Question

Problem #1. Adjusting Journal Entries (SHOW YOUR WORK)

Mr. Sky started his own pharmaceutical firm to discover new drugs to make people’s lives better, SkyPVP Inc., on May 1, 2020. The trial balance at May 31 is as follows.

SKYPVP INC. Trial Balance May 31, 2020

Acc. No. Debit Credit

101 Cash 4,500

112 Accounts Receivable 6,000

126 Supplies 1,900

130 Prepaid Insurance 3,600

149 Equipment 11,400

201 Accounts Payable 4,500

209 Unearned Service Revenue 2,000

301 Owner’s Capital 18,700

400 Service Revenue 9,500

726 Salary & Wages Expenses 6,400

729 Rent Expense 900

Total 34,700 (Dr.) 34,700 (Cr.)

In addition to those accounts listed on the trial balance, the chart of accounts for Meteor Inc. also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 631 Supplies Expense, No. 717 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense. Other data: 1. $900 of supplies have been used during the month. 2. Utilities expense incurred but not paid on May 31, 2018, $250. 3. The insurance policy is for 2 years. 4. $400 of the balance in the unearned service revenue account remains unearned at the end of the month. 5. May 31 is a Wednesday, and employees are paid on Fridays. SkyPVP Inc. has two employees, who are paid $920 each for a 5-day work week. 6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $190 per month for 60 months. 7. Invoices representing $1,700 of services performed during the month have not been recorded as of May 31. Instructions (a) Prepare the adjusting entries for the month of May

(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column. (c) Prepare an adjusted trial balance at May 31, 2020.

Answer 1

SKYPVP INC. Adjusting Enteries Date Particulars 31.5.2020 Supplies Expense a/c To Supplies (Supplies expensed) Dr. Debit in $ Credit in $ 900 900 Dr. 250 31.5.2020 Utilities Expense a/c To Accounts Payable (Expense accrued) 250 150 31.5.2020 Insurance Expense a/c Dr. To Prepaid Insurance (Insurance expensed) 3600/24 150 1600 31.5.2020 Unearned Service Revenue a/c Dr. To Service Revenue (Revenue recognized) 2000 - 400 1600 1104 31.5.2020 Salary & Wages Expenses a/c Dr. To Salary & Wages Payable (Salary accrued) 920 x 2 x 3/5 1104 190 31.5.2020 Depreciation Expense a/c Dr. To Accum. Depre - Equip. (To record depreciation) 190 Dr. 1700 31.5.2020 Accounts Receivable a/c To Service Revenue (Revenue on account) 1700

Worksheet For the Month ending 31.5.2020 Acc. Particulars 101 Cash 112 Accounts Receivable 126 Supplies 130 Prepaid Insurance 149 Equipment 150 Accum. Depre - Equip. 201 Accounts Payable 209 Unearned Service Revenue 212 Salary & Wages Payable 301 Owner's Capital 400 Service Revenue 726 Salary & Wages Expenses 729 Rent Expense 631 Supplies Expense 732 Utilities Expense 722 Insurance Expense 717 Depreciation Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 4500 4500 6000 1700 7700 1900 900 1000 3600 150 3450 11400 11400 190 190 4500 250 4750 2000 1600 400 1104 1104 18700 18700 9500 3300 12800 6400 1104 7504 900 900 900 250 250 150 150 190 190 34700347005894 5894 37944 37944 900

Bal. Prepaid Insurance 3600 Insurance Expense Bal. 3600 Supplies Expense 900 Bal. Supplies 150 3450 3600 900 900 900 Salary & Wages Expenses Bal. 6400 Salary & Wages Pay 1104 Bal. 7504 Bal. Supplies 1900 Supplies Expense Bal. 1900 900 7504 7504 1000 1900 Salary & Wages Payable Salary & Wages Exp: 1104 1104 1104 Accounts Payable Utilities Expense 250 Bal. 250 Bal. 1104 250 250 Depreciation Expense Accum. Depre - Equ 190 Bal. 190 Accounts Payable Bal. 4750 Utilities Expense 4750 Bal. 4500 250 4750 190 190 Accum. Depre - Equip. Depreciation Expen 190 190 2000 Bal. Service Revenue Bal. Unearned Service Revenue 1600 Bal. 400 2000 190 190 2000 Service Revenue Accounts Receivable 6000 1700 Bal. 7700 Bal. Service Revenue Bal. 7700 7700 9500 1600 1700 12800 Unearned Service 12800 Accounts Receivab 12800 Bal. Insurance Expense Prepaid Insurance 150 Bal. 150 150 150