Question

Consider the unadjusted trial balance of London, Inc., at December 31, 2007, and the related month-end adjustment data. London, Inc., December 31, 2007 Unadjusted trial balance Accounts Dr. Cr. Cash 19,200 Account receivable 11,600 Supplies 2,200 Prepaid rent 2,400 Equipment 81,000 Accumulated depreciation- equipment 4,000 Accounts payable 3,700 Unearned service revenue 1,500 Tax payable 2,000 Salary payable 5,300 Share capital 60,000 Retained earning 28,500 Dividend 5,000 Service revenue 34,000 Salary expenses 2,700 Depreciation expenses 1,800 Supplies expenses 9,600 Rent expenses 3,500 Total 139,000 139,000 Adjustment data on December 31, 20X7: 1. Unearned service revenue that has been earned is 70%. 2. The company pays employees each Friday. The amount of the weekly payroll is $10,000 for a five-day work week. The current accounting period ends on Tuesday. 3. Supplies on hand, $1,300 4. Payment for rent during the year, $2,000. Prepaid rent ending $3,000. 5. Service revenue of $6,000 has been earned but not yet received. 6. The equipment was purchased on July 1, 20X7. The equipment’s useful life is five years. There is a residual value of $3,000. Record the depreciation. Required: 1- Prepare adjusting entries for these transactions at December 31, 20X7, for each situation. Consider each fact separately. Omit the explanation. 2- Prepare an income statement for the year ended Dec. 31, 20X7 (after updating the accounts)

Answer 1