Question

IV. Adjusting Entries and Completion of the Accounting Cycle P Inc.'s unadjusted trial balance as of 12/31/17 is provided below. Credits Debits $56,600 34,000 29,000 4,000 24,000 7.200 Cash Accounts Receivable Inventory Supplies Note Receivable Prepaid insurance Accounts Payable Unearned Service Revenue Common Stock Retained Earnings Dividends Sales Revenue Service Revenue COGS Utilities Expense Salaries Expense $32,600 18,000 120,000 11,800 6,800 179,500 29,000 124,300 23,000 82,000 Total $390,900 $390,900 Analysis reveals the following additional information: a) A physical count showed that supplies totaling $900 remain on hand at 12/31/17. b) Employees are owed salaries for 4 days of a 5 day workweek; weekly payroll is $20,000. c), A customer signed a one-year service gontract with SAP Inc. for $18,000 on October 1, 2017. The customer paid the full amount on that date. d) SAP Inc. paid $7,200 for 10 months of insurance coverage on September 1, 2017. e) The note receivable was received from a customer on 3/31/17, with an annual interest rate of 6%. The note and interest will not be collected until 2/1/18. interest Given the information provided above, please: 8 months 1440m 1.) Prepare the necessary December 31 year-end adjusting entries (omit the explanation) and show the calculation process when necessary (25 points).

Answer 1

The adjusted trial balance will be as follows:

	UNADJUSTED TRIAL BALANCE		ADJUSTMENTS		ADJUSTED TRIAL BALANCE
Cash	56600				56600
Accounts Receivable	34000				34000
Inventory	29000				29000
Supplies	4000			(1) 4000-900 = 3100	900
Notes Receivable	24000		(5) 1080		25080
Prepaid Insurance	7200			(4) 7200*4/10 = 2880	4320
Accounts Payable		32600				32600
Unearned service revenue		18000	(3) 18000*3/12 = 4500			13500
Common Stock		120000				120000
Retained earnings		11800				11800
Dividends	6800				6800
Sales revenue		179500				179500
Service revenue		29000		(3) 4500		33500
COGS	124300				124300
Utilities	23000				23000
Salaries	82000		(2) 16000		98000
SUPPLIES EXPENSES			(1) 3100		3100
SALARIES PAYABLE				(2) 20,000*4/5 = 16000		16000
INSURANCE EXPENSE			(4) 2880		2880
INTEREST INCOME				(5) 24000*6%*9/12 = 1080		1080
	390900	390900	27560	27560	407980	407980

The journal entries for adjustment are: (computation of amounts pls see the above table)

1	12/31/2017	Supplies expense a/c Dr	3100
		To Supplies a/c		3100
2	12/31/2017	Salaries a/c Dr	16000
		To Salaries payable a/c		16000
3	12/31/2017	Service revenue a/c Dr	4500
		To Unearned service revenue a/c		4500
4	12/31/2017	Insurance expense a/c Dr	2880
		To Prepaid Insurance a/c		2880
5	12/31/2017	Notes receivable a/c Dr	1080
		To Interest Income a/c		1080