Question

Section C: Long Exercises (20 Marks) C1 - The trial balance of Smith Company at December 31, 2019 is shown below. [SK2: 10 marks Credit Smith Company Trial Balance December 31, 2019 Accounts Debit Cash 75,000 Prepaid Insurance 165.000 Supplies 62.500 Equipment 1.800.000 Accumulated Depreciation - Equipment Notes Payable Accounts Payable Smith, Capital Smith, Drawings 180,000 Service Revenue Utilities Expense 30,000 Total 2,332,500 337,500 300,000 180,000 1.147.500 367,500 2,332,500 Other information: 1. Depreciation of equipment for December was $30,000. 2. Rent owed for the month of December but will not be paid until January, 2020 was $45.000 3. The amount of insurance that expired in the month of December was $15,000. 4. Salaries owed for the month of December but will not be paid until January, 2020 was $60,000. 5. A physical count of supplies indicates $22,500 on hand at December 31 Required: a. Prepare the adjusting entries required on December 31, 2019. (5 marks) b. Prepare the adjusted trial balance on December 31, 2019. (5 marks)

Answer 1

a. Preparation of adjusting entries required on December 31, 2019

Date	Particular	Debit($)	Credit($)
December 31, 2019	Depreciation expense a/c	30,000
	To Accumulated Depreciation		30,000
	(Being depreciation charged on equipment)
December 31, 2019	Rent expense	45,000
	To Rent Payable		45,000
	(Being rent expense charged)
December 31, 2019	Insurance	15,000
	To Prepaid Insurance		15,000
	(Being december insurance expense charged)
December 31, 2019	Salary expense	60,000
	To salary payable		60,000
	(Being salary expense charged)
December 31, 2019	Loss of Supplies(82,500-22,500)	60,000
	To Supplies		60,000
	(being reduction in value of inventory recorded)

2. Adjusted Trial Balance as on December 31, 2019

Particular	Debit	Credit
Cash	75,000
Prepaid Insurance(165,000-15,000)	150,000
Supplies	22,500
Equipment	1,800,000
Accumulated Depreciation- Equipment(337,500+30,000)		367,500
Notes Payable		300,000
Accounts Payable		180,000
Salary Payable		60,000
Rent Payable		45,000
Smith Capital		1,147,500
Smith, Drawings	180,000
Service Revenue		367,500
Utilities Expense	30,000
Depreciation	30,000
Rent Expense	45,000
Insurance	15,000
Salary	60,000
Loss of supplies	60,000
Total	2,467,500	2,467,500