Question

Carlos Sanchez opened a business called Sanchez Engineering and recorded the following transactions in its first month of operations.

Jun.		1		Carlos Sanchez, the owner, invested $134,000 cash, office equipment with a value of $13,500, and $77,000 of drafting equipment to launch the company.
Jun.		2		The company purchased land worth $57,500 for an office by paying $18,200 cash and signing a long-term note payable for $39,300.
Jun.		2		The company purchased a portable building with $46,500 cash and moved it onto the land acquired on June 2.
Jun.		2		The company paid $8,100 cash for the premium on a 15-month insurance policy.
Jun.		7		The company completed and delivered a set of plans for a client and collected $13,000 cash.
Jun.		12		The company purchased $30,200 of additional drafting equipment by paying $18,000 cash and signing a long-term note payable for $12,200.
Jun.		14		The company completed $27,600 of engineering services for a client. This amount is to be received in 30 days.
Jun.		15		The company purchased $2,000 of additional office equipment on credit.
Jun.		17		The company completed engineering services for $25,400 on credit.
Jun.		18		The company received a bill for rent of equipment that was used on a recently completed job. The $2,150 rent cost must be paid within 30 days.
Jun.		20		The company collected $13,800 cash in partial payment from the client billed on June 14.
Jun.		21		The company paid $1,600 cash for wages to a drafting assistant.
Jun.		23		The company paid $2,000 cash to settle the account payable created on June 15.
Jun.		24		The company paid $1,350 cash for minor maintenance of its drafting equipment.
Jun.		26		Carlos Sanchez withdrew $9,820 cash from the company for personal use.
Jun.		28		The company paid $1,600 cash for wages to a drafting assistant.
Jun.		30		The company paid $3,180 cash for advertisements on the web during June.

  
For transactions a-g, review the unadjusted balance and prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred.  Descriptions of items that require adjusting entries on June 30, 2017, follow.

a) The company has completed, but not yet billed, $12,800 of engineering services for a client.

b) Straight-line depreciation on the office equipment, assuming a 5-year life and a $2,900 salvage value, is $210 per month.

c) Straight-line depreciation on the drafting equipment, assuming a 5-year life and a $11,200 salvage value, is $1,600 per month.

d) Straight-line depreciation on the building, assuming a 25-year life and a $7,500 salvage value, is $130 per month.

e) The balance in prepaid insurance represents a 15-month policy that went into effect on June 1.

f) Accrued interest on the long-term note payable is $140.

g) The drafting assistant is paid $1,600 for a 5-day work week. 2 days' wages have been incurred but are unpaid as of month-end.

Answer 1

	Adjusting entries:
	Event	Account titles and explanation			Debit	Credit
	(a)	Unearned service revenue			12800
		Service revenue				12800
		(Unbilled service recorded)
	(b)	Depreciation expense			210
		Accumulated depreciation-Office equipment				210
		(Depreciation for office equipment recorded)
	©	Depreciation expense			1600
		Accumulated depreciation-Drafting equipment				1600
		(Depreciation for drafting equipment recorded)
	(d)	Depreciation expense			7500
		Accumulated depreciation-Building				7500
		(Depreciation for building recorded)
	€	Insurance expense		(8100/15)*1	540
		Prepaid insurance				540
		(Insurance for one month expired)
	(f)	Interest expense			140
		Interest payable				140
		(Interest due on long term notes)
	(g)	Salary expenses		(1600/5)*2	640
		Salary payable				640
		(Salary unpaid)