Question

) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1, 2019. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, if any. 2) Based on a physical count, supplies on hand total $3,600. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any. 3) The equipment is expected to have a 5-year useful life, and be worth about $11,000 at the end of five years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if any. 4) On December 26, the client paid a $12,000 60-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any. 5) Landscape Dreams's employee earns $170 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last paid on Friday, December 26. Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry, if any. 6) In the second week of December, Landscape Dreams agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $5,100. The terms of the initial agreement call for Landscape Dreams to provide services from December 12, 2019, through January 10, 2020, or 30 days of service. The club agrees to pay Landscape Dreams $5,100 on January 10, 2020, when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, if any

Answer 1

1. The adjusting entry for Prepaid Insurance

December 31, 2019   Dr. Insurance Expense A/C

Cr. Prepaid Insurance A/C   

(To record the insurance expenses from Dec. 1st to Dec. 31st, 2019)

Note: As the amount of policy is not given in the question, to calculate the amount of prepaid insurance, divide the policy amount by 24 as the policy is for 24 months and only one month has expired

2. The adjusting entry for supplies consumed during the year

December 31, 2019   Dr. Supplies Expense A/C

Cr. Supplies A/C

   (To record the amount of supplies consumed during the period)

Note: The amount of supplies on hand total $3,600 and hence the balance in Supplies A/C will need to be reduced to 3600. Deduct 3600 from the balance in Supplies A/C and the resulting amount will be the amount of this adjusting entry

3. The adjusting entry for Depreciation Of Equipment:

December 31, 2019 Dr. Depreciation Expense A/C  

Cr. Accumulated Depreciation A/C

     (To record the depreciation on equipment for December 31st, 2019)

Note: The method of depreciation given in the question appears to be by Straight Line. To calcutae the monthly depreciation, use the formula:

(Cost of equipment - 11000) / 5

The resulting figure will be annual depreciation. Divide annual depreciation by 12 to get monthly depreciation.

4. The adjusting entry for unearned consulting revenue:

December 31, 2019 Dr. Unearned Consulting Revenue A/C 1000

Cr. Consulting Revenue A/C 1000

(To record consulting revenue received in advance recognized as earned from Dec. 27 to Dec. 31st)

Note: There are 5 days from Dec. 27 to Dec. 31st and the contract is for 60 days. Hence, the consulting revenue recognized as earned is calculated as = ($12000/60) * 5 = $1000

5. The adjusting entry for unpaid salary

December 31, 2019 Dr. Salaries Expense A/C 510

Cr. Unpaid Salaries A/C 510   

     (To record the unpaid salary @ $170 for 3 days)

Note: The employee was last paid on Friday, December 26th. Dec. 27 and 28 were weekend days. Hence, the adjusting entry for unpaid salary will be recorded for 3 days from Dec. 29 to Dec. 31st

6. The adjusting entry for consulting revenue earned :

December 31, 2019    Dr. Accounts Receivale A/C 3400

Cr. Consulting Revenue A/C 3400

(To record consulting revenue earned from Dec. 12 to Dec. 31st)

Note: There are 20 days from Dec. 12 to Dec. 31st and the contract is for 30 days. Hence, the consulting revenue will be recognized as earned is calculated as = (5100 / 30) * 20 = $3400