Question

Romero started his own consulting firm, Romero Company, on July 1, 2018. The trial balance at July 31 is shown below.

ROMERO COMPANY
Trial Balance
July 31, 2018
		Debit		Credit
Cash		23,150
Accounts receivable		5,000
Supplies		4,000
Prepaid insurance		3,000
Equipment		13,000
Notes payable				15,000
Accounts payable				7,500
Unearned service revenue				4,000
Owner’s capital				18,750
Service revenue				12,900
Salaries and wages expense		7,000
Rent expense		3,000
		$ 58,150		$ 58,150

Other data:

1. Supplies on hand at July 31 are $750.

2. A utility bill for $350 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. $1,200 of unearned service revenue remain unearned.

5. Romero company pays its employees total salaries of $7,250 every Monday for the preceding 5-day week (Monday through Friday). On Monday July 30, employees were paid for the week ending July 27. All employees worked the last 2 days of the month of July 2018.

6. The equipment is being depreciated over a 5-year life with no salvage value.

7. Invoices representing $3,200 of services performed during the month have not been recorded as of July 31.

8. Romero company borrowed $15,000 by signing a 7.3%, two-year note on July 11^th, 2018.

Instructions

a. Prepare the adjusting entries for the month of July.

b. Prepare the Classified Balance sheet at Dec. 31, 2018.

Answer 1

Requirement a:

Date	Account title and explanation	Debit	Credit
July 31	Supplies expense [$4,000 - $750]	$3,250
	Supplies		$3,250
	[To record supplies expense]
July 31	Utilities expense	$350
	Utilities payable		$350
	[To record accrued utilities expense]
July 31	Insurance expense [$3,000/12]	$250
	Prepaid insurance		$250
	[To record insurance expense]
July 31	Unearned service revenue [$4,000 - $1,200]	$2,800
	Service revenue		$2,800
	[To record revenue earned from unearned]
July 31	Depreciation Expense [($13,000/5 years) x 1/12]	$217
	Accumualted depreciation-equipment		$217
	[To record depreciation expense]
July 31	Accounts receivable	$3,200
	Service revenue		$3,200
	[To record accrued revenue]
July 31	Interest expense [$15,000 x 7.3% x (1/12)]	$91
	Interest payable		$91
	[To record accrued interest expense]

Requirement b:

Balance Sheet
At July 31,2018
Assets		Liabilities and Owner's equity
Current assets:		Current liabilities:
Cash	$23,150	Accounts payable	$7,500
Accounts receivable [5000+3200]	$8,200	Utilities payable	$350
Supplies	$750	Interest payable	$91
Prepaid insurance [3000-250]	$2,750	Unearned service revenue	$4,000
Total current assets	$34,850	Total current liabilities	$11,941
Property,plant and equipment:		Notes payable	$15,000
Equipment	$13,000	Total liabilities	$26,941
Accumulated depreciation-equipment	($217)
Total property,pant and equipment	$12,783	Owner's Equity:
		Owner's capital	$20,692
Total Assets	$47,633	Total liabilities and Owner's equity	$47,633

Calculations:

Adjusted Trial Balance
	Debit	Credit
Cash	$23,150
Accounts receivable [5000+3200]	$8,200
Supplies	$750
Prepaid insurance [3000-250]	$2,750
Equipment	$13,000
Accumulated depreciation-equipment		$217
Notes payable		$15,000
Accounts payable		$7,500
Utilities payable		$350
Interest payable		$91
Unearned service revenue		$4,000
Owner’s capital		$18,750
Service revenue [12900+3200]		$16,100
Salaries and wages expense	$7,000
Rent expense	$3,000
Supplies expense	$3,250
Utilities expense	$350
Insurance expense	$250
Depreciation expense	$217
Interest expense	$91
Total	$62,008	$62,008

.

Income Statement
Service revenue [12900+3200]		$16,100
Expenses:
Salaries and wages expense	$7,000
Rent expense	$3,000
Supplies expense	$3,250
Utilities expense	$350
Insurance expense	$250
Depreciation expense	$217
Interest expense	$91
Total expenses		$14,158
Net income		$1,942
Statement of Changes in Owner's equity
Owner's equity July 1		$18,750
Add: net income		$1,942
Owner's equity July 31		$20,692