Eli Enterprises has just completed its first full year of operations on December
ID: 2412940 • Letter: E
Question
Eli Enterprises has just completed its first full year of operations on December 31, 2018. It provides accounting services to not-for-profit organizations. The unadjusted (normal) trial balance is presented below:
Eli Enterprises
Trail Balance – unadjusted (normal)
As of December 31, 2018
Account Title
Debit
Credit
Cash
$ 20,000
$ .
Accounts Receivable
50,000
Supplies
5,000
Prepaid Rent
7,200
Equipment
200,000
Notes Payable
75,000
Accounts Payable
15,000
Unearned Service Revenues
12,000
Common Stock
100,000
Retained Earnings
50,000
Dividends
1,300
Service Revenues
800,000
Salaries Expenses
700,000
Advertising Expense
50,000
Utilities Expenses
18,500
Total
$ 1,052,000
$ 1,052,000
An analysis of the firm’s records reveals the following:
a. Equipment purchased January 1, 2018, has an estimated life of ten years.
b. Utilities expense does not include the expense for December, estimated at $1,650. The bill will not arrive until January, 2019.
c. The balance in Prepaid Rent represents the amount paid for a three-year insurance beginning on January 1, 2018.
d. On July 1, 2018, management borrowed $ 75,000 on a two-year note paying interest of four percent each year.
e. On September 25, 2018, management received $ 12,000 (unearned service revenues) to perform services from October 1, 2018 through June 30, 2019, nine months.
Required: Prepare adjusting entries in journal entry form.
Eli Enterprises
Trail Balance – unadjusted (normal)
As of December 31, 2018
Account Title
Debit
Credit
Cash
$ 20,000
$ .
Accounts Receivable
50,000
Supplies
5,000
Prepaid Rent
7,200
Equipment
200,000
Notes Payable
75,000
Accounts Payable
15,000
Unearned Service Revenues
12,000
Common Stock
100,000
Retained Earnings
50,000
Dividends
1,300
Service Revenues
800,000
Salaries Expenses
700,000
Advertising Expense
50,000
Utilities Expenses
18,500
Total
$ 1,052,000
$ 1,052,000
Explanation / Answer
Adjusting entries S. No. Account tittle Debit Credit a. Depreciation expense ($200000/10) $20,000.00 Accumulated depreciation equipment $20,000.00 b. Utility expense $1,650.00 Accounts payable $1,650.00 c. Rent Expense ($7200X1/3) $2,400.00 Prepaid Rent $2,400.00 d. Interest expense ($75000*4%*6/12) $1,500.00 Interest payable $1,500.00 e. Cash ($12000*3/9) $4,000.00 Unearned Servcie Revenue $4,000.00
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