Question

Sutton Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as at the end of the company's fiscal year, December 31, 2017: Credit $ Debit 60,000 13,000 800 1,000 20,000 $ 12,000 Account Titles Cash Accounts receivable Service supplies inventory Prepaid insurance Service trucks Accumulated depreciation, service trucks Other assets Accounts payable Note payable (three years; 5% due each December 31) Contributed capital (5,000 shares outstanding) Retained earnings Service revenue Other expenses, excluding income tax 11,200 3,000 20,000 28,200 7,500 77,000 41.700 Totals $ 147,700 $ 147,700 Data not yet recorded at December 31, 2017, include the following: a. Supplies inventory on December 31, 2017, reflecting $200 remaining on hand. b. Insurance expired during 2017, $400. c. Depreciation expense for 2017, $4,000. d. Wages earned by employees not yet paid on December 31, 2017, $1,100. e. Income tax expense, $7,350. Required: 1. Prepare the adjusting entries at December 31, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Sutton Inc. Trans. Adjusting Enteries Trans. Particulars Supplies Expense a/c Dr. To Supplies (Supplies expensed) 800 - 200 Debit in $ Credit in $ 600 600 Effect on Net Earnings decrease decrease decrease decrease decrease Effect on Cash N/A N/A N/A N/A N/A Dr. 400 Insurance Expense a/c To Prepaid Insurance (Insurance Expensed) 400 4000 Depreciation Expense a/c Dr. To Accum. Deprec. Service trucks (To record depreciation) 4000 d. Dr. 1100 Wages Expense a/c To Wages Payable (Wages accrued) 1100 e. Dr. 7350 Income tax Expense a/c To Income Tax Payable (Income tax accrued) 7350

Trial Balance For the period ending 31.12.2017 Particulars Cash Accounts Receivable Service Supplies Inventory Prepaid Insurance Service Trucks Accum. Deprec. Service trucks Other Assets Accounts Payable Wages Payable Income Tax Payable Note Payable Contributed Capital Retained Earnings Service Revenue Other Expenses Supplies Expense Insurance Expense Depreciation Expense Wages Expense Income tax Expense Totals Debit in $ Credit in $ 60000 13000 200 600 20000 16000 11200 3000 1100 7350 20000 28200 7500 77000 41700 600 400 4000 1100 7350 160150 160150 77000 Statement of Earnings For the period ending 31.12.2017 Revenues: Service Revenue Operating Expenses: Other Expenses Supplies Expense Insurance Expense Depreciation Expense Wages Expense 41700 600 400 4000 1100 47800 29200 -7350 21850 Income tax Expense Net Income

Statement of Retained Earnings For the period ending 31.12.2017 Beginning Balance Net Income 7500 21850 29350 Statement of Financial Position As at 31.12.2017 Assets Current Assets Cash Accounts Receivable Service Supplies Inventory Prepaid Insurance Total Current Assets 60000 13000 200 600 73800 Non Current Assets Service Trucks Accum. Deprec. Service trucks Other Assets Total Assets 20000 - 16000 4000 11200 89000 Liabilities Current Liabilities Accounts Payable Wages Payable Income Tax Payable Total Current Liabilities 3000 1100 7350 11450 Non Current Liabilities Note Payable 20000 Shareholders Equity Contributed Capital Retained Earnings Total Shareholders Equity Total Liabilites & Shareholders Equity 28200 29350 57550 89000