3-3A Adjusting entries Milbank Repairs & Service, an elec trial balance at the e

Question

3-3A Adjusting entries Milbank Repairs & Service, an elec trial balance at the end of its first year of operations: OBJ. 2, 3,4,5 tronics repair store, prepared the following unadjusted ger Milbank Repairs & Service Unadjusted Trial Balance June 30, 2019 Debit Balances Credit Balances Cash Accounts Receivable. Supplies Equipment. Accounts Payable ...10,350 67,500 .. . 166,100 15,750 18,000 171,500 Nancy Townes, Capital . . . 13,500 94,500 294,750 72,000 51,750 Miscellaneous Expense 500,000 500,000 For preparing the adjusting entries, the following data were assembled: . Fees earned but unbilled on June 30 were $7,380. * Supplies on hand on June 30 were $2,775 . Depreciation of equipment was estimated to be $11,000 for the year * The balance in unearned fees represented the June 1 receipt in advance for services to be provided. During June, $16,500 of the services were provided. Unpaid wages accrued on June 30 were $3,880. Instructions 1. Journalize the adjusting entries necessary on June 30, 2019. 2. Determine the revenues, expenses, and net income of Milbank Repairs & Service before the adjusting entries. 3. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries. 4. Determine the effect of the adjusting entries on Nancy Townes, Capital.

Explanation / Answer

Solution: 1. Adjusting journal entries Sr. No. General Journal Debit Credit a. Accounts Receivable 7,380 Fees Earned 7,380 Notes: Being Accrued fees earned recorded b. Supplies Expense 13,425 Supplies 13,425 Notes: Supplies Expense = Supplies at beginning - Supplies at End =$16,200 - $2,775 = 13,425 c. Depreciation Expense 11,000 Accumulated Depreciation—Equipment 11,000 Equipment depreciation charged d. Unearned Fees 16,500 Fees Earned 16,500 Fees Earned recorded e. Wages Expense 3,880 Wages Payable 3,880 Accrued wages recorded 2. Before the adjusting entries. Revenues 294,750 Expenses 226,350 Net income 68,400 Working Notes: Before the adjusting entries. Revenues 294,750 I = given Expenses 226,350 II= Calculated below [Wages exp. + Rent exp. + Utilities exp. + misc. exp. ] [94,500 + 72,000 + 51,750 + 8,100 = 226,350] Net income 68,400 III= I - II 3. After the adjusting entries. Revenues 318,630 Expenses 254,655 Net income 63,975 Working Notes: After the adjusting entries. Revenues 318,630 I = given 294,750 + a. 7,380 + d. 16,500 = 318,630 ] Expenses 254,655 II= Calculated below [Wages exp. + Rent exp. + Utilities exp. + misc. exp. + b. + c. + e . ] [94,500 + 72,000 + 51,750 + 8,100 + 13,425 + 11,000 + 3,880 = 254,655 ] Net income 63,975 III= I - II 4. The effect of the adjusting entries on Nancy Townes, Capital is difference in net income before and after adjusting entries. Nancy Townes, Capital will decrease by $4,425 as net income after adjustment is lower than before adjusting entries.      [ 68,400 -63,975 = 4,425] Please feel free to ask if anything about above solution in comment section of the question.

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