On July 1, 2019, Tim Stein established his own accounting practice. Selected tra
ID: 2403994 • Letter: O
Question
On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow. DATE TRANSACTIONS July 1 Signed a lease for an office and issued Check 101 for $14,100 to pay the rent in advance for six months. 1 Borrowed money from Second National Bank by issuing a four-month, 12 percent note for $32,800; received $31,488 because the bank deducted the interest in advance. 1 Signed an agreement with Carter Corp. to provide accounting and tax services for one year at $6,600 per month; received the entire fee of $79,200 in advance. 1 Purchased office equipment for $26,400 from Office Outfitters; issued a two-month, 6 percent note in payment. The equipment is estimated to have a useful life of six years and a $1,920 salvage value. The equipment will be depreciated using the straight-line method. 1 Purchased a one-year insurance policy and issued Check 102 for $1,692 to pay the entire premium. 3 Purchased office furniture for $18,400 from Furniture Warehouse; issued Check 103 for $10,400 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of five years and a $1,000 salvage value. The office furniture will be depreciated using the straight-line method. 5 Purchased office supplies for $1,930 with Check 104. Assume $860 of supplies are on hand July 31, 2019. Required: Record the transactions in the general journal. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability for the year 2019. Record the adjusting journal entries that must be made on July 31, 2019. Analyze: What balance should be reflected in Unearned Accounting Fees at July 31, 2019?
Explanation / Answer
Adjusting entries:
Analyze:
Balance in unearned accounting fees on July 31, 2019: $79200 - $6600 = $72600
Date General Journal Debit Credit Jul. 1 Prepaid rent 14100 Cash 14100 (To record rent paid in advance) Jul. 1 Cash 31488 Prepaid interest 1312 Note payable 32800 (To record borrowing against note) Jul. 1 Cash 79200 Unearned accounting fees 79200 (To record fees received in advance) Jul. 1 Office equipment 26400 Note payable 26400 (To record purchase of office equipment) Jul. 1 Prepaid insurance 1692 Cash 1692 (To record insurance paid in advance) Jul. 3 Office furniture 18400 Cash 10400 Accounts payable 8000 (To record purchase of office furniture) Jul. 5 Office supplies 1930 Cash 1930 To record purchase of office supplies)Related Questions
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