Question

Adjusting Entries The Wheel Place, Inc, began operations on March 1 to provide automotive wheel alignment and balancing services. On March 31, 2012, the undiusted balances of the firm's accounts are as follows: THE WHEEL PLACE, INC. Unadjusted Trial Balance March 31, 2012 Debit Credit Cash $1,900 Accounts Receivable 3.820 Prepaid Rent 4,770 Supplies 3,700 Equipment 36.000 Accounts Payable 2330 Unearned Service Revenue 1.000 Common Stock 38,400 Service Revenue 12360 Wages Expense 3.900 Totals $54,090 $54,090 The following information is also available: 1. The balance in Prepaid Rent was the amount paid on March 1 for the first 3 months rent. 2. Supplies on hand on March 31 were $1,920. 3. The equipment, has an estimated life of 6 years. 4. Unpaid wages at March 31 were $650, 5. Utility services used during March were estimated at $390. A bill is expected early in April 6. The balance in Unearned Service Revenue was the amount received on March 1 from a new car dealer to cover alignment and balancing services on all new cars sold by the dealer in March and April. The Wheel Place agreed to provide the services at a fixed fee of $570 each month.

Answer 1

Date	Description	Ref	Debit	Credit
Mar 31	Rent expense	1	$1590
	Prepaid rent			$1590
	(To record march month rent)
Mar 31	Supplies expense	2	$1780
	Supplies			$1780
	(To record supplies expense)
Mar 31	Depreciation expense	3	$500
	Accumulated depreciation			$500
	(To record depreciation for Mar)
Mar 31	wages expense	4	$650
	Outstanding wages			$650
	(To record unpaid wages of Mar month)
Mar 31	utility expenses	5	$390
	Outstanding utility expense			$390
	(To record estimated march utility expenses)
Mar 31	Unearned service revenue	6	$570
	Service Revenue			$570
	(To record portion of revenue received in advance that was earned in March)

Note 1: calculations of March month rent expense -

Mar month expense = Total prepaid rent / 3 months

= $4770/3 months

= $1590

Note 2: calculations of supplies expense-

Supplies expense = supplies at the beginning - supplies at the end.

= $3700 - $1920

= $1780

Note 3: calculations of Mar month depreciation expense -

Mar month depreciation expense = [(cost - salvage) /useful life in months ]× 1 month

= [($36000 - $0)/(6×12)]×1

= [$36000/72]×1

= $500×1

= $500