Question

Part 5 Please prepare the adjusting entries for Cookie Creations. As of December 31, Cookie Creations’ year-end, the following adjusting entry data are provided.

1. A count reveals that $45 of brochures and posters were used.

2. Depreciation is recorded on the baking equipment purchased in November. The bak- ing equipment has a useful life of 5 years. Assume that 2 months’ worth of depreci- ation is required.

3. Amortization (which is similar to depreciation) is recorded on the website. (Credit the Website account directly for the amount of the amortization.) The website is amortized over a useful life of 2 years and was available for use on December 1.

4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued during November and December.) Round to nearest dollar.

5. One month’s worth of insurance has expired.

6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neigh- borhood community center on December 31. In early January Cookie Creations sends an invoice for $450 to the community center.

7. A count reveals that $1,030 of baking supplies were used.

8. A cell phone invoice is received for $75. The invoice is for services provided during the month of December and is due on January 15.

9. Because the cookie-making class occurred unexpectedly on December 28 and is for such a large group of children, Natalie’s assistant helps out. Her assistant worked 7 hours at a rate of $8 per hour.

10. An analysis of the unearned revenue account reveals that two of the five classes paid for by the local school board on December 9 still have not been taught by the end of Decem- ber. The $60 deposit received on December 19 for another class also remains unearned.

Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Part 4, plus the new information above, do the following.

(d) Prepare and post adjusting journal entries for the month of December. (e) Prepare an adjusted trial balance as of December 31, 2011.

Answer 1

		ADJUSTING ENTRIES
	Ref	Account title and explanation	Debit	Credit
	1	Supplies expenses	$45
		Supplies		$45
		(To record supplies expense)
	2	Depreciation expenses	$400		(purchase price not given. Assuming to be $12,000)
		Accumulated depreciation		$400	(depreciation=(Cost of asset/5)*(2/12)=(12000/5)*(2/12)=$400
		(To record depreciation expense)
	3	Amortization expense	$750		(Website value not given.Assuming to be $18000
		Website		$750	Amortization expense=(Website value/2)*(1/12)=
		(To record amortization of website)
	4	Interest expense	$150		(Amount of note payable and interest rate not given)
		Interest payable		$150	Assuming note payable=$12,000 and interest rate=10%
		(To record interest expenses)			1.5 months interest=12000*0.1*(1.5/12)=$150
	5	Prepaid expense	$1,100		(Insurance amount paid not mentioned)
		Insurance expense		$1,100	Assuming it to be $1200,insurance expense=1200/12=$100
		(To record insurance expense)			Prepaid insaurance expenses=(1200-100)=$1100
	6	Accounts receivable	$450
		Service Revenue		$450
		(To record service revenue earned on Dec 31)
	7	Raw materials expenses	$1,030
		Raw materials inventory		$1,030
		(To record raw materials expenses)
	8	Telephone expenses	$75
		Accrued expenses		$75
		(To record telephone expenses)
	9	Wages & Salaries expenses	$56		($8*7)
		Wages & Salaries payable		$56
		(To record unpaid wages & salaries)
	10	Sevice revenue	$180		(Amount ofunearned revenue for two classes is not maentioned)
		Unearned revenue		$180	Assuming it to be $120, total unearned revenue=$120+$60=$180)
	b	Adjusted trial balance cannot be prepared without data on unadjusted trial balance