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Q: 1 Supplies on hand at June 30 total $980. 2. A utility bill for $180 has not been recorded and will not be paid until next month. 3. The insurance policy is for a year. 4. $3,900 of unearned
service revenue has been earned at the end of the month. 5. Salaries of $1,250 are accrued at June 30. 6. The office equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months. 7. Invoices representing $3,500 of services performed during the month have not been recorded as of June 30. Prepare the adjusting entries for the month of June.
A: Before we prepare the trial balance, we need to "update the books" and make sure the general ledger balances reflect ALL activity during the period. [ Not everything up to this point has been entered into the general journal, so we need to prepare journal entries, i.e., adjusting entries, to determine the correct ending balances. Our adjusting entries will be based on the information under
"Other data." 1. The balance in Supplies should be $980. According to the beginning of the year balances, however, it is $2000. We need to "adjust" the balance of Supplies so that it reflects the actual amount of supplies on hand and to recognize, as an expense, the amount of supplies used up. Our adjusting entry looks like this: Supplies expense . . . . . 1020 . . Supplies . . . . . . . . . . . . . . 1020 2. There is a liability for utilities outstanding at the end of the month. We need to report this liability as well as ensure that this expense is recorded - after all, the utilities bill is for THIS month. Utilities expense . . . . . . . 180 . . . Utilities payable . . . . . . . . 180 3. The insurance policy, purchased for $2640, is for one year. One month has passed, so one month of the insurance policy has been "used up." What we're really doing is matching expenses with revenues; the insurance policy needs to be expensed throughout its life. Insurance expense . . . . . 220 . . . Prepaid insurance . . . . . . 220 . . . . [ 2640 / 12 ] 4. At the beginning of the month, unearned service revenue of $5200 is reported. $3900 was earned during the month, so we need to 1) recognize the revenue earned and 2) decrease our liability, as we no longer owe our customers $5200 of services. Unearned service revenue . . . 3900 . . . Service revenue . . . . . . . . . . . . 3900 5. Like #2, salaries is an accrued expense, an expense of the period that won't be paid until next month. This means that, as of June 30, there is a liability to pay the employees the salary they earned. Salaries and wages expense . . . 1250 . . . Salaries and wages payable . . . . . 1250 6. ]
Expert answered|jeifunk|Points 8949|
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Asked 3/11/2013 8:18:54 AM
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