Question

Winter Designs was organized on January 1, 2014, by Katie Brownsey. Winter Designs records all prepaid costs as expenses and revenue received in advance as revenue. At the end of the first year of operations, the trial balance had the following accounts: WINTER DESIGNS Trial Balance December 31, 2014 Debit Credit Cash Accounts receivable Equipment Accounts payable Notes payable K. Brownsey, capital K. Brownsey, drawings Service revenue Insurance expense Rent expense Salaries expense Supplies expense $16,110 25,550 83,200 $14,550 42,200 59,860 40,490 127,962 4,272 8,840 59,850 6,260- $244,572 S244,572 Analysis reveals the following additional data 1. On February 1, 2014, the company purchased a one-year insurance policy. 2. The one-year, 6% note payable was issued on March 1, 2014, Interest and pnncipal are payable on the maturity date 3. The equipment was purchased on March 2, 2014, and has an estimated useful life of eight years. 4. At December 31, 2014, there was $810 of supplies on hand 5. At December 31, 2014, service revenue of $2,580 was unearned 6. Service revenue earned but unbilled and unrecorded at December 31, 2014, totalled $1,275 7. January 2015 rent of $680 was paid on December 31, 2014, and is indluded in Rent Expense.

Answer 1

Journal

Date	Account title	Debit	Credit
1. Dec. 31	Prepaid insurance expense	356
	Insurance expense		356
2. Dec. 31	Interest expense	2,110
	Interest payable		2,110
3. Dec. 31	Depreciation expense	8,667
	Accumulated depreciation - Equipment		8,667
4. Dec. 31	Supplies	810
	Supply expense		810
5. Dec. 31	Service revenue	2,580
	Unearned service revenue		2,580
6. Dec. 31	Accrued service revenue	1,275
	Service revenue		1,275
7. Dec. 31	Prepaid rent expense	680
	Rent expense		680

Depreciation on equipment = 83,200/8 x 10/12

= $8,667

Interest on note payable = 42,200 x 6% x 10/12

= $2,110

Prepaid insurance expense = 4,272 x 1/12

= $356

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