Based on the information below, record the adjusting journal entries that must b

Question

Based on the information below, record the adjusting journal entries that must be made for Garibaldi Consulting on June 30, 2016. The company has a June 30 fiscal year-end. Use 18 as the page number for the general journal.

a.–b. Merchandise Inventory, before adjustment, has a balance of $8,500. The newly counted inventory balance is $9,000.

c. Unearned Seminar Fees has a balance of $7,000,representing prepayment by customers for five seminars to be conducted in June, July, and August 2016. Two seminars had been conducted by June 30, 2016.

d. Prepaid Insurance has a balance of $18,000 for six months insurance paid in advance on May 1, 2016.

e. Store equipment costing $8,760 was purchased on March31,2016 It has a salvage value of $600, and a useful life of four years.

f. Employees have earned $350 that has not been paid at June 30, 2016.

g. TheemployerowesthefollowingtaxesonwagesnotpaidatJune30,2016:SUTA,$10.50; FUTA, $2.10; Medicare, $5.08; and social security, $21.70.

h. Management estimates uncollectible accounts expense at 1% of sales. This year’s sales were $3,000,000.

i. Prepaid Rent has a balance of $8,100 for six months’ rent paid in advance on March 1, 2016.

j. The Supplies account in the general ledger has a balance of $500. A count of supplies on hand at June 30, 2016 indicated $200 of supplies remain.

k. The company borrowed $10,100 from First Bank on June 1, 2016 and issued a four-month note. The note bears interest at 12%.

Analyze: After all adjusting entries have been journalized and posted, what is the balance of the Prepaid Rent account?

Explanation / Answer

date Particulars Debit Credit 30-06-2016 Merchandise Inventory 500              Cost of Goods sold 500 Gain on inventory recorded to cost of Goods sold Increase in inventory at end is used to reduce cost of goods sold 30-06-2016 Revenue from seminar fees 2800                  Unearned seminar fees 2800 Revenue earned on two seminars recorded to income = 7000 / 5 seminars x 2 seminars 30-06-2016 Insurance exxpense 6000               Prepaid Insurance 6000 Insurance expire for month may and june recorded = 18000 / 6 months x 2 months 30-06-2016 Depreciatin expense 510       Acccumulated Depreciation 510 Depreciation on equipment charged Yearly depreciation = (Cost - salvage value) / life of asset = ( 8760-600)/4 = 2040 yearly depreciation for 3 months ( april, may,, june) = 2040/12*3 30-06-2016 Salaries expense 350        Salary payable 350 Salary due and not paid 30-06-2016 Payroll Taxes 39.38         SUTA Payable 10.50         FUTA Payable 2.10         Medicare payable 5.08         Social security payable 21.70 Payroll taxes due 30-06-2016 Bad debt expense 30000       Allowance for doubtful account 30000 = 1 % of 3000000 30-06-2016 Rent expense 5400           Pre paid rent 5400 = 8100 / 6 months x 4 months 30-06-2016 Supplies expense 300          supplies 300 Supplies consumed = 500 - 200 , = 300 30-06-2016 Interest expense 101              interest Payable 101 = 10100 x 12% x 1/12 year Balance in prepaid rent account will be Amount paid = 8100 Amount expired = 5400 Amount in prepaid account = 8100 - 5400 = 2700

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