Question

(Adjusting Entries and Financial Statements) The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer.

YORKIS PEREZ, CONSULTING ENGINEER
TRIAL BALANCE
DECEMBER 31, 2014

   Debit                     Credit

Cash                                                                                      $ 44,500
Accounts Receivable                                                           49,600
Allowance For Doubtful Accounts                                                             $       750
Inventory                                                                                  1,960
Prepaid Insurance                                                                  1,100
Prepaid Rent                                                                          3,750
Equipment                                                                              25,000
Accumulated Depreciation—Equipment                                                     6,250
Unearned Revenue                                                                                             15,000
Notes Payable                                                                                                         7,200
Owner’s Capital                                                                                                   35,010
Service Revenue                                                                                                103,750
Rent Expense                                                                           9,750
Salaries and Wages Expense                                            30,500
Utilities Expenses                                                                   1,080
Office Expense                                                                           720                               0      
                                                                                                $167,960             $167,960

Note: none of the below adjustments/transactions have been recorded. They are NOT reflected in the above trial balance. You’ll need to add some accounts as you record the adjustments/transactions below:

1. Provided $8,000 of the services related to the unearned revenue reflected in the trial balance. Record the adjustment.
2. Services performed for clients that were not recorded by December 31, $11,000. Record the accrued revenue.
3. Bad debt expense for the year is $2,130. Record bad debt expense.
4. Insurance expired during the year $800. Record the adjustment.
5. Equipment has a 10 year useful life and no salvage value. Record depreciation expense using the straight-line method.
6. The company took out a loan from the bank (this transaction was already recorded). It was a 90-day, 9% note for $7,200 taken out on December 1, 2014. Record the accrued interest expense for the month of December.
7. Rent on the administrative offices building is $750 per month. The company paid for 5 month’s rent on December 1, 2014 (this entry was already recorded). Record the used portion of prepaid rent at December 31, 2014.
8. Office salaries and wages earned but unpaid December 31, 2014, $2,510. Record accrued salaries and wages.
9. The owner of the company withdrew $4,000 cash for personal use.

Answer 1

Yorkis Perez, Consulting Engineer Adjusting Enteries Trans. Particulars 1 Unearned Revenue a/c To Service Revenue (Revenue reognized) Dr. Debit in $ Credit in $ 8000 8000 2 Dr. 11000 Accounts Receivable a/c To Service Revenue (Services on account) 11000 3 2130 Bad Debt expense a/c Dr. To Allowance For Doubtful Accounts (To record Bad debts) 2130 Dr. Adjusted Trial Balance For the period ending 31.12.2014 Particulars Cash Accounts Receivable Allowance For Doubtful Accounts Inventory Prepaid Insurance Prepaid Rent Equipment Accumulated Depreciation-Equipment Unearned Revenue Salaries and Wages Payable Interest Payable Notes Payable Owner's Capital Owner's Drawing Service Revenue Rent Expense Salaries and Wages Expense Utilities Expenses Office Expense Bad Debt expense Insurance Expense Depreciation Expense Interest Expense Rent Expense Totals Insurance Expense a/c To Prepaid Insurance (Insurance Expensed) 800 Debit in $ Credit in $ 40500 60600 2880 1960 300 3000 25000 8750 7000 2510 54 7200 35010 4000 122750 9750 33010 1080 720 2130 800 2500 54 750 186154 186154 800 5 2500 Depreciation Expense a/c Dr. To Accum. Depre - Equip. (To record depreciation) 25000 / 10 2500 6 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 7200 x 9% x 1/12 54 7 Dr. 750 Rent Expense a/c To Prepaid Rent (Rent expensed) 750 2510 Salaries and Wages Expense a/c Dr. To Salaries and Wages Payable (Salaries and wages accrued) 2510 9 Dr. 4000 Owner's Drawing a/c To Cash (Cash drawn for personal use) 4000

122750 Statement of Income For the period ending 31.12.2014 Service Revenue Less: Rent Expense 9750 Salaries and Wages Expense 33010 Utilities Expenses 1080 Office Expense Bad Debt expense 2130 Insurance Expense 800 Depreciation Expense 2500 Interest Expense Rent Expense 750 Net Income 720 54 50794 71956 Statement of Owner's Equity For the period ending 31.12.2014 Owner's Capital 35010 Net Income 71956 106966 Owner's Drawing -4000 102966

Amounts in $ Amounts in $ Balance sheet As at 31.12.2014 Assets Current Assets Cash Accounts Receivable Allowance For Doubtful Accounts Inventory Prepaid Insurance Prepaid Rent 7000 2510 Amounts in $ Amounts in $ Liabilities Current Liabilities 40500 Unearned Revenue 60600 Salaries and Wages Payable -2880 Interest Payable 1960 300 Non Current Liabilities 3000 103480 Notes Payable 54 9564 7200 Non Current Assets Equipment Accumulated Depreciation-Equipn Total Assets 25000 -8750 Owner's Equity 16250 Owner's Capital 119730 Total Liabilities & Equity 102966 119730