Question

The unadjusted trial balance as of December 31, 2021, for the Bagley Consulting Company appears below. December 31 is the company’s reporting year-end.

Account Title	Debits		Credits
Cash	13,150
Accounts receivable	7,250
Prepaid insurance	2,900
Land	205,000
Buildings	55,000
Accumulated depreciation—buildings			22,000
Office equipment	87,000
Accumulated depreciation—office equipment			34,800
Accounts payable			28,150
Salaries payable			0
Deferred rent revenue			0
Common stock			220,000
Retained earnings			46,050
Service revenue			79,000
Interest revenue			3,800
Rent revenue			4,500
Salaries expense	30,000
Depreciation expense	0
Insurance expense	0
Utilities expense	20,200
Maintenance expense	17,800
Totals	438,300		438,300

Information necessary to prepare the year-end adjusting entries appears below.

1. The buildings have an estimated useful life of 50 years with no salvage value. The company uses the straight-line depreciation method.
2. The office equipment is depreciated at 10 percent of original cost per year.
3. Prepaid insurance expired during the year, $1,450.
4. Accrued salaries at year-end, $1,150.
5. Deferred rent revenue at year-end should be $700.

Required:
1. From the trial balance and information given, prepare adjusting entries.
2. Post the beginning balances and adjusting entries into the appropriate T-accounts.
3. Prepare an adjusted trial balance.
4. Prepare closing entries.
5. Prepare a post-closing trial balance.

Answer 1

adjusting journal entries

	Adjusting Journal Entries	Dr. ($)	Cr. ($)
1	depreciation expenses – buildings	1100
	To accumulated depreciation – buildings		1100
	($55000/50 years)
2	depreciation expenses – office equipment	8700
	To accumulated depreciation – office equipment		8700
	($87000*10%)
3	insurance expenses	1450
	To prepaid insurance		1450
4	salaries expenses	1150
	To salaries payable		1150
5	rent revenue	700
	To deferred rent revenue		700

closing journal entries

	Closing Entries	Dr. ($)	Cr. ($)
CJE1	service revenue	79000
	interest revenue	3800
	rent revenue	3800
	To income summary		86600
CJE2	income summary	80400
	To salaries expenses		31150
	To depreciation expenses		9800
	To insurance expenses		1450
	To utilities expenses		20200
	To maintenance expenses		17800
CJE3	income summary	6200
	To retained earnings		6200

adjusted and post-closing trial balance

Bagley Consulting Company	Adjusted Trial Balance	Post closing Trial Balance
accounts payable	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
cash	13150		13150
accounts receivable	7250		7250
prepaid insurance	1450		1450
land	205000		205000
buildings	55000		55000
accumulated depreciation – buildings		23100		23100
office equipment	87000		87000
accumulated depreciation – office equipment		43500		43500
accounts payable		28150		28150
salaries payable		1150		1150
deferred rent revenue		700		700
common stock		220000		220000
retained earnings		46050		52250
service revenue		79000
interest revenue		3800
rent revenue		3800
salaries expenses	31150
depreciation expenses	9800
insurance expenses	1450
utilities expenses	20200
maintenance expenses	17800
totals	449250	449250	368850	368850

cash
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	13150	0	13150
accounts receivable
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	7250	0	7250
prepaid insurance
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	2900	0	2900
3	0	1450	1450
land
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	205000	0	205000
buildings
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	55000	0	55000
office equipment
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	87000	0	87000
accounts payable
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	28150	28150

salaries payable
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	0	0
4	0	1150	1150
deferred rent revenue
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	0	0
5	0	700	700
common stock
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	220000	220000
retained earnings
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	46050	46050
CJE3	0	6200	52250
accumulated depreciation – buildings
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	22000	22000
1	0	1100	23100
accumulated depreciation – office equipment
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	34800	34800
2	0	8700	43500
salaries expenses
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	30000	0	30000
4	1150	0	31150
depreciation expenses
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	0	0
1	1100	0	1100
2	8700	0	9800
insurance expenses
Transaction	Dr. ($)	Cr. ($)	Bal.
opening balance	0	0	0
3	1450	0	1450