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a.-b. Merchandise Inventory , before adjustment, has a balance of $6,600. The ne

ID: 2545228 • Letter: A

Question

a.-b. Merchandise Inventory, before adjustment, has a balance of $6,600. The newly counted inventory balance is $7,100.

Unearned Seminar Fees has a balance of $5,100, representing prepayment by customers for five seminars to be conducted in June, July, and August 2019. Two seminars had been conducted by June 30, 2019.

Prepaid Insurance has a balance of $6,600 for six months’ insurance paid in advance on May 1, 2019.

Store equipment costing $12,890 was purchased on March 31, 2019. It has a salvage value of $410 and a useful life of four years.

Employees have earned $160 that has not been paid at June 30, 2019.

The employer owes the following taxes on wages not paid at June 30, 2019: SUTA, $4.80; FUTA, $0.96; Medicare, $2.32; and social security, $9.92.

Management estimates uncollectible accounts expense at 1 percent of sales. This year’s sales were $1,100,000.

Prepaid Rent has a balance of $5,250 for six months’ rent paid in advance on March 1, 2019.

The Supplies account in the general ledger has a balance of $310. A count of supplies on hand at June 30, 2019, indicated $105 of supplies remain.

The company borrowed $13,700 from First Bank on June 1, 2019, and issued a four-month note. The note bears interest at 12 percent.


Required:
Based on the information above, record the adjusting journal entries that must be made for Sufen Consulting on June 30, 2019. The company has a June 30 fiscal year-end.

Analyze:
After all adjusting entries have been journalized and posted, what is the balance of the Prepaid Rent account?

Explanation / Answer

Journal entries:

Merchandise Inventory $500

Cost of goods sold $500

Cash (5,100*3/5) $3,060

Unearned seminar fees $3,060

Prepaid Insurance (6,600*4/6) $4,400

Cash $4,400

Depreciation (12,890-410)/4 *3/12 $780

Accumulated depreciation $780

Salaries expense $160

Salaries payable $160

Income tax expense $18

Income tax payable $18

Provision for doubtful debts (1%*1,100,000) $11,000

Accounts receivable $11,000

Prepaid rent (5,250*4/6) $3,500

Cash $3,500

Cost of goods sold(310-105) $205

Supplies Inventory $205

Interest on note expense (13,700*12%*1/4) $411

Interest on note payable $411

Balance of prepaid rent = $3,500