Question

In: Accounting

Milbank Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the...

Milbank Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Milbank Repairs & Service
Unadjusted Trial Balance
June 30, 2019
Debit
Balances
Credit
Balances
Cash 12,410
Accounts Receivable 82,420
Supplies 19,860
Equipment 472,590
Accounts Payable 19,360
Unearned Fees 21,850
Nancy Townes, Capital 342,000
Nancy Townes, Drawing 16,380
Fees Earned 496,510
Wages Expense 115,190
Rent Expense 87,880
Utilities Expense 63,060
Miscellaneous Expense 9,930
879,720 879,720

For preparing the adjusting entries, the following data were assembled:

Required:

  • Fees earned but unbilled on June 30 were $8,980.
  • Supplies on hand on June 30 were $7,330.
  • Depreciation of equipment was estimated to be $12,410 for the year.
  • The balance in unearned fees represented the June 1 receipt in advance for services to be provided. During June $17,260 of the services was provided.
  • Unpaid wages accrued on June 30 were $1,590.

1. Journalize the adjusting entries necessary on June 30, 2019.

a. Accounts Receivable
Fees Earned
b. Supplies Expense
Supplies
c.
d.
e.

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1. Keep in mind that you will be making an adjusting entry for each of these that affects at least one income statement account (revenue or expense) and one balance sheet account (asset or liability). As you go through each of these, consider both sides of the transaction that results in an adjusting entry and identify related accounts. Remember, four different categories of adjusting entries include prepaid expenses (deferred expenses), unearned revenues (deferred revenues), accrued expenses (accrued liabilities), and accrued revenues (accrued assets) plus the adjustment for depreciation expense.

2. Determine the revenues, expenses, and net income of Milbank Repairs & Service before the adjusting entries.

Revenues $
Expenses
Net income $

3. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries.

Revenues $
Expenses
Net income $

4. Determine the effect of the adjusting entries on Nancy Townes, Capital.
Nancy Townes, Capital decreases  by $.

Solutions

Expert Solution

Solution 1:

Adjusting Journal Entries
Date Particulars Debit Credit
(a) Accounts Receivable Dr $8,980
      To Fees earned $8,980
(To record fees earned)
(b) Supplies expense Dr ($19860-7330) $12,530
      To Supplies $12,530
(To record supplies expense)
(c ) Depreciation expense Dr $12,410
      To Accumulated Depreciation $12,410
(To record Depreciation expense on Equipment)
(d) Unearned Fees Dr $17,260
      To Fees Earned $17,260
(To record fees earned)
(e) Wages expense Dr $1,590
      To Wages Payable $1,590
(To record Wages expense payable)

Solution 2:

Before the adjusting entries
Revenues $4,96,510
Expenses (115190+87880+63060+9930) $2,76,060
Net Income $2,20,450

Solution 3:

After the adjusting entries
Revenues (496510+8980+17260) $5,22,750
Expenses ($276060+12530+12410+1590) $3,02,590
Net Income $2,20,160

Solution 4:

Nancy Townes, Capital decreases  by = $220450 - $220160 = $290


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