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 adjusting entry, if any. 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 any 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. General Journal General Ledger Trial Balance Requirement Income Statement St Retained Earnings Balance Sheet Impact on income In chapter 2, we learned how to prepare journal entries for external transactions; transactions between the company and other entities. In this chapter, we will review the trial balance to see if the balances have remained accurate, or whether they have become inaccurate as a result of internal transactions (I.e. the use of supplies, or the use of insurance coverage). This question will review the unadjusted trial balance presented in chapter 2, and demonstrate the adjusting entry process used to ensure the accuracy of the general ledger balances prior to the preparation of financial statements. General Journal tab - For transactions 1-6, review the unadjusted balance and prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred. General Ledger tab - Each journal entry is posted automatically to the general ledger. Use the drop-down button to view the unadjusted or adjusted balances. Trial Balance tab. You may view either the unadjusted or adjusted balances by choosing from the dropdown box below. Your choice will determine the reported values on the financial statement tabs. Income Statement, Statement of Retained earnings, Balance Sheet tabs - The financial statements will display the unadjusted or adjusted balances, based on your selection. Impact on Income tab - For each adjustment, indicate the income statement and balance sheet account affected, and the impact on net income. If an adjustment caused net income to decrease, enter the amount as a negative value. Net income balne demante ran he found on the inenme statement tab. (Hint: Select unadiusted on the drondown.

Answer 1

Contract Plus Company Adjusting entries Date Account 31-Dec Insurance expense Prepaid Insurance Credit Debit $ Calculation 3000/24 months 125 $ 125 $ 1,050 4200-3150 31-Dec Supplies expense Supplies $ 1,050 $ 350 (33000-12000)/5*1/12 31-Dec Depreciation expense - Equipment Accumulated Depreciation - Equipment $ 350 $ 850 31-Dec Unearned Consulting Revenue Consulting Revenue 10200/60*5 days Dec 27 to 31 is 5 days $ 850 $ 420 31-Dec Salaries expense Salaries Payable =140*3 days 420 Dec 29 to 31 is 3 days due $ $ 2,920 31-Dec Accounts Receivable Consulting Revenue =4380/30*20 days $ 2,920 Dec 12 to 31 is 20 days

Contract Plus Company Account Names Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation - Equipment Accounts Payable Salaries Payable Unearned Consulting Revenue Common Stock Retained Earnings Dividends Consulting Revenue Rental Revenue Depreciation expense - Equipment Salaries expense Insurance expense Rent expense Supplies expense Utilities expense Totals Adjusted TB Debit Credit 24,295 2,920 3,150 2,875 33,000 350 8,200 420 9,350 42,000 1,500 13,170 500 350 2,800 125 1,600 1,050 325 73,990 73,990

13,170 500 13,670 Contract Plus Company Income Statement For the Month Ended December 31, 2019 Revenues Consulting Revenue Rental Revenue Total Revenues Expenses Depreciation expense - Equipment Salaries expense Insurance expense Rent expense Supplies expense Utilities expense Total Expenses Net Income 350 2,800 125 1,600 1,050 325 6,250 7,420 Statement of Retained Earnings For the Month Ended December 31, 2019 Retained Earnings, December 1, 2019 Add: Net Income Less: Dividends Retained Earnings, December 31, 2019 7,420 (1,500) 5,920

Contract Plus Company Balance Sheet As of December 31, 2019 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Insurance Total Current Assets 24,295 2,920 3,150 2,875 33,240 Plant Assets Equipment Accumulated Depreciation - Equipment Equipment, Net Total Assets 33,000 (350) 32,650 65,890 Liabilities & Equity Current Liabilities Accounts Payable Salaries Payable Unearned Consulting Revenue Total Liabilities 8,200 420 9,350 17,970 Equity Common Stock Retained Earnings Total Equity Total Liabilities & Equity 42,000 5,920 47,920 65,890

Impact on net income (125) (1,050) Contract Plus Company Account affecting the Adjusting entry related to Income Statement Balance Sheet Insurance Insurance expense Prepaid Insurance Supplies Supplies expense Supplies Depreciation expense- Accumulated Depreciation- Depreciation Equipment Equipment Fees collected in advance Consulting revenue Unearned Consulting revenue Salaries Salaries expense Salaries Payable Work performed in advance Consulting revenue Accounts Receivable Total impact on income due to adjustments Net income before adjustments Net income after adjustments Had no adjustments, income understated by (350) 850 (420) 2,920 1,825 5,595 Workings below 7,420 om Income 24.60% 1825/7420 ement 9,400 500 9,900 Workings Net income before adjustments Consulting Revenue Rental Revenue Total Revenues Expenses Salaries expense Rent expense Utilities expense Total Expenses Net income before adjustments 2,380 1,600 325 4,305 5,595