Question

Please do both

E3-31B. (Learning Objectives 2, 3: Apply the revenue and expense recognition principles; adjust the accounts) Englewood Corporation experienced four situations for its supplies, Calculate the amounts that have been left blank for each situation. For situations 1 and 2. journalize the needed transaction. Consider each situation separately. 1 $1,500 2 700 400 3 700 $ S $1,000 800 Situation Beginning supplies... Purchases of supplies during the year........ Total amount to account for ..... Ending supplies............... Supplies Expense ....................................... 2,900 1.800 (990) $1,910 $ (900) ? (700) $ 1,300 $1,600

Answer 1

Solution

Part 1 –

Situation	1	2	3	4
Beginning supplies	$1,500	$700	$700	$1,000
Purchases of supplies during the year		$400	$1,300	$800
Total amount to account for	$2,900	$1,100	$2,000	$1,800
Ending Supplies	($990)	($900)	($700)	($200)
Supplies Expense	$1,910	$200	$1,300	$1,600

The missing values are computed using the equation,

Beginning supplies + purchase of supplies = total amount to account for

Total amount to account for – ending supplies = supplies expense

Part 2:

Lauer Production Company
Account	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	18,000				18,000
Prepaid Rent	1,000			700	300
Equipment	45,000				45,000
Accumulated depreciation - equipment		6,100		950		7,050
Accounts Payable		4,300				4,300
Salaries payable				300		300
Unearned Service Revenue		8,900	7,400			1,500
Income Tax Payable				1,400		1,400
Notes payable long-term		15,000				15,000
Common Stock		8,100				8,100
Retained Earnings		15,400				15,400
Dividends	1,500				1,500
Service Revenue		13,500		7,400		20,900
Salary Expense	4,700		300		5,000
Rent Expense	1,100		700		1,800
Depreciation expense - equipment			950		950
Income tax expense			1,400		1,400
Total	71,300	71,300	10,750	10,750	73,950	73,950

Explanation for adjustments:

1. Rent expense –

Rent expense increased by 700 in adjustments, hence prepaid rent is decreased by 700.

Hence, remaining balance in prepaid expense is 1,000 – 700 = 300

2. Salaries expense is 5,000 in adjustments, hence unpaid salaries is 5,000 – 4,700 = 300
3. Service revenue is 20,900 in adjusted trial balance, hence earned portion of unearned revenue is 20,900 – 13,500 = 7,400
4. Hence, remaining balance in unearned revenue is 8,900 – 7,400 = 1,500
5. Depreciation expense in adjusted trial balance is 950, hence depreciation expense adjustments is 950 and the accumulated depreciation expense – equipment is increased by 950.
6. Income tax expense in adjustments is 1,400 hence, income tax payable is 1,400.