Question

The following are the trial balance and the other information related to Kevin Consulting Engineer.

KEVIN CONSULTING ENGINEER TRIAL BALANCE DECEMBER 31, 2020
		Debit			Credit
Cash		$29,500
Accounts Receivable		55,700
Allowance for Doubtful Accounts					$803
Supplies		2,300
Prepaid Insurance		1,120
Equipment		29,000
Accumulated Depreciation-Equipment					6,145
Notes Payable					7,200
Common Stock					10,000
Retained Earnings					23,254
Service Revenue					115,957
Rent Expense		10,439
Salaries and Wages Expense		32,900
Utilities Expenses		1,760
Office Expense		640
		$163,359			$163,359

1.		Fees received in advance from clients $5,890, which were recorded as revenue.
2.		Services performed for clients that were not recorded by December 31, $4,928.
3.		Bad debt expense for the year is $1,544.
4.		Insurance expired during the year $437.
5.		Equipment is being depreciated at 10% per year.
6.		Kevin gave the bank a 90-day, 10% note for $7,200 on December 1, 2020.
7.		Rent of the building is $803 per month. The rent for 2020 has been paid, as has that for January 2021, and recorded as Rent Expense.
8.		Office salaries and wages earned but unpaid December 31, 2020, $2,718.

From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.
4.
5.
6.
7.
8.

Prepare an income statement for 2020. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

KEVIN CONSULTING ENGINEER Income Statement                                                                       December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
DrawingsExpensesNet Income / (Loss)Onwer’s Capital, January 1Owner’s Capital, December 31RevenuesTotal ExpensesTotal Revenues
		$
DrawingsExpensesNet Income / (Loss)Onwer’s Capital, January 1Owner’s Capital, December 31RevenuesTotal ExpensesTotal Revenues
	$
DrawingsExpensesNet Income / (Loss)Onwer’s Capital, January 1Owner’s Capital, December 31RevenuesTotal ExpensesTotal Revenues
DrawingsExpensesNet Income / (Loss)Onwer’s Capital, January 1Owner’s Capital, December 31RevenuesTotal ExpensesTotal Revenues		$

  

  

Prepare a retained earnings statement for 2020. Kevin paid a $17,080 cash dividend during the year. (recorded in Retained Earnings.) (List items that increase owner's capital first.)

KEVIN CONSULTING ENGINEER Statement of Retained Earnings                                                                       December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
DividendsExpensesNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues	$
AddLess:                                                                       DividendsExpensesNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
AddLess:                                                                       DividendsExpensesNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
DividendsExpensesNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues	$

Answer 1

Adjusting Entries:

Date	Account title and explanation	Debit	Credit
Dec 31	Service Revenue	$5,890
	Unearned revenue		$5,890
	[To record unearned revenue]
Dec 31	Accounts receivable	$4,928
	Service revenue		$4,928
	[To record accrued revenue]
Dec 31	Bad debt expense	$1,544
	Allowance for doubtful accounts		$1,544
	[To record bad debt expense]
Dec 31	Insurance expense	$437
	Prepaid insurance		$437
	[To record insurance expense]
Dec 31	Depreciation expense [29,000 x 10%]	$2,900
	Accumulated depreciation		$2,900
	[To record depreciation expense]
Dec 31	Interest expense [7200 x 10% x (90/360)]	$180
	Interest payable		$180
	[To record accrued interest expense]
Dec 31	Prepaid rent	$803
	Rent expense		$803
	[To record prepaid rent]
Dec 31	Salaries and wages expense	$2,718
	Salaries and wages payable		$2,718
	[To record accrued salaries and wages expense]

Income Statement:

Income Statement
For the year ended Dec 31,2020
Service revenue [115957-5890+4928]		$114,995
Rent expense [10439-803]	$9,636
Salaries and wages expense [32900+2718]	$35,618
Utilities expense	$1,760
Office expense	$640
Bad debt expense	$1,544
Insurance expense	$437
Depreciation Expense	$2,900
Interest expense	$180
Total expenses		$52,715
Net income		$62,280

Statement of retained earnings:

Statement of retained earnings
For the year ended Dec 31,2020
Retained earnings, Dec 31 2019	$23,254
Add: Net income	$62,280
(Less): Dividends	$0
Retained earnings, Dec 31 2020	$85,534