On July 1, 2019, Tim Stein established his own accounting practice. Selected tra
ID: 2545039 • 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 $14,250 to pay the rent in advance for six months.
1 Borrowed money from Second National Bank by issuing a four-month, 9 percent note for $36,000; received $34,920 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 $6,700 per month; received the entire fee of $80,400 in advance.
1 Purchased office equipment for $23,000 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,400 salvage value. The equipment will be depreciated using the straight-line method.
1 Purchased a one-year insurance policy and issued Check 102 for $1,704 to pay the entire premium.
3 Purchased office furniture for $15,360 from Furniture Warehouse; issued Check 103 for $8,460 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,200 salvage value. The office furniture will be depreciated using the straight-line method.
5 Purchased office supplies for $1,950 with Check 104. Assume $870 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
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Account Debit Credit July 1 Prepaid Rent 14250 July 1 Capital 14250 July 1 Cash/Bank 34920 July 1 Interest Expense 1080 July 1 Note Paybale 36000 July 1 Cash/Bank 80400 July 1 Unearned Fee 80400 July 1 Office Equipment 23000 July 1 Note Payable 23000 July 1 Prepaid Insurance 1704 July 1 Cash/Bank 1704 July 3 Office Equipment 15360 July 3 Cash/Bank 8460 July 3 Accounts Payable 6900 July 5 Office Supplies 1950 July 5 Cash/Bank 1950 Adjusting Journal July 31 Rent Expense 2375 July 31 Prepaid Rent 2375 (14250/6) July 31 Unearned Fee 6700 July 31 Earned Fee 6700 (80400/12) July 31 Interest Expense 230 July 31 Interest Payable 230 (23000*12%*1/12) July 31 Insurance Expense 142 July 31 Prepaid Insurance 142 (1704/12) July 31 Supplies expense 1080 July 31 Office Supplies 1080 (1950-870)Related Questions
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