c03AdjustingTheAccounts.indd Page 133 11/29/10 1:15:03 PM f-392 /Users/f-392/Desktop/Nalini 23.

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Exercises 133
3. Mannelly’s employees worked 3 days in 2012 but will not be paid until 2013.
4. Mannelly earned service revenue but has not yet received cash or recorded the transaction.
5. Mannelly paid $2,400 rent on December 1 for the 4 months starting December 1.
6. Mannelly received cash for future services and recorded a liability until the revenue was
earned.
7. Mannelly performed consulting services for a client in December 2012. On December 31, it
had not billed the client for services provided of $1,200.
8. Mannelly paid cash for an expense and recorded an asset until the item was used up.
9. Mannelly purchased $900 of supplies in 2012; at year-end, $400 of supplies remain unused.
10. Mannelly purchased equipment on January 1, 2012; the equipment will be used for 5 years.
11. Mannelly borrowed $10,000 on October 1, 2012, signing an 8% one-year note payable.
Instructions
Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense,
or accrued revenue) is needed in each situation, at December 31, 2012.
E3-5 Garrett Wolfe Company has the following balances in selected accounts on December Prepare adjusting entries from
31, 2012. selected data.
(SO 5, 6)
Accounts Receivable $ -0-
Accumulated Depreciation—Equipment -0-
Equipment 7,000
Interest Payable -0-
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries and Wages Payable -0-
Supplies 2,450
Unearned Service Revenue 30,000
All the accounts have normal balances. The information below has been gathered at December
31, 2012.
1. Garrett Wolfe Company borrowed $10,000 by signing a 12%, one-year note on September 1,
2012.
2. A count of supplies on December 31, 2012, indicates that supplies of $900 are on hand.
3. Depreciation on the equipment for 2012 is $1,000.
4. Garrett Wolfe Company paid $2,100 for 12 months of insurance coverage on June 1, 2012.
5. On December 1, 2012, Garrett Wolfe collected $30,000 for consulting services to be performed
from December 1, 2012, through March 31, 2013.
6. Garrett Wolfe performed consulting services for a client in December 2012. The client will be
billed $4,200.
7. Garrett Wolfe Company pays its employees total salaries of $9,000 every Monday for the
preceding 5-day week (Monday through Friday). On Monday, December 29, employees were
paid for the week ending December 26. All employees worked the last 3 days of 2012.

Instructions
Prepare adjusting entries for the seven items described above.
E3-6 J. Marten Company accumulates the following adjustment data at December 31. Identify types of adjustments
1. Services provided but not recorded total $1,000. and account relationships.
2. Supplies of $300 have been used. (SO 4, 5, 6)
3. Utility expenses of $225 are unpaid.
4. Unearned service revenue of $260 has been earned.
5. Salaries of $800 are unpaid.
6. Prepaid insurance totaling $350 has expired.

Instructions
For each of the above items indicate the following.
(a) The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued
expense).
(b) The status of accounts before adjustment (overstatement or understatement).
Prepare adjusting entries from
E3-7 The ledger of Danieal Rental Agency on March 31 of the current year includes the selected account data.
selected accounts, shown on the next page, before adjusting entries have been prepared. (SO 5, 6)