Recording adjustments for accrued and prepaid expense items and earned income. O

Question

Recording adjustments for accrued and prepaid expense items and earned income. On July 31, 2016 after one month of operation, the general ledger of Michael Domenici, Consultant, contained the accounts and balances given below.

Instructions

1. Prepare a partial worksheet with the following sections: Trial Balance, Adjustments, and Adjusted Trial Balance. Use the data about the firm's accounts and balances to complete the Trial Balance section.

2. Enter the adjustments described below in the Adjustments section. Identify each adjustment with the appropriate letter.

3. Complete the Adjusted Trial Balance Section.

ACCOUNTS AND BALANCES

Cash: $25,510 Dr.

Accounts Receivable: $1,440 Dr.

Supplies: $960 Dr.

Prepaid Rent: $10,500 Dr.

Prepaid Insurance: $2,220 Dr.

Prepaid Interest: $400 Dr.

Furniture: $14,760 Dr.

Accumulated Depreciation--Furniture:

Equipment: $7,250 Dr.

Accumulated Depreciation--Equipment:

Notes Payable: $17,700 Cr.

Accounts Payable: $5,500 Cr.

Interest Payable:

Unearned Consulting Fees: $6,000 Cr.

Michael Domenici, Capital: $2,520 Cr.

Michael Domenici, Drawing: $3,000 Dr.

Consulting Fees: $9,000 Cr.

Salaries Expense: $4,200 Dr.

Utilities Expense: $270 Dr.

Telephone Expense: $210 Dr.

Supplies Expense:

Rent Expense:

Insurance Expense:

Depreciation Expense-- Furniture:

Depreciation Expense-- Equipment:

Interest Expense:

ADJUSTMENTS

a. On July 31, an inventory of the supplies showed that items costing $630 were on hand.

b. On July 1, the firm paid $10,500 in advance for six months rent.

c. On July 1, the firm purchased a one-year insurance policy for $2,220.

d. On July 1, the firm paid $400 interest in advance on a four-month note that it issued to the bank.

e. On July 1, the firm purchased Office furniture for $14,760. The furniture is expected to have a useful life of eight years and a salvage value of $1,800.

f. On July 1, the firm purchased office equipment for $7,250. The equipment is expected to have a useful life of five years and a salvage value of $1,850.

g. On July 1, the firm issued a three-month, 6 percent note for $9,800.

h. On July 1, the firm received a consulting fee of $6,000 in advance for a one-year period.

Explanation / Answer

Unadjusted Trial Balance Adjustment Adjusted Trial balance Debit Credit Debit Credit Debit Credit Cash 25510 25510 Accounts Receivable 1440 1440 Supplies 960 330 630 Prepaid Rent 10500 1750 8750 Prepaid Insurance 2220 185 2035 Prepaid Interest 400 100 300 Furniture 14760 14760 Accumulated Depreciation--Furniture 135 135 Equipment 7250 7250 Accumulated Depreciation--Equipment 90 90 Notes Payable 17700 17700 Accounts Payable 5500 5500 Interest Payable 147 147 Unearned Consulting Fees 6000 500 5500 Michael Domenici, Capital 32520 32520 Michael Domenici, Drawing 3000 3000 Consulting Fees 9000 500 9500 Salaries Expense 4200 4200 Utilities Expense 270 270 Telephone Expense 210 210 Supplies Expense 330 330 Rent Expense 1750 1750 Insurance Expense 185 185 Depreciation Expense-- Furniture 135 135 Depreciation Expense-- Equipment 90 90 Interest Expense 247 247 Total 70720 70720 3237 3237 71092 71092

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