Question

The balances of the ledger accounts for a Company on November 30, 2020 are as follows:

  

Account Name	Balance
Cash	$	21,000
Accounts Receivable		10,200
Supplies		4,000
Prepaid Insurance		10,800
Equipment		12,000
Accumulated Depreciation—Equipment		−
Accounts Payable		6,800
Alicia Santiago, Capital		48,000
Alicia Santiago, Drawing		4,600
Fees Income		35,000
Advertising Expense		4,400
Rent Expense		7,200
Salaries Expense		13,200
Supplies Expense		−
Insurance Expense		−
Utilities Expense		2,400
Depreciation Expense—Equipment		−

   

Adjustment information:
(a)	The supplies were purchased on November 1, 2020. An inventory of supplies showed $2,800 on hand on November 30, 2020.
(b)	The amount of Prepaid Insurance represents a payment made November 1, 2020, for a six-month insurance policy.
(c)	The equipment, purchased November 1, 2020, has an estimated useful life of 5 years with no salvage value. The firm uses the straight-line method of depreciation.

Prepare the Trial Balance section, record the adjustments, and complete the worksheet.

Answer 1

Answer:

Trial Balance

(Before making adjustments)

Account Names	Debit	Credit
Cash	$21000
Accounts Receivables	$10200
Supplies	$4000
Prepaid Insurance	$10800
Equipment	$12000
Accounts Payables		$6800
Alicia Santiago , capital		$48000
Alicia Santiago, drawings	$4600
Fees Income		$35000
Advertising Expense	$4400
Rent Expense	$7200
Salaries Expense	$13200
Utilities Expense	$2400
TOTALS	$89800	$89800

Adjustment Journal Entries

Date	Particulars	Debit	Credit
	Supplies Expense	$1200
	Supplies		$1200
	(Supplies used in November)
	Insurance Expense	$1800
	Insurance Prepaid		$1800
	(Insurance Expense incurred)
	Depreciation Expense	$200
	Accumulated depreciation		$200
	(Depreciation on equipment)

Adjusted Trial Balance

Account Names	Debit	Credit
Cash	$21000
Accounts Receivables	$10200
Supplies	$2800
Prepaid insurance	$9000
Equipment	$12000
Accumulated depreciation-Equipment		$200
Accounts Payables		$6800
Alicia Santiago, Capital		$48000
Alicia Santiago, Drawings	$4600
Fees income		$35000
Advertising Expense	$4400
Rent Expense	$7200
Salaries Expense	$13200
Supplies Expense	$1200
Insurance Expense	$1800
Utilities Expense	$2400
Depreciation Expense- Equipment	$200
​​​​​​TOTALS	$90000	$90000

WORK SHEET

As on November 30 , 2020

Accounts	Amount($)
Fees income	($35000)
Depreciation on equipment	$200
Advertising Expense	$4400
Rent Expense	$7200
Salaries Expense	$13200
Supplies Expense	$1200
Insurance Expense	$1800
Utilities Expense	$2400
Net Income	($4600)
Retained Earnings on 01/11/2020	$0
Net income	($4600)
Dividend Declared	$0
Retained Earnings on 30/11/2020	($4600)
Cash	$21000
Accounts Receivables	$10200
Supplies	$2800
Prepaid Insurance	$9000
Equipment	$12000
TOTAL ASSETS	$55000
Accounts Payables	($6800)
Alicia Santiago, Capital	($48000)
Alicia Santiago, Drawing	$4600
Accumulated Depreciation	($200)
Retained Earnings on 30/11/2020	($4600)
TOTAL LIABILITIES AND EQUITY	($55000)

Note:

Computation of Supplies to be expensed

Supplies purchased - Supplies closing

; That is

$4000 - $2800 = $1200

Computation of prepaid Insurance closing

Prepaid insurance opening - insurance expense incurred

; That is

$10800 - $1800 = $9000

Computation of depreciation on equipment

​​​​​(Cost of Equipment / useful life )* number of month/12

; That is

($12000/5)*1/12 = $200

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