Question

The ledger of Luke, Inc. on March 31st includes these selected accounts before adjusting entries are...

The ledger of Luke, Inc. on March 31st includes these selected accounts before adjusting entries are prepared.

Prepaid Insurance: $18,000

Supplies: $3,000

Unearned Service Revenue: $12,000

An analysis of the accounts shows the following:

  • Insurance expires at the rate of $600 per month.
  • Supplies on hand total $1,400
  • During March, services were performed for 20% of the unearned revenue.

Before these adjusting entries, retained earnings is $15,000. After making the adjusting entries, what would be ending retained earnings?

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Answer #1

Retained Earnings:

Particulars Amount ($)
Retained earnings before adjusting entries          15,000
Add:
Services performed during March (12,000*20%)            2,400
Less:
Insurance for the month of March               600
Supplies Consumed (3,000-1,400)            1,600
Retained earnings after adjusting entries         15,200
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