Adjusting Entries
Selected Ledger Accounts Used by American Advertising, Inc

question 44

Essay

Adjusting entries
Selected ledger accounts used by American Advertising, Inc., are listed along with identifying numbers. Following this list of account numbers and titles is a series of transactions. For each transaction, you are to indicate the proper accounts to be debited and credited.
$$\begin{array} { | l | l | l | l | l | l | } \hline 1 & \text { Cash } & 22 & \text { Accounts Payable } & 41 & \text { Fees Earned } \\\hline 2 . & \text { Accounts Receivable } & 23 & \text { Income Taxes Payable } & 51 & \text { Salaries Expense } \\\hline 3 & \text { Office Supplies } & 24 & \text { Unearned Fees } & 52 & \text { Office Supplies Expense } \\\hline 4 & \text { Unexpired Insurance } & 25 & \text { Dividends Payable } & 53 & \text { Rent Expense } \\\hline 5 & \text { Office Equipment } & 31 & \text { Capital Stock } & 54 & \text { Insurance Expense } \\\hline 6 & \text { Accumulated Depr. } & 32 & \text { Retained Earnings } & 55 & \text { Depreciation Expense: } \\\hline & \text { Expense Office Equip } & 33 & \text { Dividends } & & \text { Office Equip. } \\\hline & & & & 56 & \text { Income Taxes Expense } \\\hline & & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | c | c | } \hline & \text { Account(s) } & \text { Accounts(s) } \\\hline & \text { Transactions } & \text { Debited } & \text { Credited } \\\hline & \begin{array} { l } \text { Example: Paid rent on the building for the current } \\\text { period. }\end{array} & 53 & 1 \\\hline \text { a) } & \begin{array} { l } \text { Received an advance payment from a client for } \\\text { services to be rendered over next six months. }\end{array} & & \\\hline \text { b) } & \text { Paid salaries of employees. } & \\\hline \text { c) } & \begin{array} { l } \text { Bought a three-year insurance policy and paid in } \\\text { full. }\end{array} & & \\\hline \text { d) } & \begin{array} { l } \text { Performed services for a client; received part of } \\\text { fee in cash remainder to be collected in 30 days. }\end{array} & & \\\hline \text { e) } & \begin{array} { l } \text { Purchased office equipment; paid [part] in cash, } \\\text { balance payable in 60 days. }\end{array} & & \\\hline \text { f) } & \begin{array} { l } \text { Purchased a large quantity of office supplies on } \\\text { credit. }\end{array} & & \\\hline \text { g) } & \text { Declared a dividend to be paid in 45 days. } & & \\\hline \text { h) } & \begin{array} { l } \text { Made an adjusting entry for the portion of the } \\\text { insurance premium which had expired. }\end{array} & & \\\hline \text { i) } & \begin{array} { l } \text { Made an adjusting entry to record depreciation for } \\\text { the period. }\end{array} & & \\\hline \text { j) } & \begin{array} { l } \text { Made an. adjusting entry for office supplies used } \\\text { during this period. }\end{array} & & \\\hline \text { k) } & \begin{array} { l } \text { Made an adjusting entry to recognize that a } \\\text { portion of the fee received in advance (transaction } \\\text { a) had now been earned. }\end{array} & & \\\hline \text { 1) } & \text { Paid the dividend declared in transaction g. } & \\\hline\end{array}$$

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Definitions:

Periodic Inventory System

An inventory accounting system where stock levels and cost of goods sold are calculated at the end of an accounting period, rather than being continuously updated.

Ending Inventory

The price of items for sale at the closing of a fiscal period.

Lower Of Cost

An accounting principle stating that inventory or other assets should be recorded at the lower of either the original cost or the current market value.

Market

A place or system where buyers and sellers interact to trade goods, services, or securities.