Question

BIG CONSTRUCTION COMPANY Unadjusted Trial Balance December 31, 2020 ADIUSTED T.B. INCOME STATEMENT ADJUSTMENTS CREDIT UNADJUSTED T.B CREDIT CREDIT DEBIT DEBIT DEBIT DEBIT CREDIT ACCOUNT TITLE Cash Notes Receivable Accounts Receivable 220,000 24,000 23,000 Inventory 12/31/2020 Prepaid Insurance 47,000 4,300 Prepaid Rent 8,400 Supplies Land 2,900 28.000 Equipment Accum Deprec-Equipment Accounts Payable 90,000 18,000 28.000 12,500 75.000 Unearned Rent Revenue Mortgage Payable (Due 2022) Owner's Capital Owner's Drawings 124,000 4,700 279,000 Sales Revenue 2,100 Sales Returns and Allowances 1,900 Sales Discount 51,000 Purchases 800 Purchases and Allowances 1,200 Purchases Discount 3,000 Freight-In Rent Expense Salaries and Wages Expense 21.000 18,000 2,800 1,900 Jtilitities Expense dvertising Expense teret Expense terest Revenue 2,200 15,000 2,700 556,200 ent Revenue atals 556,200

Answer 1

Step 1: Classify each and every item of Unadjusted Trial Balance, and read every adjustment below the Trial Balance and mark it as it needs attention as follows:
Particulars	Dr	Cr	Classification
Cash	220000		Current Asset
Notes Receivale	24000		Current Asset
Accounts Receivale	23000		Current Asset
Inventory	47000		Debit to P&L
Prepaid Insurance	4300		Current Asset
Prepaid Rent	8400		Current Asset
Supplies	2900		Current Asset
Land	28000		Fixed Asset
Equipment	90000		Fixed Asset
Accumulated Depreciation		18000	(-) from Fixed Asset
Accounts Payable		28000	Current Liablities
Unearned Rent Revenue		12500	Current Liablities
Mortgage Payable (due 2022)		75000	Current Liablities
Owners Capital		124000	Capital
Owners Drawings	4700		(-) from Capital
Sales Revenue		279000	Sales (Credit of P&L)
Sales Return Revenue	2100		(-) from Sales
Sales Discount	1900		Expense (Debit to P&L)
Purchases	51000		Purchases (Debit to P&L)
Purchases and allownaces		800	(-) from Purchases
Purchase Discount		1200	Income (Credit to P&L)
Freight in	3000		Expense (Debit to P&L)
Rent Expense	21000		Expense (Debit to P&L)
Salaries and Wages	18000		Expense (Debit to P&L)
Utilities Expenses	2800		Expense (Debit to P&L)
Advertising Expense	1900		Expense (Debit to P&L)
Internet Expense	2200		Expense (Debit to P&L)
Interest Revenue		15000	Income (Credit to P&L)
Rent Revenue		2700	Income (Credit to P&L)
Total	556200	556200

Step 2: Once the classification is done, post every figure of Unadjusted Trial Balance in the Balance Sheet and make a rough P&L statement as a working note for better clarity, for whatever figures that are subject to adjustment and highlighted in red post it in the inner coloumn for making either an addition or subtraction for the adjustment. Please note that unadjusted balance sheet will have only one effect of posting it either on the balance sheet or on the profit and loss statement and adjustments will have two effects which will one effect on the balance sheet and one on the P&L statement
BALANCE SHEET OF BIG CONSTRUCTION COMPANY
Liabilities				$	$
Capital
Owners Capital				1,24,000
(-) Drawings				(4,700)
(+) Profit				1,80,800	3,00,100
Loans
Current Liabilities
Accounts Payament					28,000
Unearned Rent Revenue				12,500
(-) Earned Rent				(8,000)	4,500
Mortgage Payable					75,000
Unpaid Salaries					2,800
TOTAL					4,10,400
Assets				$	$
Fixed Asset
Land					28,000
Equipment				90,000
(-) Accumulated Depreciation				(27,000)	63,000
Current Asset
Cash					2,20,000
Notes Receivanle				24,000
(+) Interest receivable				400	24,400
Accounts receivable				23,000
(+) accrued sales				3,400	26,400
Inventory					42,000
Prepaid Insurance				4,300
(-) Expired Insurance				(2,000)	2,300
Prepaid Rent				8,400
(-) Expired Rent				(5,900)	2,500
Supplies					1,800
TOTAL					4,10,400

Particulars	Dr	Dr	Particulars	Cr	Cr
Stock		47,000
Supplies		2,900	Sales Revenue	2,79,000
Purchases	51,000		(-) Sales Return Revenue	(2,100)
(-) Purchases and Allowances	(800)	50,200	(+) Accrued Sales	3,400	2,80,300
Freight		3,000	Purchase Discount		1,200
Sales Discount		1,900	Interest Revenue	15,000
Rent	21,000		(+) Interest revenue	400	15,400
(+) Expired Rent Amount	5,900	26,900	Rent Revenue	2,700
Salaries & Wages	18,000		(+) Rent earned	8,000	10,700
(+) Unpaid	2,800	20,800	Inventory		42,000
Utilities		2,800			-
Advertising Expense		1,900			1800
Internet Expense		2,200			-
Depreciation		9,000
Insurance		2,000
Profit to be transferred to Capital		180800
Total		351400	Total		351400

Step 3: Make closing journal entries for the adjustments with Explanations
Particulars	Dr	Cr
1) Inventories stood at $ 42,000
Closing stock account	$      42,000
To Profit and Loss account		$      42,000
(Being Closing stock stood at $ 42,000)
2) Depreciation was $ 9000
Depreciation account	$         9,000
To Accumulated Depreciation account		$         9,000
(Being accumulated depreciation of $ 9000 making the existing balance of $ 18000 to $ 9000)
3) Unpaid accrued salaries of $ 2800
Wages and Salaries account	$         2,800
To Unpaid Salaries account		$         2,800
(Being Unpaid salaries of $ 2800)
4) Unexpired Rent amount $ 2,500
Rent Expense account	$         5,900
To Prepaid Rent account		$         5,900
( Since there was a prepaid of $ 8400 and unexpired amount is $ 2500, the difference of $5900 makes it $ 2500)
5) Supplies were at $ 1,800
Supplies account	$         1,800
To Profit and Loss account		$         1,800
(Being supplies at $ 1800)
6) Accrued Sales revenue $ 3,400
Accounts receivable account	$         3,400
To Sales Revenue account		$         3,400
(Being Sales accrual of $ 3,400 thereby adding to Sales and then accounts receivable)
7) Expired Insurance amount $ 2,000	$         2,000
Insurance Expense account		$         2,000
To Prepaid Insurance account
(Being Expired Insurance of 2000 which is expensed to Profit and loss and reduced from Prepaid Insurance account)
8) Interest earned of $ 400
Notes receivable accoount	$            400
To Interest Income		$            400
(Being Interest Income of $ 400 thereby adding it to Interest Income and Notes receivable)
9) Unearned rent stood at $4,500
Unearned Rent account	$         8,000
To Rent Income		$         8,000
(Being unearned rent of $12500 reducing to $ 4500 which makes a revenue of $ 8000 which is added to Income and reduced from Unearned revenue since it is now being earned)
Total	$      75,300	$      75,300