35PGA_1 The unadjusted trial balance of ... [FREE SOLUTION]

Chapter 3: 35PGA_1 (page 171)

The unadjusted trial balance of Anniston Air Purification System at December 31, 2018, and the data needed for the adjustments follow ANNISTON AIR PURIFICATION SYSTEM Unadjusted Trial Balance December 31, 2018 Adjustment data at December 31 follow Account Title Prepaid Rent Cash Debit Credit Accounts Receivable Office Supplies Equipment Accumulated Depreciation鈥擡quipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Depreciation Expense鈥擡quipment Advertising Expense Supplies Expense Total Balance $ 7,600 $ 69,000 $ 69,000 22,000 43,800 3,100 15,300 19,700 2,900 1,800 $ 3,900 2,900 9,900 3,300 1,800 a. On December 15, Anniston contracted to perform services for a client receiving $3,100 in advance. Anniston recorded this receipt of cash as Unearned Revenue. As of December 31, Anniston has completed $2,100 of the services. b. Anniston prepaid two months of rent on December 1. (Assume the Prepaid Rent balance as shown on the unadjusted trial balance represents the two months of rent prepaid on December 1.) c. Anniston used $750 of office supplies. d. Depreciation for the equipment is $850. e. Anniston received a bill for December鈥檚 online advertising, $1,100. Anniston will not pay the bill until January. (Use Accounts Payable.) f. Anniston pays its employees on Monday for the previous week鈥檚 wages. Its employees earn $3,500 for a five-day workweek. December 31 falls on Wednesday this year. g. On October 1, Anniston agreed to provide a four-month air system check (beginning October 1) for a customer for $3,400. Anniston has completed the system check every month, but payment has not yet been received and no entries have been made. Requirements 1. Journalize the adjusting entries on December 31. 2. Using the unadjusted trial balance, open the T-accounts with the unadjusted balances. Post the adjusting entries to the T-accounts. 3. Prepare the adjusted trial balance. 4. How will Anniston Air Purification System use the adjusted trial balance?

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Answer

Adjusting entries are as follows:

	Journal entry
Transactions	Accounts and Explanation	Debit	Credit
(a)	Unearned Revenue	$2,100
	Service Revenue		$2,100
	To record service revenue earned that was collected in advance

(b)	Rent Expense	$1,450
	Prepaid Rent		$1,450
	To record rent expense

(c)	Supplies Expense	$750
	Office Supplies		$750
	To record office supplies used

(d)	Depreciation Expense鈥擡quipment	$850
	Accumulated Depreciation鈥擡quipment		$850
	To record depreciation on equipment

(e)	AdvertisingExpense	$1,100
	Accounts Payable		$1,100
	To record accrued advertising expense

(f)	Salaries Expense	$2,100
	Salaries Payable		$2,100
	To record accrued salaries expense

(g)	Accounts Receivable	$2,550
	Service Revenue		$2,550
	To record earned service revenue

Salaries expense is calculated as follows:

$Salaries Expense = Salaries Per Weekly Payroll 脳 \frac{Number of Days Expired}{Number of Days Per Payroll Week} = $ 3, 500 脳 \frac{3}{5} = $ 2, 100$

Insurance expense is calculated as follows:

Rent Expense = Prepaid Rent 脳 \frac{Number of Months Expired}{Total Months of Insurance Paid} = $ 2, 900 脳 \frac{1}{2} = $ 1, 450

Service revenue earned is calculated as follows:

$Service Revenue = Total Amount 脳 \frac{Number of Months Expired}{Total Months of Service} = $ 3, 400 脳 \frac{3}{4} = $ 2, 550$

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