Question

Learning Objective 3 3. Unearned Revenue bal. $800 CR E3-24 Journalizing adjusting entries and posting to T-accounts The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, $1,500; Office Supplies, $700; Prepaid Rent, $2,240; Equipment, $8,000; Accumulated Depreciation Equipment, $0; Salaries Payable, $0; Unearned Revenue, $900; Service Revenue, $4,100; Salaries Expense, $800; Supplies Expense, $0; Rent Expense, SO; Depreciation Expense—Equipment, $0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, $700. b. Unearned revenue that has been earned, $100. c. Office Supplies on hand $300. d. Salaries owed to employees, $200. e. One month of prepaid rent has expired, $560. f. Depreciation on equipment, $120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account's adjusted balance.

Please explain your answer. Thank you.

Note: Please explain to question C why they have 400. I give you the picture.

Answer 1

The unadjusted balance of Office Supplies as at March 31 is $700 (given in the question). In the image provided by you, it is clearly stated that at the time of purchase of office supplies, the purchase of office supplies was accounted for as an asset.

The journal entry at the time of purchase would have been as follows:

Dr. Office Supplies $700

Cr. Cash $700

According to the point (c) of your question, Office supplies in hand are worth $300. This makes it evident that the office supplies worth $400 (i.e. $700 - $300) have been consumed during the year. Therefore, we need to book an expense of $400 in the current year and reduce the Office Supplies by $400 from their current unadjusted balance. The journal entry to adjust the above stated transactions shall be:

Dr. Supplies Expense $400

Cr. Office Supplies $400

This journal entry will bring down the balance of Office Supplies to $300 at the year end and book an expense of $400 for the office supplies use during the year.