Question

The December 31, 2012, trial balance of a company included the following: Debits Credits Accounts Receivable...

The December 31, 2012, trial balance of a company included the following:

Debits

Credits

Accounts Receivable

$176,000

Unearned Service Fees

$24,000

Prepaid Rent

64,000

Prepaid Insurance

33,600

Equipment

240,000

Accumulated Depreciation-Equipment

30,000

Salaries Expense

120,000


Additional data:
1.      The equipment has an estimated life of 11 years and expected salvage value of $20,000 at the end of its life.
2.      Delivery services performed but unbilled at year-end amount to $6,400.
3.      Two-thirds of the Unearned Service Fees has been earned by December 31.
4.      The prepaid rent relates to one-half of a year beginning on October 1, 2012.
5.      The prepaid insurance is the annual premium on a policy providing coverage starting on September 1, 2012.
6.      Since the last payday, employees have earned an additional $2,400.

Prepare the necessary adjusting entries as of December 31, 2012. (Use T-accounts to demonstrate the entries showing the balances before adjustment and balance after adjustment).

Business   Accounting   
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Answer #1

Adjusting entries

No General Journal Debit Credit
1 Depreciation expense (240000-20000/11) 20000
Accumulated depreciation-equipment 20000
2 Account receivable 6400
Service revenue 6400
3 Unearned service fees 16000
Service revenue 16000
4 Rent expense (64000*3/6) 32000
Prepaid rent 32000
5 Insurance expense (33600/12*4) 11200
Prepaid insurance 11200
6 Salaries expense 2400
Salaries payable 2400
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