ Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved of 24 videos for this lesson are available at evideolearner.com Revised: 2011-05-24

Lesson FA-10-020-03

Financial Accounting Fundamentals -

The Accounting Cycle and

Adjusting Journal Entries

Part 3

This workbook contains notes and worksheets

to accompany the corresponding video lesson

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Financial Accounting Fundamentals – – The Accounting Cycle

and Adjusting Journal Entries – Part 3

[Clip 22] Comprehensive Problem 1 - January 20x0 - Adjusting Entries -

Malorie Stylists

This part of our lesson includes journalizing some practice adjusting entries for

Malorie Stylists at January 31, 20x0, followed by an adjusted trial balance.

We will use the results of these exercises as a starting point for the lesson on

financial statements. We have 8 adjusting entries at January 31 for you to

journalize and post. Some are similar to those we looked at earlier. Others will

require some creative thinking on your part.

Comprehensive Problem 1 – Malorie Stylists

Adjusting Entries

1. Jan. 2 – Contracted with a famous actress to provide weekly styling and spa treatments

for a fixed fee of $800 monthly, billable monthly. On January 31, accrued revenue for

January from this contract.

2. Jan. 31 – Accrued one month’s interest expense on $5,000, 12%, 6-month note.

3. Jan. 31 – Adjusting entry for one month of $900 six-month deferred insurance expired.

4. Jan. 31 – Adjusting entry for one-month’s rent of $1,500 three-month prepaid rent.

5. Jan. 31 – Adjusting entry for one-month’s subscription expense on $480 two-year

subscriptions.

6. Jan. 31 – $100 in supplies were unused at the end of January. Adjusting entry for $100

in supplies unused.

7. Jan. 31 – Adjusting entry for deferred revenue from a famous actor in the amount of

$1000.

8. Jan. 31 – Malorie determined that the legal fees expense of $1,200 should be allocated

over each of the 12 months in the year. Adjusting entry to reflect one-month’s legal

fees expense for January.

Instructions: Prepare the adjusting journal entries and adjusted trial balance for January 20x0.




Comprehensive Problem 1 – Malorie Stylists

Adjusting Entries

Instructions:

For each situation,

1. Analyze the situation

2. Determine which accounts are affected

3. Analyze the effect on the accounting equation

4. Write the journal entry in good form

5. Post the journal entry to t-accounts

6. Write the adjusting entry in the adjusted trial balance worksheet

After all situations are journalized and posted, complete the adjusted trial

balance.

In practice, professional accountants usually write their adjusting entries in the

adjusted trial balance worksheet first, then journalize the entries, then post them

to t-accounts.

Since this video is intended to show you how to solve situations involving accruals

and deferrals, it is more logical for us to write the adjusting entries in the general

journal first.




As an aid for these problems, you will find the following in the workbook that

accompanies this lesson:

1. A list of common accounts in the chart of accounts

2. The expanded accounting equation with debit and credit guidelines

3. General journal

4. T-accounts with titles and balances from lesson FA-10-010 (part 3)

5. A completed trial balance from lesson FA-10-010 (part 3)

6. An adjusted trial balance worksheet

Refer to Appendix 2 for an Enlarged Chart










This lesson is designed so that you can watch a video clip explaining each adjusting

entry.

You can either work through the lesson by watching each video clip, then solving

the situation on your own before I show you the solution… I will give a moment to

press pause on the video before I show the solution...

Or, you can work through the lesson by analyzing and journalizing all 8 situations,

check your answers in the workbook, and then watch the video clip if you need an

explanation.




[Clip 23] Comprehensive Problem 1 - January 20x0 - Adjusting Entry #1 -

Malorie Stylists

Comprehensive Problem 1 - January 20x0 - Adjusting Entry #1 - Malorie

Stylists (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets)

1. Jan. 2 – Contracted with a famous actress to provide weekly styling and

spa treatments for a fixed fee of $800 monthly, billable monthly. On

January 31, accrued revenue for January from this contract.

General Journal

Date Description Debit Credit

Instructions: Write the journal entry and post to the t-accounts.


Malorie Stylists

Comprehensive Problem 1 - January 20x0 - Adjusting Entry #2 - Malorie


2. Jan. 31 – Accrued one month’s interest expense on $5,000, 12%, 6-month

note.

General Journal







Malorie Stylists

Comprehensive Problem 1 - January 20x0 – Adjusting Entry #3 - Malorie


3. Jan. 31 – Adjusting entry for one month of $900 six-month deferred

insurance expired.

General Journal




Malorie Stylists



4. Jan. 31 – Adjusting entry for one-month’s rent of $1,500 three-month

prepaid rent.

General Journal







Malorie Stylists



5. Jan. 31 – Adjusting entry for one-month’s subscription expense on $480

two-year subscriptions.

General Journal




Malorie Stylists



6. Jan. 31 – $100 in supplies were unused at the end of January. Adjusting

entry for $100 in supplies unused.

General Journal







Malorie Stylists



7. Jan. 31 – Adjusting entry for deferred revenue from a famous actor in the

amount of $1000.

General Journal




Malorie Stylists



8. Jan. 31 – Malorie determined that the legal fees expense of $1,200 should

be allocated over each of the 12 months in the year. Adjusting entry to

reflect one-month’s legal fees expense for January.

General Journal






[Clip 31] Comprehensive Problem 1 - January 20x0 – Adjusted Trial Balance -

Malorie Stylists

Comprehensive Problem 1 - January 20x0 – Adjusted Trial Balance - Malorie


Instructions: Determine the balance of each t-account and prepare the trial

balance.




APPENDIX 1 - SOLUTIONS

[Clip 23] Comprehensive Problem 1 - January 20x0 - Adjusting Entry #1 - Malorie Stylists

SOLUTION:


SOLUTION:





SOLUTION:


SOLUTION:




[Clip 31] Comprehensive Problem 1 - January 20x0 – Adjusted Trial Balance - Malorie Stylists

SOLUTION:



Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved of 24 videos for this lesson are available at evideolearner.com Revised: 2011-05-24

APPENDIX 2 – CHARTS AND WORKSHEETS

CHARTS 1, 2, 3

REFER TO NICHOLE HEALTH SERVICES ILLUSTRATION PROBLEM

(see part 2 for those charts)

CHART 4

COMMON ACCOUNTS IN THE CHART OF ACCOUNTS




CHART 5

The Expanded Accounting Equation with Debit and Credit Guidelines




CHART 6 – GENERAL JOURNAL

General Journal





CHARTS 7

REFERS TO NICHOLE HEALTH SERVICES ILLUSTRATION PROBLEM

(see part 2 for this chart)

CHART 8

T-Accounts for Comprehensive Problem 1 – Malorie Stylists

January 31, 20x0




CHART 9

Trial Balance, January 31, 20x0

(Before Adjusting Entries)

Malorie Stylists




CHART 10

Adjusted Trial Balance Worksheet, January 31, 20x0

Malorie Stylists




CHART 11 – BLANK T-ACCOUNTS

T-Accounts Worksheet

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