Cardon’s Boat Yard, Inc., repairs, stores, and cleans boats for customers. It is
ID: 2384863 • Letter: C
Question
Cardon’s Boat Yard, Inc., repairs, stores, and cleans boats for customers. It is completing the accounting process for the year just ended, November 30, 2012. The transactions during 2012 have been journalized and posted. The following data with respect to adjusting entries are available:a) Cardon’s winterized (cleaned and covered) three boats for customers at the end of November, but did not record the service for $2,700.
b) On October 1, 2012, Cardon’s paid $1,200 to the local newspaper for an advertisement to run every Thursday for 12 weeks. All ads have been run except for three Thursdays in December to complete the 12-week contract.
c) Cardon’s borrowed $250,000 at a 12 percent annual interest rate on April 1, 2012, to expand its boat storage facility. The loan requires Cardon’s to pay the interest quarterly until the note is repaid in three years. Cardon’s paid quarterly interest on July 1 and October 1.
d) The Johnson family paid Cardon’s $4,500 on November 1, 2012, to store its sailboat for the winter until May 1, 2013. Cardon’s credited the full amount to Unearned Storage Revenue on November 1.
e) Cardon’s used boat-lifting equipment that coast $220,000; $22,000 was the estimated depreciation for 2012.
f) Boat repair supplies on hand at December 1, 2011, totaled $16,500. Repair supplies purchased and debited to Supplies during the year amounted to $46,000. The year-end count showed $12,400 of the supplies on hand.
g) Wages earned by employees during November 2012, unpaid and unrecorded at November 30, 2012, amounted to $3,800. The next payroll date will be December 5, 2012.
Required:
1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Prepare the adjusting entries that should be recorded for Cardon’s at November 30, 2012.
Explanation / Answer
Adjusting Entries:
Date
Account Titles and explanation
Debit
Credit
Nov.30
Accounts Receivables
$2,700
Service Revenue
$2,700
(To record revenue for services provided)
Advertising Expenses
900
Pre-paid Advertisement expenses
900
To record pre-paid advertisement expenses)
1-Jul
Interest Expense
5,000
Interest payable
5,000
(To record interest on loan)
1-Nov
Unearned Service Revenue
4,500
Service Revenue
4,500
(To record revenue for services provided)
Nov. 30
Depreciation Expenses
22,000
Accumulated Depreciation
22,000
(To record depreciation)
30-Nov
Supplies Expenses
50,100
Supplies
50,100
(To record supplies used)
30-Nov
Wages Expenses
3,800
wages Payable
3,800
(To record accrued wages)
Accounts Receivables
Accrued Revenue
Pre-paid Advertisement expenses
Deferred Expenses
Interest payable
accrued Expenses
Unearned Revenue
deferred Revenue
wages Payable
accrued expenses
Adjusting Entries:
Date
Account Titles and explanation
Debit
Credit
Nov.30
Accounts Receivables
$2,700
Service Revenue
$2,700
(To record revenue for services provided)
Advertising Expenses
900
Pre-paid Advertisement expenses
900
To record pre-paid advertisement expenses)
1-Jul
Interest Expense
5,000
Interest payable
5,000
(To record interest on loan)
1-Nov
Unearned Service Revenue
4,500
Service Revenue
4,500
(To record revenue for services provided)
Nov. 30
Depreciation Expenses
22,000
Accumulated Depreciation
22,000
(To record depreciation)
30-Nov
Supplies Expenses
50,100
Supplies
50,100
(To record supplies used)
30-Nov
Wages Expenses
3,800
wages Payable
3,800
(To record accrued wages)
Accounts Receivables
Accrued Revenue
Pre-paid Advertisement expenses
Deferred Expenses
Interest payable
accrued Expenses
Unearned Revenue
deferred Revenue
wages Payable
accrued expenses