Question

In: Accounting

The Smith Engineering Company began operations on December 1, 2017. The unadjusted trial balance of the...

The Smith Engineering Company began operations on December 1, 2017. The unadjusted trial balance of the Smith Engineering Company as of December 31, 2017 is found on the trial balance tab. The following information is required to prepare the necessary adjusting entries for the Smith Engineering Company found in chapter 3.

1) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1, 2017. 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 $3,300. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any.

3) The equipment is expected to have a 4-year useful life, and be worth about $9,000 at the end of four years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry, if any.

4) On December 26, the client paid a $3,600 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) Smith Engineering's sole employee earns $80 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 payable, and prepare the necessary adjusting entry, if any.

6) In the second week of December, Smith Engineering agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $2,940. The terms of the initial agreement call for Smith Engineering to provide services from December 12, 2017, through January 10, 2018, or 30 days of service. The club agrees to pay Smith Engineering $2,940 on January 10, 2018, when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, if any.

Prepare the required adjusting and closing entries for the Smith Engineering Company.

Prepare a general journal, income statement, and balance sheet.

Unadjusted

~a(39)~
Trial Balance
December 31, 2017
Account Title Debit Credit
Cash 13,525
Supplies 4,400
Prepaid insurance 3,000
Equipment 25,800
Accounts payable 8,200
Unearned consulting revenue 3,600
S. Smith, Capital 32,000
S. Smith, Withdrawals 800
Consulting revenue 6,100
Rental revenue 350
Salaries expense 1,360
Rent expense 1,050
Utilities expense 315
Total 50,250 50,250

Solutions

Expert Solution

  • All working forms part of the answer
  • Adjustment Journal Entries

S.no.

General Journal

Dr (in $)

Cr (in $)

Working

1

Insurance expense

125

(3000=24 month)

Prepaid Insurance

125

Dec = 3000 x 1/24

2

Supplies expense

1100

Opening balance - Closing balance

Supplies

1100

(4400 - 3300)

3

Depreciation expense

350

(cost - Salvage value)/Life

Accumulated Depreciation

350

[((25800-9000)/4) x 1/12]

4

Unearned consulting revenue

300

(3600x5days/60 days)

Consulting revenue

300

Dec27-Dec31=5 days

5

Salaries expenses

240

Dec29 to Dec 31

Salaries payable

240

(80 x 3 days)

6

Consulting revenue

980

10 days of January=Unearned

Unearned consulting revenue

980

(2940 x 10/30days)

  • Adjusted Trial Balance, after adjusting entries

Trial Balance

December 31, 2017

Account Title

Debit ($)

Credit ($)

Cash

13525

Supplies

3300

Prepaid insurance

2875

Equipment

25800

Accounts payable

8200

Unearned consulting revenue

4280

S. Smith, Capital

32000

S. Smith, Withdrawals

800

Consulting revenue

5420

Rental revenue

350

Salaries expense

1600

Rent expense

1050

Utilities expense

315

Insurance expense

125

Supplies expense

1100

Depreciation expense

350

Salaries payable

240

Accumulated Depreciation

350

Total

$50840

$50840

  • Income Statement

Amount (in $)

Consulting revenue

5420

Rental revenue

350

Total Revenues

$5770

Expenses:

Salaries expense

1600

Rent expense

1050

Utilities expense

315

Insurance expense

125

Supplies expense

1100

Depreciation expense

350

Total expenses

$4540

Net Income

$1230

  • Balance Sheet

Assets

Amount (in $)

Cash

13525

Supplies

3300

Prepaid insurance

2875

Equipment

25800

(Less) Accumulated Depreciation

350

Total Assets

$45150

Liabilities

Accounts payable

8200

Unearned consulting revenue

4280

Salaries payable

240

Total Liabilities

12720

Owner's Equity

S. Smith, Capital

32000

(Less) Drawings

800

(Add) Net Income

1230

Total Owner's Equity

32430

Total Liabilities and Equity

$45150

  • Closing Entries

S.no.

General Journal

Dr (in $)

Cr (in $)

1

Rental revenue

5420

Consulting revenue

350

Income Summary

5770

2

Income Summary

4540

Salaries expense

1600

Rent expense

1050

Utilities expense

315

Insurance expense

125

Supplies expense

1100

Depreciation expense

350

3

Income Summary

1230

S. Smith, Capital

1230

4

S. Smith, Capital

800

S. Smith, Withdrawals

800


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