Unadjusted Trial Balance – December 31, 2018
Cash $ 11,500
Accounts Receivable 3,500
Prepaid Rent 24,000
Accumulated Depreciation $1,400
Accounts Payable 1,900
Unearned Service Revenue 2,800
Common Stock 10,300
Retained Earnings 7,500
Service Revenue 91,350
Salaries Expense 55,000
Advertising Expense 900
Utilities Expense 650
Total: Debits =$115,250 Credits total = $115,250
1.) The equipment was purchased on January 1, 2017. The useful life is estimated to be 10 years.
2.) As of December 31, 2018, the company had accrued salaries of $950.
3.) Of the balance in the unearned revenue account, $500 had not been earned by year -end.
4.) On December 1, 2018, the company paid $900 for four months of advertising.
5.) A count of supplies on December 31, 2018 showed $400 of supplies had been used during the year.
6.) On May 1, 2018, the company rented an office building for one year and paid $24,000 in cash.
The adjusting journal entry to record (f) above would include:
a debit to rent expense for $10,000
a debit to prepaid rent for $16,000
a credit to rent expense for $10,000
a credit to cash for $16,000
a credit to prepaid rent for $16,000
Correct answer---(e) a credit to prepaid rent for $16,000
Full journal entry will be
Rent expense $16,000
Prepaid Rent $16,000.
Rent expense of 8 months will be recorded and adjusted with prepaid rent. Balance in prepaid rent should be for 4 months, that is unexpired period of rent. Balance in prepaid rent after the adjusting entry will be $8000 (24000-16000)
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