Question

PacRim Careers provides training to individuals who pay tuition directly to the business. The business also offers extension training to groups in off-site locations. Additional information available at the December 31, 2020, year-end follows:

1. An analysis of the company’s policies shows that $1,150 of insurance coverage has expired.
2. An inventory shows that teaching supplies costing $350 are on hand at the end of the year.
3. The estimated annual depreciation on the equipment is $6,750
4. The estimated annual depreciation on the professional library is $4,050.
5. The school offers off-campus services for specific employers. On November 1, the company agreed to do a special six-month course for a client. The contract calls for a monthly fee of $750, and the client paid the first five months' revenue in advance. When the cash was received, the Unearned Extension Revenue account was credited.
6. On October 15, the school agreed to teach a four-month class for an individual for $1,100 tuition per month payable at the end of the class. The services to date have been provided as agreed, but no payment has been received.
7. The school's two employees are paid weekly. As of the end of the year, three days' wages have accrued at the rate of $130 per day for each employee.
8. The balance in the Prepaid Rent account represents the rent for three months: December, January, and February.

PACRIM CAREERS Trial Balances December 31, 2020
	Unadjusted										Adjusted
	Trial Balance							Adjustments			Trial Balance
Account		Dr.				Cr.		Dr.	Cr.		Dr.	Cr.
Cash	$	17,000
Accounts receivable		0
Teaching supplies		5,500
Prepaid insurance		1,300
Prepaid rent		5,700
Professional library		54,000
Accumulated depreciation, professional library					$	16,200
Equipment		81,000
Accumulated depreciation, equipment						27,000
Accounts payable						2,000
Salaries payable						0
Unearned extension revenue						5,300
Karoo Ashevak, capital						219,000
Karoo Ashevak, withdrawals		87,000
Tuition revenue						172,700
Extension revenue						62,500
Depreciation expense, equipment		0
Depreciation expense, professional library		0
Salaries expense		196,000
Insurance expense		0
Rent expense		34,000
Teaching supplies expense		0
Advertising expense		13,000
Utilities expense		10,200
Totals	$	504,700			$	504,700

Required:
1. Prepare the necessary annual adjusting journal entries at December 31, 2020, based on (a) to (h) above.

Analysis Component:
2. Complete the adjusted trial balance using the information in (a) through (h) above.

4. Is it ethical to ignore adjusting entries?

Answer 1

PacRim Careers Adjusting Enteries Debit in $ Cedit in $ Particulars Date 31.12.2020 Insurance expense a/c Dr. 1150 To Prepaid insurance 1150 |Insurance expensed) |31.12.2020 Teaching supplies expense a/c Dr. 5150 To Teaching supplies 5150 |(Supplies expensed) 5500 350 31.12.2020 Depreciation expense, equipment a/c 6750 To Accumulated depreciation, equipment 6750 (To record depreciation) 31.12.2020 Depreciation expense, professional library a/c 4050 To Accumulated depreciation, professional library (To record depreciation) 4050 31.12.2020 Unearned extension revenue a/c Dr. 1500 To Extension revenue 1500 (Revenue recognized) 750 x 2 31.12.2020 Accounts receivable a/c 2750 Dr. To Tuition revenue 2750 (Revenue accrued) 1100 x 2.5 31.12.2020 Salaries expense a/c To Salaries payable Dr. 780 780 |(Salary accrued) 31.12.2020 Rent expense a/c Dr, 1900 To Prepaid rent 1900 (Rent Expensed) 5700/3

Worksheet For the period ending 31.12.2020 Adjustments Debit in $ Cedit in $ Debit in $ Cedit in $ Debit in $ Cedit in $ Unadjusted Adjusted Particulars Cash 17000 17000 Accounts receivable 2750 2750 Teaching supplies 5500 5150 350 Prepaid insurance 1300 1150 150 Prepaid rent Professional library 5700 3800 1900 54000 54000 Accumulated depreciation, professional library 4050 16200 20250 Equipment Accumulated depreciation, equipment Accounts payable 6750 27000 33750 2000 2000 Salaries payable 780 780 Unearned extension revenue 1500 5300 3800 Karoo Ashevak, capital 219000 219000 Karoo Ashevak, withdrawals 87000 87000 172700 Tuition revenue 2750 175450 Extension revenue 62500 1500 64000 Depreciation expense, equipment 6750 6750 Depreciation expense, professional library 4050 4050 Salaries expense 196000 780 196780 1150 Insurance expense 1150 1900 Rent expense 34000 35900 Teaching supplies expense 5150 5150 Advertising expense 13000 13000 Utilities expense 10200 10200 Totals 504700 24030 24030 504700 519030 519030 Adjusting entries give an accurate picture of account balances as of the end of the period or cut off date. If not done accounts do not show true and fair view as the enteries have not been recorded

If the adjustments were not recorded Accounts effected Income Adjustments 1.Insurance Expense 2.Supplies expense 3.Depreciation - Equipment 4.Depreciation - professional library 5.Unearned revenue earned Balance sheet Amounts effect Income Statement Insurance expense Prepaid insurance -1150 Teaching supplies expense Teaching supplies Accumulated depre, equipment -5150 Depre exp., equipment -6750 Depre exp, professional library Accumulated depre, professional library -4050 Unearned extension revenue 1500 Extension revenue 6.Accrued Revenue Tuition revenue Accounts receivable 2750 7.Salary accrued 8.Rent expensed Salaries expense Salaries payable -780 Rent expense Prepaid rent -1900 Income would be overstated by -15530