Question

The trial balances before and after adjustment for Crane Company at October 31, 2021, which is the end of its fiscal year, are as follows: Before Adjustment Debit Credit After Adjustment Debit Credit Cash $9,185 $9,185 Accounts Receivable 8,715 9,290 Supplies 2,550 710 Prepaid Insurance 3,820 2,620 Equipment 34,110 34,110 Accumulated Depreciation Equipment $3,250 $5,545 Accounts Payable 5,770 5,770 Notes Payable 39,450 39,450 1,175 Salaries Payable 0 Interest Payable 0 475 Unearned Revenue 1,685 980 E. Crane, Capital 5,695 5,695 E. Crane, Drawings 10,370 10,370 Service Revenue 46,820 48, 100 Depreciation Expense 0 2,295 Insurance Expense 1,200 Interest Expense 1,900 1,425 15,325 Rent Expense 15,325 Salaries Expense 17,170 18,345 Supplies Expense 1,840 Totals $102,670 $102,670 $107,190 $107,190

Answer 1

Credit Date Oct. 31 Debit 575 $ Account titles Accounts receivable Service revenue (To accrue revenue for services performed but not billed or collected) $ 575 Oct. 31 $ 1,840 Supplies expense Supplies (To record supplies used) $ 1,840 Oct. 31 $ 1,200 Insurance expense Prepaid insurance (To record insurance expired) $ 1,200

Oct. 31 $ 2,295 Depreciation expense Accumulated depreciation - equipment (To record depreciation expense) $ 2,295 Oct. 31 $ 1,175 Salaries expense Salaries payable (To record accrued salaries) $ 1,175 Oct. 31 475 Interest expense Interest payable (To accrue interest expense) 475 705 Oct. 31 Unearned revenue Service revenue (To record revenue for services performed) 705

• Entry 1: Services are performed but revenue is not collected. The amount not collected is recorded as accounts receivable. Adjustment required: $9,290 - $8,715 = $575. Increase accounts receivable and service revenue by $575
• Entry 2: Supplies are stock of consumables such as cleaning supplies, printer cartridges, etc. They are written off as supplies expense once they are consumed.
• Entry 3: Prepaid insurance is the premium unexpired. One the premium is expired, decrease prepaid insurance and recognize insurance expense.
• Entry 4: Depreciation expense is accumulated in accumulated depreciation.
• Entry 5: Accrued salaries are salary expenses incurred but not paid. It is a liability.
• Entry 6: Interest accrued is the interest expenses incurred but not paid. It is a liability.
• Entry 7: Unearned revenue is the amount received in advance from the customers. It is a liability. Once the services are provided, revenue is recognized. Revenue recognized = decrease in unearned revenue = $1,685 - $980 = $705
• 
  Basic account type Increase Decrease Specific accounts in the question Assets Debit | Credit Accounts receivable, Supplies, Prepaid insurance Liabilities Credit Debit Salaries payable, Interest payable, Unearned revenue Capital Credit Debit Income Credit Debit Service revenue Expense Debit Credit Supplies expense, Insurance expense, Depreciation expense, Salaries expense, Interest expense
  
• Accumulated depreciation is a contra asset account. It has a credit balance. Increases are credited.

CRANE COMPANY Income Statement Year Ended October 31, 2021 Revenue Service revenue $ 48,100 а $ $ Expenses Depreciation expense Insurance expense Interest expense Rent expense Salaries expense Supplies expense Total expenses Net income 2,295 1,200 1,900 15,325 18,345 1,840 $ $ 40,905 7,195 $ a-b

CRANE COMPANY Statement of Owner's Equity Year Ended October 31, 2021 Beginning Balance Add: Net Income 5,695 7,195 12,890 (10,370) 2,520 $ Less: Drawings Ending Balance

$ 9,185 $ 9,290 $ 710 $ 2,620 34,110 (5,545) $ 28,565 $ 50,370 CRANE COMPANY Balance Sheet As on October 31, 2021 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment $ Less: Accumulated Depreciation - Equipment $ Total Assets Liabilities and Owner's Equity Liabilities Accounts Payable Notes Payable Salaries Payable Interest Payable Unearned Revenue Total Liabilities Owner's Equity E. Crane, Capital Total Liabilities and Owner's Equity $ $ $ $ $ $ 5,770 39,450 1,175 475 980 47,850 $ $ 2,520 50,370

• E. Crane capital account balance is from the statement of owner's equity.