Question

Required: Prepare the proper ADJUSTING journal entries for the following events. Also, prepare a balance sheet after adjusting entries have been made.

The unadjusted trial balance for Tahini & Jam Inc. appears below:

                                        Tahini & Jam Inc.

                                   Unadjusted Trial Balance

                                       December 31, 2020

                                                                      Debit                     Credit

Cash                                                          $75,500

Accounts receivable                                       5,000

Prepaid rent                                                 1,000

Prepaid insurance                                         15,000

Supplies                                                        3,000

Equipment                                                   40,000

Accumulated depreciation-equipment                                          $4,000

Accounts payable                                                                       11,000

Bank loan payable                                                                     10,000

Unearned service revenue                                                           10,500

Common shares                                                                          48,250

Retained earnings                                                                       32,000

Dividends                                                      5,000

Service revenue                                                                          44,600

Salary expense                                               7,200

Utilities expense                                            1,200

Rent expense                                                 5,250

Advertising expense                                        2,200              ________

                                                                $160,350                $160,350

Additional data is as follows. Record the adjusting entry below the information.

1. Unearned service revenue NOT YET earned at year end, $2,000.

Dr.

Cr.

2. Depreciation for the current year amounts to $4,500.

Dr

Cr.

3. Prepaid insurance consists of a policy purchased on January 1, 2020 for a 15 months coverage.

Dr.

Cr.

4. Supplies on hand/counted at year end amount to $1,200.

Dr.

Cr.

5. Accrued salaries on December 31, 2020, amount to $2,500.

Dr.

Cr.

6. The bank loan was received on March 1, 2020, and the annual interest rate was 12%.

Dr.

Cr.

7. Rent is $500/month, and January, 2021 rent is included in the trial balance amount.

Dr.

Cr.

8. Corporate income tax is 20% of net income before tax.

Dr.

Cr.

Prepare a balance sheet based on the unadjusted trial balance and the adjusting entries.

Record your answers below (in white).

                                        Tahini & Jam Inc.

                                           Balance Sheet

                                  (As at December 31, 2020)

Prepare balance sheet here.

                                        Tahini & Jam Inc.

                                        Income Statement

                                        (for the year ended

                                       December 31, 2020)

Prepare balance sheet here.

Answer 1

Balance Sheet
Assets
Current Assets:
Cash				$    75,500.00
Accounts receivable				$      5,000.00
Prepaid rent				$          500.00
Prepaid insurance				$      3,000.00
Supplies				$      1,200.00
Total Current Assets				$    85,200.00
Property, Plant and Equipment:
Equipment			$ 40,000.00
Less: Accumulated Depreciation			$   8,500.00	$    31,500.00
Total Assets				$ 1,16,700.00
Liabilities and Shareholder's Equity
Liabilities:
Current Liabilities:
Accounts payable				$    11,000.00
Bank loan payable				$    10,000.00
Unearned service revenue				$      2,000.00
Salaries Payable				$      2,500.00
Interest Payable				$      1,000.00
Income Tax Payable				$      2,990.00
Total Liabilities				$    29,490.00
Shareholder's Equity
Common Shares				$    48,250.00
Retained Earnings				$    38,960.00
Total Shareholder's Equity				$    87,210.00
Total Liabilities and Shareholder's Equity				$ 1,16,700.00

Adjusting Entries
Events	Particulars			Debit	Credit
a)	Unearned Service Revenue			$   8,500.00
	To Service Revenue				$   8,500.00
	($ 10500 - $ 2000)
b)	Depreciation Expense			$   4,500.00
	To Accumulated depreciation				$   4,500.00
c)	Insurance Expense			$ 12,000.00
	To Prepaid insurance				$ 12,000.00
	($ 15000 x 12/15)
d)	Supplies Expense			$   1,800.00
	To Supplies				$   1,800.00
	($ 3000 - $ 1200)
e)	Salaries Expense			$   2,500.00
	To Salaries Payable				$   2,500.00
f)	Interest Expense			$   1,000.00
	To Interest Payable				$   1,000.00
	($ 10000 x 12% x 10/12)
g)	Rent Expense			$      500.00
	To Prepaid Rent				$      500.00
h)	Income Tax Expense			$   2,990.00
	To Income Tax Payable				$   2,990.00
	(Refer Income Statement)

	Workings:
	Income Statement
	Service revenue					$ 53,100.00
Less:	Expenses:
	Salary expense				$   9,700.00
	Utilities expense				$   1,200.00
	Rent expense				$   5,750.00
	Advertising expense				$   2,200.00
	Depreciation Expense				$   4,500.00
	Insurance Expense				$ 12,000.00
	Supplies Expense				$   1,800.00
	Interest Expense				$   1,000.00
	Total Expense (excluding Income Tax)					$ 38,150.00
	Income before Income Tax					$ 14,950.00
	Income Tax Expense @ 20%					$   2,990.00
	Net Income					$ 11,960.00