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	7,650
Accounts receivable	7,750
Prepaid insurance	3,200
Land	215,000
Buildings	60,000
Accumulated depreciation—buildings			24,000
Office equipment	93,000
Accumulated depreciation—office equipment			37,200
Accounts payable			28,850
Salaries payable			0
Deferred rent revenue			0
Common stock			230,000
Retained earnings			46,950
Service revenue			82,000
Interest revenue			4,200
Rent revenue			5,100
Salaries expense	32,000
Depreciation expense	0
Insurance expense	0
Utilities expense	21,200
Maintenance expense	18,500
Totals	458,300		458,300

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, $1,600.
4. Accrued salaries at year-end, $1,250.
5. Deferred rent revenue at year-end should be $800.

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

Journal of Bagley Consulting Company

Date	Particulars	Debit	Credit
31/12/21	Depreciation on Building	1,200
	To accumulated depreciation building(60,000/50)		1,200
	(Depreciation for the year provided)
31/12/21	Depreciation on Office equipment	9,300
	To accumulted depreciation on Office equipment(93,000*10/100)		9,300
	(Depreciation for the year provided)
31/12/21	Insurance	1,600
	To Prepaid Insurance		1,600
	(Insurance recognized for the year)
31/12/21	Salaries	1,250
	To Salary Payable		1,250
	(Salary recognized)
31/12/21	Rent Revenue	800
	To Deferred Rent revenue		800
	(Rent revenue deferred)
Accumulated Depreciation on Building account		Debit	Credit
	Opening balance		24,000
31/12/2021	Depreciation Expense		1,200
	Closing balance c/f	25,200
	Total	25,200	25,200
	Closing balance b/d		25,200
Accumulated Depreciation on Office Equipment account
	Opening balance		37,200
31/12/2021	Depreciation Expense		9,300
	Closing balance c/f	46,500
	Total	46,500	46,500
	Closing balance b/d		46,500
Prepaid Insurance
	Opening balance	3,200
31/12/21	Insurance expense recognized		1,600
	Closing balance c/f		1,600
	Total	3,200	3,200
	Closing balance b/d	1,600
Salary payble
	Opening balance		0
31/12/21	Salary accured		1,250
	Closing balance c/f	1,250
	Total	1,250	1,250
	Closing balance b/d		1,250
Deferred Rent Revenue
	Opening balance		0
31/12/21	Rent Revenue		800
	Closing balance c/f	800
	Total	800	800
	Closing balance b/d		800
	Adjusted Trial balance as on 31/12/2021
	Accounts Title	Debit	Credit
	Cash	7,650
	Accounts receivable	7,750
	Prepaid Insurance	1,600
	Land	215,000
	Buildings	60,000
	Accumulated depreciation-Buildings		25,200
	Office Equipment	93,000
	Accumulated Depreciation-Office Equipment		46,500
	Accounts Payble		28,850
	Salaries Payable		1,250
	Deferred Rent Revenue		800
	Common Stock		230,000
	Retained earning		46,950
	Service Revenue		82,000
	Interest Revenue		4,200
	Rent Revenue		4,300
	Salaries Expenses	33,250
	Depreciation Expense	10,500
	Insurance Expenses	1,600
	Utilities Expense	21,200
	Maintenance Expenses	18,500
	Total	470,050	470,050
4	Closing Entries
	Service Revenue	82,000
	Interest Revenue	4,200
	Rent Revenue	4,300
	To Income Summary		90,500
	Income Summary	85,050
	To Salaries Expense(32,000+1,250)		33,250
	To Depreciation Expense(1,200+9,300)		10,500
	To Insurance Expense		1,600
	To Utilities Expense		21,200
	To Maintenance Expense		18,500
	Income Summary	5,450
	To Retained Earning(90,500-85,050)		5,450
5	Post Closing Trial Balance as on 31/12/2021
	Accounts Title	Debit	Credit
	Cash	7,650
	Accounts receivable	7,750
	Prepaid Insurance	1,600
	Land	215,000
	Buildings	60,000
	Accumulated depreciation-Buildings		25,200
	Office Equipment	93,000
	Accumulated Depreciation-Office Equipment(37,200+9,300)		46,500
	Accounts Payble		28,850
	Salaries Payable		1,250
	Deferred Rent Revenue		800
	Common Stock		230,000
	Retained earning (46,950+5,450)		52,400
	Total	385,000	385,000