Exercise A
What are adjusting entries? Are they similar or different to other journal entries? Identify and describe the two types of adjusting entries.

Exercise B
What is the time period principle? Provide an example of its application.

Exercise C
What is accrual accounting? Compare it to cash basis accounting. Why is accrual accounting preferable for recording transactions?

Exercise D
What is the matching principle?

For Exercises E through H, make the appropriate adjusting entry. Exercise E
Epsilon Company pays its employees every two weeks. For the current pay period, employees earned $2,500, which has yet to be recorded or paid.

Exercise F
Epsilon Company purchased an insurance policy on January 1 for $2,400. The policy covers a full year. Adjusting entries are made quarterly. What is the adjusting entry as of March 31?

Exercise G
Epsilon Company began the current year with $800 of supplies. During the year, $4,000 of supplies were purchased. A count of the supplies as of the end of the year indicated $700 of supplies remaining.

Exercise H
Epsilon Company purchased equipment costing $30,000 on January 1. Depreciation for the first month was calculated to be $500. What is the adjusting entry to record the depreciation? What is the book value as of the end of the first month?

Problem A
Small Company purchased a delivery van for $44,000 on January 1, Year 1. Prepare a complete depreciation schedule assuming a 5 year life and a $5,000 salvage value at the end of the 5 years for each of the following methods:
1 Straight-line
2 Sum-of-the-Years' Digits
3 Double Declining Balance

Problem B
Psi Company made $250,000 in sales of which $200,000 were on credit. Prior experience indicates that 2% of all credit sales will not be collected. What is the entry to record the estimated uncollectible accounts?

During the year, an account with a balance of $4,000 was written off as a bad debt. What is the write-off entry?

Psi Company started the year with an accounts receivable balance of $50,000. The credit sales of
$200,000 were also made. Collections on account were $230,000. Prior experience indicates that 2% of the ending accounts receivable balance will not be collected. What is the entry to record the estimated uncollectible accounts?

During the year, an account with a balance of $4,000 was written off as a bad debt. What is the write-off entry?

Problem C
Lambda Company borrowed $120,000 from First Bank on January 1. The loan has a term of two years and bears an interest rate of 8% which is paid annually. Make all the entries for the life of the loan.

Lambda Company borrowed $120,000 from First Bank on September 1. The loan has a term of two years and bears an interest rate of 8% which is paid annually. Make all the entries for the life of the loan.

Problem D
Smith Company made the following adjusting entries. Using Smith Company's unadjusted trial balance, complete a worksheet for the month ended July, 2018.

adjusting entries:

Depreciation Expense -- Building Accumulated Depreciation - Building 5,000
5,000
Insurance Expense
Prepaid Insurance 400 400
Supplies Expense
Supplies 250 250
Salaries Expense
Salaries Payable 3,500 3,500
Interest Expense
Interest Payable 300 300

Smith Company Unadjusted Trial Balance July 31, 2018
Cash 10,000
Accounts Receivable 7,500
Supplies 900
Prepaid Insurance 2,000
Building 350,000
Accumulated Depreciation - Building 25,000
Accounts Payable 12,000
Salaries Payable -
Interest Payable -
Notes Payable 50,000
James Smith, Capital, July 1, 2018 249,000
James Smith, Drawing 15,000
Service Revenue 60,000
Advertising Expense 4,000
Depreciation Expense - Building -
Insurance Expense -
Interest Expense -
Maintenance Expense 2,900
Salaries Expense 3,500
Supplies Expense -
Telephone Expense 200
Totals 396,000 396,000

Exercise A What are adjusting entries? Are they similar or differe...