Question

In: Accounting

Rainmaker Environmental Consultants is just finishing its second year of operations. The company’s unadjusted trial balance...

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

Unadjusted Trial Balance

October 31, 2011

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.

Solutions

Expert Solution

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)

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