Question

Management Group, Inc., adjusts and closes its books each month. The trial balance at March 31, 2017 before adjustments is as follows:

Debit Credit Cash.......................................... 26,650

Accounts Receivable................. 30,000

Supplies..................................... 3,750

Prepaid Advertising................... 8,400

Equipment................................ 72,000

Accumulated Depreciation: Equipment 25,000

Unearned Consulting Fees............ 19,500

Capital Stock....................... 20,000

Retained Earnings................... 26,500

Consulting Fees Earned.............. 87,500

Salaries Expense.................... 32,000

Utilities Expense................... 1,200

Rent Expense........................ 4,500 _______ 178,500 178,500 ======= ========

The following information relates to month-end adjustments:

a According to contracts, consulting fees received in advance that were earned in March total $13,000.

b On January 1, 2017, the company paid in advance for 6 months' advertising in professional journals.

c At March 31, supplies on hand amount to $1,250. d The equipment has an original estimated useful life of 6 years.

Required: 1. Prepare the required adjusting entries in the journal form.

2. After the proper adjusting entry is made, what is the balance in the Unearned Consulting Fees account at March 31?

3. After closing entries on March 31, how much is the Total Stockholders’ Equity.

Answer 1

1.

Date	Accounts title	Dr	Cr
a	Unearned Consulting Fees	13000
	To Consulting Fees Earned		13000
b	advertisement expense	1400
	To Prepaid Advertising [8400 / 6 months*1 month]		1400
c	Supplies expense [3750 - 1250 ]	2500
	To Supplies		2500
d	Depreciation expense[72000 /6 * 1/12 months]	1000
	To Accumulated Depreciation: Equipment		1000

2. Beginning Unearned Consulting Fees account = $19,500

less:  Consulting Fees Earned during the year = $13,000

Unearned Consulting Fees account at March 31 = $6500

3. Total Stockholders’ Equity as on on March 31

Beginning Capital Stock and Retained Earnings [20,000 + 26500] = $46500

add: net income = $57900

Total Stockholders’ Equity as on on March 31   = $104400

Note:- Total revenue [ 87,500 +13000 ] = $100500

less: Total expenses :

Salaries Expense = 32,000

  Utilities Expense = 1,200

Rent Expense = 4,500

advertisement expense = 1400

  Supplies expense = 2500

Depreciation expense[72000 /6 *1/12] = 1000

   Net income = $57900