Question

The unadjusted trial balance of the Contracts Plus Company as of December 31 is found on the trial balance tab. The following information is required to prepare the necessary adjusting entries for the Contracts Plus Company. 1) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, if any. 2) Based on a physical count, supplies on hand total $3,150. Review the unadjusted balance in Supplies, and prepare the necessary 3) The equipment is expected to have an 5-year useful life, and be worth about $12,000 at the end of five years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if 4) On December 26, the client paid a $10,200 60-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any. 5) Contracts Plus's employee earns $140 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last paid on Friday, December 26. Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry, If any 6) In the second week of December, Contracts Plus agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $4,380. The terms of the initial agreement call for Contracts Plus to provide services from December 12, through January 10, or 30 days of service. The club agrees to pay Contracts Plus $4,380 on January 10, when the service period is complete. Review the unadjusted balance in Consulting revenue and prepare the necessary adjusting entry, if any. any

Answer 1

Prepare journal entries as follows:

Date	Account Title	Debit	Credit
Dec. 31	Insurance Expense	$125
	Prepaid Insurance		$125
	[$3000 / 24 months] * 1 month
Dec. 31	Supplies Expense	$1,050
	Supplies [$4200 - $3150]		$1,050
Dec. 31	Depreciation Expense	$350
	Accumulated depreciation		$350
	[($33000 - $12000) / 5 years ] * 1/12
Dec. 31	Unearned consulting revenue	$850
	Consulting revenue		$850
	[($10200 / 60 days] * 5 days
Dec. 31	Salaries Expense	$420
	Salaries payable		$420
	[$140 * 3 days]
Dec. 31	Accounts receivable	$2,920
	Consulting revenue		$2,920
	[$4380 * 20/30]

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Prepare adjusted trial balance:

Adjusted Trial Balance
	Debit	Credit
Cash	$24,295
Supplies	$3,150
Prepaid insurance [$3000 - $125]	$2,875
Accounts receivable	$2,920
Equipment	$33,000
Accumulated depreciation		$350
Unearned consulting revenue [$10200 - $850]		$9,350
Accounts payable		$8,200
Salaries payable		$420
Common stock		$42,000
Dividends	$1,500
Consulting revenue [$9400 + $850 + $2920]		$13,170
Rental revenue		$500
Salaries expense [$2380 + $420]	$2,800
Rent expense	$1,600
Utilities expense	$325
Insurance expense	$125
Supplies expense	$1,050
Depreciation expense	$350
Totals	$73,990	$73,990

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Income Statement
Revenue:
Consulting revenue [$9400 + $850 + $2920]		$13,170
Rental revenue		$500
Expenses:
Salaries expense [$2380 + $420]	$2,800
Rent expense	$1,600
Utilities expense	$325
Insurance expense	$125
Supplies expense	$1,050
Depreciation expense	$350	$6,250
Net Income		$7,420

Statement of retained earnings Beg Bal Add: Net Income Less: Dividends End. Bal. SO $7,420 ($1,500) $5,920

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Balance Sheet
Assets
Cash		$24,295
Supplies		$3,150
Prepaid insurance		$2,875
Accounts receivable		$2,920
Equipment	$33,000
Accumulated depreciation	($350)	$32,650
Total Assets		$65,890
Liabilities:
Unearned consulting revenue	$9,350
Accounts payable	$8,200
Salaries payable	$420
Total Liabilities		$17,970
Equity:
Common stock	$42,000
Retained earnings	$5,920
Total Equity		$47,920
Total Liabilities and Equity		$65,890