Question

The unadjusted trial balance as of December 31, 2018, for the Bagley Consulting Company appears below. December 31 is the company’s fiscal 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 and wages payable			0
Deferred rent revenue			0
Common stock			230,000
Retained earnings			46,950
Sales revenue			82,000
Interest revenue			4,200
Rent revenue			5,100
Salaries and wages expense	32,000
Depreciation expense	0
Insurance expense	0
Utility expense	21,200
Maintenance expense	18,500
Totals	458,300		458,300

The buildings have an estimated useful life of 50 years with no salvage value. The company uses the straight-line depreciation method.

The office equipment is depreciated at 10 percent of original cost per year.

Prepaid insurance expired during the year, $1,600.

Accrued salaries and wages at year-end, $1,250.

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

Solution

Bagley Consulting Company

1. Adjusting Entries:

Account Title and Explanation	Ref. No.	Debit	Credit
Depreciation Expense - Office Equipment		$9,300
Accumulated Depreciation - Office Equipment			$9,300
(To record depreciation on office equipment ; 93,000 x10% = 9,300)
Depreciation Expense - Building		$1,200
Accumulated Depreciation - Buildings			$1,200
(Depreciation on buildings; 60,000 x 1/50 = $1,200)
Insurance Expense		$1,600
Prepaid Insurance			$1,600
(To record insurance expense)
Salaries and Wages Expense		$1,250
Salaries and Wages Payable			$1,250
(To record unpaid salaries)
Rent Revenue		$800
Deferred Rent Revenue			$800
(To record unearned portion of rent revenue)

1. T- Accounts for adjusting entries;

						Depreciation Expense - Office Equipment
Debit										Credit
Date		Description				Amount		Date	Description	Amount
31-Dec		Accumulated Depreciation - Equipment (adj.)				$9,300		31-Dec-16	Income Summary	$9,300
						$9,300				$9,300
			Prepaid Insurance
Date	Description		Debit	Credit	Balance
31-Dec	Beg. Balance		$3,200	Insurance Expense	$1,600
				Ending Balance	$1,600
			$3,200		$3,200

Insurance Expense

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Prepaid Insurance

$1,600

31-Jan-12

Income Summary

$1,600

$1,600

$1,600

Salaries and Wages Expense

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Bal

$32,000

31-Dec-18

Income Summary

$33,250

Salaries and Wages Payable

$1,250

$33,250

$33,250

Salaries and Wages Payable

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Ending Balance

$1,250

31-Dec-18

Salaries and Wages Payable

$1,250

$1,250

$1,250

Deferred Rent Revenue

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Ending Balance

$800

31-Dec-18

Rent Revenue

$800

$800

$800

Rent Revenue

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Deferred Rent Revenue

$800

31-Dec-18

Bal

$5,100

31-Dec

Income Summary

$4,300

$5,100

$5,100

Depreciation Expense - Buildings

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Accumulated Depreciation - Buildings(adj.)

$1,200

31-Dec-18

Income Summary

$1,200

$1,200

$1,200

Accumulated Depreciation - Buildings

Debit

Credit

Date

Description

Amount

Date

Description

Amount

31-Dec-18

Ending balance

$1,200

31-Dec-18

depreciation Expense - Buildings(Adj.)

$1,200

$1,200

$1,200

1. Adjusted Trial Balance

Bagley Consulting
Adjusted Trial Balance as on Dec 31
Account Titles	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 Payable		$28,850
Deferred Rent Revenue		$800
Salaries Payable		$1,250
Common Stock		$230,000
Retained Earnings		$46,950
Sales Revenue		$82,000
Rent Revenue		$4,300
Interest Revenue		$4,200
Salaries and Wages Expense	$33,250
Utility Expense	$21,200
Insurance Expense	$1,600
Depreciation Expense - Buildings	$1,200
Depreciation Expense - Office Equipment	$9,300
Maintenance Expense	$18,500
Totals	$470,050	$470,050

1. Closing Entries:

Closing Entries:
Date	Account Titles and Explanation	Ref. No.	Debit	Credit
31-Dec-18	Sales Revenue		$82,000
	Interest Revenue		$4,200
	Rent Revenue		$4,300
31-Dec-18	Income Summary			$90,500
	(To close sales revenue, rent revenue and interest revenue accounts to income summary)
31-Dec-18	Income Summary		$85,050
	Depreciation Expense - Office Equipment			$9,300
	Depreciation Expense – Buildings			$1,200
	Salaries and Wages Expense			$33,250
	Insurance Expense			$1,600
	Utility Expense			$21,200
	Maintenance Expense			$18,500
	(To close all expenses accounts to income summary)
31-Dec-18	Income Summary		$5,450
	Retained Earnings			$5,450
	(To transfer net income to retained earnings account)

1. Post Closing Trial Balance

Bagley Consulting
Post Closing Trial Balance
for the year ended Dec 31, 2018
Account Titles	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 Payable		$28,850
Deferred Rent Revenue		$800
Salaries and Wages Payable		$1,250
Common Stock		$230,000
Retained Earnings		$52,400
Totals	$385,000	$385,000