Question

Option #1: Preparing Adjusting Entries in a Worksheet

Following is the unadjusted trial balance of Skylar Gaming, Inc. at the end of its first year of operations, December 31, 20x7:

Account Name	DR.	CR.
Cash	$71,550
Accounts Receivable	$25,200
Supplies	$550
Prepaid Insurance	$12,000
Equipment	$31,750
Accumulated Depreciation-Equipment		$4,050
Accounts Payable		$6,700
Salaries Payable		$0
Unearned Revenue		$2,200
Common Stock		$45,700
Retained Earnings		$23,850
Dividends	$3,500
Revenue		$80,750
Depreciation Expense-Equipment	$2,000
Salaries Expense	$4,750
Insurance Expense	$3,100
Rent Expense	$4,200
Supplies Expense	$2,500
Utilities Expense	$2,150
	$163,250	$163,250

The following additional information is available:

1. Skylar Gaming, Inc. needs to accrue $2,000 in salaries that will not be paid until next month.
2. Skylar Gaming, Inc. has earned $2,000 of the services that were paid for in advance as included in the unearned revenue account.
3. At the end of the period, Skylar Gaming, Inc. has provided services in the amount of $500 to another customer (John Gartner). However, Skylar has not billed them yet since they only issue bills at the beginning of each month.
4. Skylar Gaming, Inc. needs to record the annual $1,025 of depreciation on the equipment.
5. One month of the 12-month insurance policy in prepaid insurance has been used up, and a journal entry is needed to reflect this.
6. At the end of the period, $125 in supplies are remaining.

Required:

1. Prepare all necessary adjusting entries at December 31, 20x7 Descriptions are not needed.
2. Using the below linked template prepare an adjusted trial balance at December 31, 20x7.
3. Using a worksheet template, prepare an income statement, statement of retained earnings, and a balance sheet.
4. Prepare closing entries including descriptions.

Answer 1

	ADJUSTING ENTRIES:
1)	Salaries expense	2000
	Salaries payable		2000
	Unearned revenue	2000
	Revenue		2000
	Accounts receivable	500
	Revenue		500
	Depreciation expense-Equipment	1025
	Accumulated expense-Equipment		1025
	Insurance expense	1000
	Prepaid insurance		1000
	Supplies expense (550-125)	425
	Supplies		425
2)	CLOSING ENTRIES:
	Revenue	83250
	Income summary		83250
	(To close revenue accounts)
	Income summary	23150
	Depreciation Expense-Equipment		3025
	Salaries Expense		6750
	Insurance Expense		4100
	Rent Expense		4200
	Supplies Expense		2925
	Utilities Expense		2150
	(To close expense accounts)
	Income summary	60100
	Retained earnings		60100
	(To close income summary)
	Retained earnings	3500
	Dividend		3500
	(To close dividend account)

	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance
Account Name	DR.	CR.	DR.	CR.	DR.	CR.
Cash	71550				71550
Accounts Receivable	25200		500		25700
Supplies	550			425	125
Prepaid Insurance	12000			1000	11000
Equipment	31750				31750
Accumulated Depreciation-Equipment		4050		1025		5075
Accounts Payable		6700				6700
Salaries Payable		0		2000		2000
Unearned Revenue		2200	2000			200
Common Stock		45700				45700
Retained Earnings		23850				23850
Dividends	3500				3500
Revenue		80750		2500		83250
Depreciation Expense-Equipment	2000		1025		3025
Salaries Expense	4750		2000		6750
Insurance Expense	3100		1000		4100
Rent Expense	4200				4200
Supplies Expense	2500		425		2925
Utilities Expense	2150				2150
	163250	163250	6950	6950	166775	166775
Net income
INCOME STATEMENT
Revenue		83250
Operating expenses:
Depreciation Expense-Equipment	3025
Salaries Expense	6750
Insurance Expense	4100
Rent Expense	4200
Supplies Expense	2925
Utilities Expense	2150
Total operating expenses		23150
Net operating income		60100
RETAINED EARNINGS
Beginning balance		23850
Add: Net income for the year		60100
Less: Dividends		3500
Ending balance		80450
BALANCE SHEET
Current Assets:
Cash	71550
Accounts receivable	25700
Supplies	125
Prepaid insurance	11000
Total current assets		108375
Non-Current assets:
Equipment	31750
Accumulated Depreciation-Equipment	5075	26675
Total assets		135050
Current Liabilities:
Accounts Payable	6700
Salaries Payable	2000
Unearned Revenue	200
Total current liabilities		8900
Shareholders' equity:
Common Stock	45700
Retained Earnings	80450	126150
Total liabilities & shareholders' equity		135050