Question

Reliable Repairs and Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Reliable Repairs and Service
Unadjusted Trial Balance
April 30, 2018
	Debit Balances		Credit Balances
Cash	12,830
Accounts Receivable	85,210
Supplies	20,530
Equipment	430,000
Accounts Payable			20,020
Unearned Fees			22,590
Common Stock			55,000
Retained Earnings			240,000
Dividends	16,940
Fees Earned			513,300
Wages Expense	119,090
Rent Expense	90,850
Utilities Expense	65,190
Miscellaneous Expense	10,270
	850,910		850,910

For preparing the adjusting entries, the following data were assembled:

Required:

• Fees earned but unbilled on April 30 were $9,290.
• Supplies on hand on April 30 were $7,580.
• Depreciation of equipment was estimated to be $12,830 for the year.
• The balance in unearned fees represented the April 1 receipt in advance for services to be provided. During April $17,850 of the services was provided.
• Unpaid wages accrued on April 30 were $1,640.

1. Journalize the adjusting entries necessary on April 30, 2018.

a.
b.
c.
d.
e.

2. Determine the revenues, expenses, and net income of Reliable Repairs and Service before the adjusting entries.

Revenues	$
Expenses
Net income	$

3. Determine the revenues, expenses, and net income of Reliable Repairs and Service after the adjusting entries.

Revenues	$
Expenses
Net income	$

4. Determine the effect of the adjusting entries on Retained Earnings.
Retained Earnings   by $.__________

Answer 1

Requirement 1:

	Date	Account title and Explanation	Debit	Credit
a	April 30	Accounts receivable	$9,290
		Fees Earned		$9,290
		[To record accrued revenues earned]
b	April 30	Supplies Expense[20,530-7,580]	$12,950
		Supplies		$12,950
		[To record supplies expense]
c	April 30	Depreciation expense	$12,830
		Accumulated depreciation - equipment		$12,830
		[To record depreciation expense]
d	April 30	Unearned Fees	$17,850
		Fees earned		$17,850
		[To record revenue from unearned]
e	April 30	Wages expense	$1,640
		Wages payable		$1,640
		[To record accrued wages]

Requirement 2:

Before adjustments
Revenues	513,300
Expenses	285,400
Net income	227,900

Calculations:

Before Adjustments
Revenues:
Fees Earned		513,300
Expenses:
Wages Expense	119,090
Rent Expense	90,850
Utilities Expense	65,190
Miscellaneous Expense	10,270
Total Expenses		285,400
Net income		227,900

Requirement 3:

After adjustments
Revenues	540,440
Expenses	312,820
Net income	227,620

Calculations:

After Adjustments
Revenues:
Fees Earned [513,300+9,290+17,850]		540,440
Expenses:
Wages Expense [119,090+1,640]	120,730
Rent Expense	90,850
Utilities Expense	65,190
Miscellaneous Expense	10,270
Supplies Expense	12,950
Depreciation expense	12,830
Total Expenses		312,820
Net income		227,620

Requirement 4:

Effect of the adjusting entries on Retained earnings =227,620 - 227,900 = -$280