Name___________________________________________________Comprehensive Accounting Cycle
Exercises 4 & 5
Exercise 4: Prepare adjusting journal entries to update the accounting
records for 2024 (where appropriate, use the space under the journal entry
to show your calculation for the amount used in the journal entry) and then
post these journal entries to the t-accounts (Step 4 in the Accounting Cycle).
a. Smith’s balance in the Supplies account can be found in the Unadjusted Trial
Balance (Exercise 3). Adjust this account to its proper balance using the
following information: Smith took a physical count of its supplies closet on
12/31/24 and found they still had $900 of supplies on hand at year-end.
Record the Adjusting Entry needed on Smith’s books at 12/31/24:
Date
Account Titles
Debit
Credit
b. Refer back to Exercise 1, transaction #6. Smith incurs interest cost of $750
per month on the outstanding loan balance. The interest will not be paid
until the loan matures on 2/1/2025.
Record the Adjusting Entry Smith would record for accrued interest at 12/31/24.
Date
Account Titles
Debit
Credit
c. Refer back to Exercise 1, transaction #7 . A portion of the rent paid for in
2024 has expired as of year-end.
Record the Adjusting Entry for the expired rent cost at 12/31/24:
Date
Account Titles
Debit
Credit
1
d. Refer back to Exercise 1, transaction #8. As of year-end, Smith earned a portion of
the cash received in advance for legal services.
Record the Adjusting Entry needed on Smith’s books at 12/31/24:
Date
Account Titles
Debit
Credit
e. Refer back to Exercise 1, transaction #10. A portion of the insurance paid for
in 2024 was used by year-end.
Record the Adjusting Entry for the expired insurance at 12/31/24:
Date
Account Titles
Debit
Credit
f. Smith pays its employees every Friday for the hours they work during the
week (Monday – Friday). The amount of the payroll is $850 per day and
December 31, 2024, is a Thursday.
Record the Adjusting Entry needed on Smith’s books for salaries earned by
employees in 2024 but not paid until 2024:
Date
Account Titles
Debit
Credit
2
g. Smith performed $4,000 of legal services on 12/28/24 for a client. Smith had
not billed the client as of 12/31/24.
Record the Adjusting Entry needed at 12/31/24:
Date
Account Titles
Debit
Credit
h. Smith received invoices from vendors in 2024 related to expenses incurred in
2024 in the amount of $2,300. The expenses were for Utilities $1,500;
Advertising $600; and Telephone $200.
Record the Adjusting Entry needed at 12/31/24:
Date
Account Titles
Debit
Credit
Post adjusting entries a – h to the following t-accounts. THESE TACCOUNTS MUST BEGIN WITH THE BALANCES FROM THE UNADJUSTED
TRIAL BALANCE (Exercise 3). Once posted, calculate ending balances and
then prepare an adjusted trial balance (Step 5 in the Accounting Cycle).
CASH
ACCOUNTS
RECEIVABLE
PREPAID RENT
PREPAID
INSURANCE
3
SUPPLIES
EQUIPMENT
ACCOUNTS
PAYABLE
SALARIES
PAYABLE
UNEARNED
REVENUE
INTEREST
PAYABLE
NOTES PAYABLE
COMMON STOCK
RETAINED
EARNINGS
DIVIDENDS
SERVICE
REVENUE
ADVERTISING
EXPENSE
INSURANCE
EXPENSE
INTEREST
EXPENSE
POSTAGE
EXPENSE
RENT EXPENSE
SALARIES
EXPENSE
SUPPLIES
EXPENSE
TELEPHONE
EXPENSE
UTILITIES
EXPENSE
4
Exercise 5: Prepare an adjusted trial balance (Step 5 in the Accounting
Cycle) using the adjusted balances from the t-accounts calculated in
Exercise 4 above. I have provided some check figures!
ACCOUNT
Cash
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Supplies
Equipment
Accounts Payable
Salaries Payable
Unearned Revenue
Interest Payable
Notes Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Advertising Expense
Insurance Expense
Interest Expense
Postage Expense
Rent Expense
Salaries Expense
Supplies Expense
Telephone Expense
Utilities Expense
TOTALS
Smith Law, Inc.
Adjusted Trial Balance
December 31, 2024
DEBIT
338,900
CREDIT
5,000
20,000
15,300
34,000
587,750
19,500
$799,950
5
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