Question

Prepare adjusting entries for the seven items described above.

Mendoza Company accumulates the following adjustment data at December 31

Instructions Prepare adjusting entries for the seven items described above. E3.6 (LO 2, 3, 4) Mendoza Company accumulates the following adjustment data at December 31. Identify types of adjustments and account relationships. 1. Services performed but unbilled total $3,000. 2. Supplies of $300 have been used. 3. Utility expenses of $552 are unpaid. 4. Services performed of $260 collected in advance. 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).

Answer 1

JOURNAL ENTRIES				INSTRUCTIONS
Date	Account title	Debit	credit	Part a	Part b
1	Account receivable	3000		Accrued revenue	Understated	Accounts receivable is an asset thus not recording receivable will result in understatement of asset
	Service revenue		3000		Understated	Service revenue is a part of retained earning which in turn is a part of equity thus non recording of revenue results in understatement of equity
2	Supplies expense	300		Accrued expense	Understated	Non recording of expense results in lower expense or understatement of expense
	Supplies		300		Overstated	Since supplies account is not yet adjusted for amount of use thus it overstated
3	Utilities expense	552		Accrued expense	Understated	Non recording of expense results in lower expense or understatement of expense
	Utilities payable		552		Understated	Non recording of liability due means understatement of liability
4	Unearned service revenue	260		Unearned revenue	Overstated	Since unearned revenue which is a liability is not yet adjusted for revenue earned thus the balance of unearned revenue account at year end is overstated
	Service revenue		260		Understated	Since revenue earned is not yet adjusted thus it is understated
5	salaries and wage expense	800		Accrued expense	Understated	Non recording of expense results in lower expense or understatement of expense
	Salaries and wage payable		800		Understated	Non recording of liability due means understatement of liability
6	Insurance expense	350		Prepaid expense	Understated	Non recording of expense results in lower expense or understatement of expense
	Prepaid Insurance		350		Overstated	Since insurance expired during the period is not yet recorded ,thus the amount of prepaid insurance is overstated