Question

Barney Company Unadjusted Trial Balance December 31, 2018 Cash Accounts Receivable Supplies Prepaid Insurance Inventory Vehicle 145,000 23,000 6,500 24,000 110,000 15,000 75,000 50,000 8,000 16,900 3,000 45,000 46,000 67,600 5,000 490,000 Equipment Accumulated Depreciation Accounts Payable Unearned Revenue Wages Payable Long-Term Notes Payable Common Stock Retained Earnings (1/1/2018) Dividends Service Revenue Repair Expense Delivery Expense Depreciation Expense Rent Expense Insurance Expense Wages Expense Supplies Expense Interest Expense Income Tax Expense Total 10,000 45,000 5,000 54,000 12,000 145,000 13,000 4,000 35,000 726,500 726,500

Answer 1

Adjusting Entries: When company provided services worth $8,000 to clients that were not yet billed or recorded by Dec. 31: Dr. [1] Accounts Receivable [2] $8,000 Cr.[3] Service Revenue [4] $8,000 CREDIT DATE Dec. 31 ACCOUNT TITLES Accounts Receivable Service Revenue DEBIT $8,000 $8,000 Accounts receivable account is debited because it denotes amount is recoverable from clients; Service revenue account is credited as it denotes that service revenue is earned.

When physical count of supplies on hand Dec. 31 is $4,000, the difference between balance in Supplies account shall be decreased to $4,000. So, difference between existing balance in Supplies account and physical count balance shall be recorded as Supplies Expense. --> Difference between $6,500 and $4,000. Dr. [1] Supplies Expense [2] $2,500 Cr.[3] Supplies [4] $2,500 CREDIT DATE Dec. 31 ACCOUNT TITLES Supplies Expense | Supplies DEBIT $2,500 [$6,500 - $4,000] $2,500 Accounts receivable account is debited because it denotes amount is recoverable from clients; Service revenue account is credited as it denotes that service revenue is earned. $24,000 Unadjusted balance in prepaid insurance account Less: Prepaid insurance expired for the period Adjusted balance in prepaid insurance account $0 $24,000 ($24000 - $0] Unadjusted balance in service revenue account Add: Service revenue recorded as adjustment Adjusted balance in service revenue account $490,000 $8,000 $498,000 [$490000 + $8000]

CREDIT DEBIT $145,000 $31,000 $4,000 $24,000 $110,000 $15,000 $75,000 [$23,000 + $8,000] [As per physical count] [As calculated above] Barney Company Adjusted Trial Balance December 31, 2018 ACCOUNT TITLES Cash Accounts Receivable Supplies Perpaid Insurance Inventory Vehicle Equipment Accumulated Depreciation Accounts Payable Unearned Revenue Wages Payable Long-Term Notes Payable Common Stock Retained Earnings Dividends Service Revenue Repairs Expense Delivery Expense Depreciation Expense Rent expense Insurance expense Wages Expense Supplies Expense Interest Expense Income Tax Expense Totals amount of credits Adjusted Trial Balance $50,000 $8,000 $16,900 $3,000 $45,000 $46,000 $67,600 $5,000 $498,000 [As calculated above] $10,000 $45,000 $5,000 $54,000 $12,000 $145,000 $15,500 $4,000 $35,000 $734,500 ($13,000 + $2,500 (Ref: Adjusting entry)] $734,500