Use the following to answer the next six questions
MADONNA, INC.
Unadjusted Trial Balance
December 31, 2012
DR CR
Cash $ 51,000
Equipment 38,000
Retained Earnings $ 4,000
Accounts Payable 6,000
Unearned Fee Revenue 8,000
Accumulated Depreciation-Equipment 1,800
Accounts Receivable 1,500
Supplies 950
Salaries Expense 6,700
Common StockInsurance Expense 500 61,050
Fee RevenueRent Expense 4,200 30,000
Notes Receivable 8,000
$ 110,850 $ 110,850
1. On July 1, 2012, Madonna paid the landlord $4,200 for 10
months rent in advance. The adjusting entry at December 31, 2012
would include:
A. debit to Prepaid Rent for $2,520
B. credit to Rent Expense for $1,680
C. credit to Rent Expense for $2,520
D. debit to Rent Expense for $2,520
E. none of the above
2. On October 1, 2012, Madonna received $8,000 in advance for
fees to be earned evenly over five months beginning on that date.
The required adjusting journal entry at December 31, 2012 would
include a:
A. debit to Fee Revenue for $3,200
B. credit to Unearned Fee Revenue for $4,800
C. credit to Fee Revenue for $3,200
D. credit to Fee Revenue for $4,800
E. none of the above
3. The Notes Receivable represent a loan given to a supplier
for $8,000 on December 1, 2012. The loan carries a 12 percent
interest rate and has a term of 180 days. The adjusting entry on
December 31, 2012 will include:
A. A debit to Interest Expense for $80
B. A debit to Interest Receivable for $80
C. A credit to Interest Payable for $480
D. A debit to Notes Receivable for $480
E. none of the above
4. At December 31, 2012 there was $320 of supplies on hand.
The adjusting entry would include a:
A. credit to Supplies Expense of $630
B. debit to Supplies of $320
C. debit to Supplies Expense of $630
D. debit to Supplies Expense of $320
E. None of the above
5. The Equipment was purchased on July 1, 2011. It has a
useful life of ten years and an estimated salvage value of $2,000.
The adjusting entry at December 31, 2012 would include a:
A. credit to Equipment for $3,600
B. debit to Depreciation Expense –Equipment for $3,800
C. credit to Accumulated Depreciation –Equipment for
$3,600
D. debit to Depreciation Expense –Equipment for 5,400
E. none of the above
6. Refer to the previous question. The book value of the
Equipment on the December 31, 2012 balance sheet (after adjusting
depreciation expense for 2012) is:
A. $ 36,000
B. $ 32,600
C. $ 32,400
D. $ 30,600
E. none of the above