Question

Reyes Rides is owned by Jason Reyes. The company has an August 31 fiscal year end and prepares adjustments on an annual basis. The following is an alphabetical list of its accounts at August 31, 2021, before adjustments. All accounts have normal balances. Accounts Payable $5,740 Accounts Receivable 7,500 Accumulated Depreciation—Equipment 25,875 Accumulated Depreciation—Vehicles 175,750 Cash 8,650 Equipment 41,400 Fuel Expense 23,900 Interest Expense 9,660 J. Reyes, Capital 105,030 J. Reyes, Drawings 140,600 Notes Payable 150,000 Prepaid Insurance 12,420 Rent Expense 23,060 Salaries Expense 140,570 Service Revenue 343,745 Supplies 4,470 Unearned Revenue 27,890 Vehicles 421,800 Additional information: 1. On August 31, a physical count shows $620 of supplies on hand. 2. The insurance policy has a one-year term that began on November 1, 2020. 3. The equipment has an estimated useful life of 10 years. The vehicles have an estimated useful life of 12 years. 4. The company collects cash in advance for any special services requested by customers. As at August 31, the company has provided all but $4,600 of these services. 5. The note payable has an annual interest rate of 7%. Interest is paid on the first day of each month. 6. Employees are paid a combined total of $580 per day. At August 31, 2021, five days of salaries are unpaid. 7. On August 31, the company provided $1,360 of services for a senior citizens’ group. The group was not billed for the services until September 2. 8. Additional fuel costs of $640 have been incurred but not recorded. (Use the Accounts Payable account.)

a)Prepare T accounts and enter the unadjusted trial balance amounts. b) Journalize the annual adjusting entries at August 31, 2021 c)post the adjusting entries d) prepare an adjusted trial balance at August 31,2021.

Answer 1

Solution to part b:

Annual adjusting entries:

In the books of Reyes Rides
Date	Account titles	Debit (in $)	Credit (in $)
August 31
	Supplies expense A/c	3,850
	Supplies A/c		3,850
	(To record usage of supplies) ($4470-$620)
	Insurance expenses A/c	10,350
	Prepaid insurance A/c		10,350
	(To record expired insurance expenses) (12420/12*10)
	Depreciation expenses A/c	39,290
	Accumulated depreciation - Equipment A/c (41400/10)		4,140
	Accumulated depreciation - Vehicles A/c (421800/12)		35,150
	(To record depreciation based on SLM method)
	Interest expense A/c	875
	Interest payable A/c		875
	(To record interest accrued on notes payable) (150000*7%/12)
	Salaries expense A/c	2,900
	Salaries payable A/c		2,900
	(To record salary accrued for 5 days) (580*5)
	Accounts receivable A/c	1,360
	Service revenue A/c		1,360
	(To record services provided on account)
	Fuel expenses A/c	640
	Accounts payable A/c		640
	(To record fuel purchased on account)

Solution to part a and part c:

Preparation of T-Accounts, unadjusted trial balance and posting:

REYEN RIDES
Unadjusted Trial Balance
As on August 31, 2021
	Debit (in $)	Credit (in $)
Accounts payable		5,740
Accounts receivable	7,500
Accumulated depreciation - Equipment		25,875
Accumulated depreciation - Vehicles		175,750
Cash	8,650
Equipment	41,400
Fuel expense	23,900
Interest expense	9,660
J. Reyes, Capital		105,030
J. Reyes, Drawings	140,600
Notes payable		150,000
Prepaid Insurance	12,420
Rent expense	23,060
Salaries expense	140,570
Service revenue		343,745
Supplies	4,470
Unearned revenue		27,890
Vehicles	421,800
Total	834,030	834,030

T-Accounts:

Solution to part d:

REYEN RIDES
Adjusted Trial Balance
As on August 31, 2021
	Debit (in $)	Credit (in $)
Accounts payable		6,380
Accounts receivable	8,860
Accumulated depreciation - Equipment		30,015
Accumulated depreciation - Vehicles		210,900
Cash	8,650
Equipment	41,400
Fuel expense	24,540
Interest expense	10,535
J. Reyes, Capital		105,030
J. Reyes, Drawings	140,600
Notes payable		150,000
Prepaid Insurance	2,070
Rent expense	23,060
Salaries expense	143,470
Service revenue		345,105
Supplies	620
Unearned revenue		27,890
Vehicles	421,800
Supplies expense	3,850
Insurance expense	10,350
Depreciation expense	39,290
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