Question

Milbank Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Milbank Repairs & Service

UNADJUSTED TRIAL BALANCE

June 30, 2019

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	10,350.00
2	Accounts Receivable	67,500.00
3	Supplies	16,200.00
4	Equipment	166,100.00
5	Accounts Payable		15,750.00
6	Unearned Fees		18,000.00
7	Nancy Townes, Capital		171,500.00
8	Nancy Townes, Drawing	13,500.00
9	Fees Earned		294,750.00
10	Wages Expense	94,500.00
11	Rent Expense	72,000.00
12	Utilities Expense	51,750.00
13	Miscellaneous Expense	8,100.00
14	Totals	500,000.00	500,000.00

For preparing the adjusting entries, the following data were assembled:

• Fees earned but unbilled on June 30 were $7,380.

• Supplies on hand on June 30 were $2,775.

• Depreciation of equipment was estimated to be $11,000 for the year.

• The balance in unearned fees represented the June 1 receipt in advance for services to be provided. During June, $16,500 of the services were provided.

• Unpaid wages accrued on June 30 were $3,880.

Required: 1. Journalize the adjusting entries necessary on June 30, 2019. Refer to the Chart of Accounts for exact wording of account titles.

2. Determine the revenues, expenses, and net income of Milbank Repairs & Service before the adjusting entries.

3. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries.

4. Determine the effect of the adjusting entries on Nancy Townes, Capital.

1. Journalize the adjusting entries necessary on June 30, 2019.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11

2. Determine the revenues, expenses, and net income of Milbank Repairs & Service before the adjusting entries.

Before Adjusting Entries

1	Revenues
2	Expenses
3	Net income

3. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries.

After Adjusting Entries

1	Revenues
2	Expenses
3	Net income

4. Determine the effect of the adjusting entries on Nancy Townes, Capital.

The adjusting entries net income by .

Answer 1

Milbank Repairs & Service Journal entries Date Account 30-Jun Accounts Receivable Fees Earned Credit Liabs Equity Calculation Post Ref Debit J10 $ 7,380 J10 Assets $ 7,380 $ 7,380 $ 7,380 $ 13,425 $ (13,425) =16,200-2,775 30-Jun Supplies expense Supplies J10 J10 $ 13,425 $ (13,425) $ 11,000 $ (11,000) 30-Jun Depreciation expense Accumulated Depreciation J10 $ 11,000 $ (11,000) $ 16,500 $ (16,500) 30-Jun Unearned Fees Fees Earned J10 J10 $ 16,500 $ 16,500 $ 3,880 $ (3,880) 30-Jun Wages Expense Wages Payable J10 J10 $ 3,880 $ 3,880

Below values are taken from Unadjusted and Adjusted Trial balance & Income Statement in workings

Req 2 Req3 Before Adjusting Entries After Adjusting Entries Revenues 294,750 318,630 Expenses 226,350 254,655 Net Income 68,400 63,975 4,425 =68,400-63,975 Req4 Determine the effect of the adjusting entries on Nancy Townes, Capital. The adjusting entries DECREASE Nancy Townes, Capital by $4,425 The adjusting entries DECREASE net income by $4,425

WORKINGS

Adjustments Debit Credit Unadjusted TB Debit Credit 10,350 67,500 16,200 166,100 7,380 13,425 11,000 15,750 18,000 16,500 3,880 Milbank Repairs & Service Account Names Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Unearned Fees Wages Payable Nancy Townes, Capital Nancy Townes, Drawing Fees Earned Wages Expense Rent expense Utilities Expense Supplies expense Depreciation expense Miscellaneous Expense Totals Adjusted TB Debit Credit 10,350 74,880 2,775 166,100 11,000 15,750 1,500 3,880 171,500 13,500 318,630 98,380 72,000 51,750 13,425 11,000 8,100 522,260 522,260 171,500 13,500 294,750 23,880 3,880 94,500 72,000 51,750 13,425 11,000 8,100 500,000 500,000 52,185 52,185

Milbank Repairs & Service Income Statement For the Year Ended June 30, 2019 Before Adjusting Entries After Adjusting Entries 294,750 318,630 Revenues Fees Earned Expenses Wages Expense Rent expense Utilities Expense Supplies expense Depreciation expense Miscellaneous Expense Total Expenses Net Income 94,500 72,000 51,750 98,380 72,000 51,750 13,425 11,000 8,100 254,655 63,975 8,100 226,350 68,400 4,425 =68,400-63,975