Question

Magda Consulting initially records prepaid and unearned items in income statement accounts. Given this QS 3-20) company's accounting practices, which of the following applies to the preparation of adjusting entries at Preparing adjustin the end of its first accounting period? P4 a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit to Consulting Fees Earned of $500 and a credit to Unearned Consulting Fees of $500. b. Unpaid salaries of $400 are recorded with a debit to Prepaid Salaries of $400 and a credit to Salaries Expense of $400. c. Office supplies purchased for the period were $1,000. The cost of unused office supplies of $650 is recorded with a debit to Supplies Expense of $650 and a credit to Office Supplies of $650. d. Earned but unbilled (and unrecorded) consulting fees for the period were $1,200, which are recorded with a debit to Unearned Consulting Fees of $1,200 and a credit to Consulting Fees Earned of $1,200.

Answer 1

a.

Debited to Consulting fees earned instead of cash. So that the adjusting entry is,

Cash	$500
Consulting Fees Earned		$500

b.

Debited to Prepaid salaries and credited to salaries expense instead of Debited to Salaries expense and credited to Salaries payable. So that adjusting entry is,

Salaries expense	$800
Prepaid salaries		$400
Salaries payable		$400

c.

Actual supplies expense should be $350 (1,000-650). Instead of $350 debited and credit to $650. Hence need to reduce $300 (650-350) from both sides. So that entry is,

Office supplies (650-350)	$300
Supplies expense		$300

d.

Debited to Unearned consulting fees instead of cash, So that adjusting entry is

Accounts receivable	$1,200
Unearned consulting Fees		$1,200