Unadjusted Adjusted Debit Credit Debit Credit Cash $ 35,200 35,200 Accounts rece
ID: 2376917 • Letter: U
Question
Unadjusted AdjustedDebit Credit Debit Credit
Cash $ 35,200 35,200
Accounts receivable 29,120 34,120
Unexpired insurance 1,200 600
Prepaid rent 5,400 3,600
Office supplies 680 380
Equipment 60,000 60,000
Accumulated depreciation: equipment 49,000 50,000
Accounts payable 900 900
Notes payable 5,000 5,000
Interest payable 200 250
Salaries payable — 2,100
Income taxes payable 1,570 2,170
Unearned revenue 6,800 3,800
Capital stock 25,000 25,000
Retained earnings 30,000 30,000
Fees earned 91,530 99,530
Advertising expense 1,500 1,500
Insurance expense 6,600 7,200
Rent expense 19,800 21,600
Office supplies expense 1,200 1,500
Repairs expense 4,800 4,800
Depreciation expense: equipment 11,000 12,000
Salaries expense 26,300 28,400
Interest expense 200 250
Income taxes expense 7,000 7,600
$ 210,000 210,000 218,750 218,750
Journalize the nine adjusting entries that the company made on December 31 2011
Explanation / Answer
I think the easiest way to approach this is choose one set of accounts, either B/S accts or I/S accts, and just go through them to see where adjustments are made. I'm going to take an income statement approach. 1-2. Starting with revenues. Fees Earned increased by 8K. What's related to Fees Earned? A/R (increase for new income) and Unearned Revenue (decrease to recognize it because it's been earned.) This one is less straight-forward because there are actually two entries here. First, let's recognize the deferred income: DR Unearned Revenue 3000 CR Fees Earned 3000 Then, let's record the receivable for the remaining fees earned. DR A/R 5000 CR Fees Earned 5000 Now, we continue through the income statement accounts in order. 3. Insurance expense increased 600. So we adjust the corresponding asset. DR Insurance Exp 600 CR Unexpired Insurance 600 4. Rent expense increased 1800. So we adjust the prepaid acct. DR Rent Expense 1800 CR Prepaid Rent 1800 5. Office supplies expense increased 300. That means they took inventory at year end of supplies and are expensing what was used. So we adjust the asset. DR Office Supplies Expense 300 CR Office Supplies (asset) 300 6. Depreciation exp increased 1000. Self-explanatory right? DR Depreciation 1000 CR Accumulated Depreciation (contra asset) 1000 7. Salaries expense increased 2100. We adjust the payable account (a liability). DR Salaries Expense 2100 CR Salaries Payable 2100 8. Interest expense increased 50. Again, it's an adjustment to a payable account (a liability). DR Interest Expense 50 CR Interest Payable 50 9. Income tax expense increased by 600. Again, it's an adjustment to a payable account (a liability). DR Income Tax Expense 600 CR Income Tax Payable 600 Perfect, we reached the end of the income statement accounts and we have nine entries!! To double check, we should go through the Balance Sheet accounts and make sure we didn't miss anything - nope, looks like we've captured all of the changes! Sincerely hope this helps. :)
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