Explore BrainMass
Share

# Adjusting entries and balance sheet classification

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Selected amounts at December 31, 2003 from the Hay and Barnabas Company's information system appear as follows:

Cash paid employees for salaries and wages \$300,000
Cash collected from sales customers 1,850,000
Bonds payable 500,000
Cash 150,000
Common stock 60,000
Equipment 840,000
Prepaid insurance 30,000
Inventory 250,000
Prepaid rent 140,000
Retained earnings 130,000
Salaries and wages expense 328,000
Sales 2,000,000

You are to complete each of the following tasks.

Part A
There are five adjustments that need to be made before the financial statements can be prepared at year end. Show the effect of each of the following (a - e) on the accounting equation.
a. The equipment (purchased on January 1, 2003) has a useful life of 12 years with no salvage value (Straight-line method is used).
b. Interest accrued on the bonds payable is \$20,000 as of December 31, 2003.
c. Unexpired insurance at December 31, 2003 is \$7,000.
d. The rent payment of \$140,000 covered the four months from December 1, 2003 through March 31, 2004.
e. Salaries and wages of \$28,000 were earned but unpaid at December 31, 2003.

Part B
Indicate the proper balance sheet classification of each of the preceding 12 financial statement items on the December 31, 2003 balance sheet. If the account title would not appear on the balance sheet, indicate the financial statement on which it would be found.
a. Current assets
b. Property, plant and equipment
c. Current liabilities
d. Long-term liabilities
e. Stockholders' equity

© BrainMass Inc. brainmass.com October 24, 2018, 7:18 pm ad1c9bdddf

#### Solution Summary

The solution explains how the prepare adjusting entries and also provides the balance sheet classification of some items.

\$2.19

## Adjusting Entries and Account Classification

I am trying to get a better understanding of this before I get to the end of the class and need help with this problem.

see attached document.

Adjusting entries and account classification.
Selected amounts from Trent Company's trial balance of 12/31/05 appear below:
1. Accounts Payable \$ 160,000
2. Accounts Receivable 150,000
3. Accumulated Depreciation?Equipment 200,000
4. Allowance for Doubtful Accounts 20,000
5. Bonds Payable 500,000
6. Cash 150,000
7. Common Stock 60,000
8. Equipment 720,000
9. Insurance Expense 30,000
10. Interest Expense 10,000
11. Merchandise Inventory 300,000
12. Notes Payable (due 6/1/06) 200,000
13. Prepaid Rent 120,000
14. Retained Earnings 130,000
15. Salaries and Wages Expense 328,000
(All of the above accounts have their standard or normal debit or credit balance.)

Part A. Prepare adjusting journal entries at year end, December 31, 2005, based on the following supplemental information.

a. The equipment has a useful life of 18 years with no salvage value. (Straight-line method being used.)
b. Interest accrued on the bonds payable is \$15,000 as of 12/31/05.
c. Unexpired insurance at 12/31/05 is \$8,000.
d. The rent payment of \$120,000 covered the six months from November 30, 2005 through May 31, 2006.
e. Salaries and wages earned but unpaid at 12/31/05, \$22,000.

Part B. Indicate the proper balance sheet classification of each of the 15 numbered accounts in the 12/31/05 trial balance before adjustments by placing appropriate numbers after each of the following classifications. If the account title would appear on the income statement, do not put the number in any of the classifications.
a. Current assets
b. Property, plant, and equipment
c. Current liabilities
d. Long-term liabilities
e. Stockholders' equity

View Full Posting Details