In: Accounting
Rainmaker Environmental Consultants is just finishing its second year of operations. The company’s unadjusted trial balance at October 31, 2011 follows:
Rainmaker Environmental Consultants |
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Unadjusted Trial Balance |
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October 31, 2011 |
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Account |
Debit |
Credit |
Cash |
28,000 |
|
Accounts receivable |
56,000 |
|
Interest receivable |
0 |
|
Notes receivable |
30,000 |
|
Supplies |
4,600 |
|
Prepaid insurance |
9,350 |
|
Prepaid rent |
21,000 |
|
Office furniture |
61,440 |
|
Accumulated depreciation, office furniture |
20,480 |
|
Accounts payable |
35,000 |
|
Wages payable |
0 |
|
Unearned consulting fees |
13,160 |
|
Jeff Moore, capital |
60,000 |
|
Jeff Moore, withdrawals |
16,450 |
|
Consulting fees earned |
314,600 |
|
Interest revenue |
1,400 |
|
Depreciation expense — office furniture |
0 |
|
Wages expense |
147,000 |
|
Insurance expense |
0 |
|
Rent expense |
64,000 |
|
Supplies expense |
6,800 |
|
Totals |
444,640 |
444,640 |
Rainmaker prepares adjustments each October 31. The following additional information is available on October 31, 2011:
a.It was determined that $12,000 of the unearned Consulting fees had not yet been earned.
b.It was discovered that $6,000 of the balance in consulting fees earned was for services to be performed in November.
c.The balance in the prepaid rent account represented three months of rent beginning September 1, 2011.
d.Accrued wages at October 31 totaled $6,800.
e.The office furniture was purchased on March 1, 2010, and has an estimated useful life of two years. After two years, it is expected that the furniture will be worthless.
f.Accrued consulting fees at year-end totaled $4,200.
g.Interest of $200 had accrued on the note receivable for the month of October.
h.The balance in the prepaid insurance account represents the remaining balance of a two-year policy purchased on April 1, 2010.
i.A count of the supplies on October 31 revealed a balance remaining of $900.
Required
Prepare adjusting journal entries on October 31, 2011 based on the above.
Adjusting Journal entries on October 31, 2011 | |||
a | Unearned Consulting fees | $1,160 | |
Consulting fees earned | $1,160 | ||
b | Consulting fees earned | $6,000 | |
Unearned consulting fees | $6,000 | ||
c | Rent expense | $14,000 | |
Prepaid rent | $14,000 | ||
(prepaid rent charged to expense for 2 months) | |||
d | Wages expenses | $6,800 | |
Wages payable | $6,800 | ||
e | Depreciation expense | $30,720 | |
Accumulated depreciation-office furniture | $30,720 | ||
Depreciation = $61440/2 years = $30720 | |||
f | Accrued consulting fees | $4,200 | |
Consulting fees | $4,200 | ||
g | Interest receivable | $200 | |
Interest revenue | $200 | ||
h | Insurance expense | $6,600 | |
Prepaid insurance | $6,600 | ||
Prepaid insurance for 17 months (24months-7months (apr-oct, 2010) | $9,350 | ||
Prepaid insurance per month (9350/17) | $550 | ||
Prepaid insurance for a year (550*12) | $6,600 | ||
i | Supplies expense | $3,700 | |
Supplies | $3,700 | ||
(4600-900 = $3700) |