Question

Consider the unadjusted trial balance of AEA Insurers at October31, 20x2, and the related month-enc adjustment data.

TRIAL BALANCE
ACCOUNT TITLE	DEBIT	CREDIT
Cash	6,300
Accounts receivable	8,000
Prepaid rent	6,000
Supplies	600
Equipment	27,000
Accumulated depreciation		3,000
Accounts payable		2,800
Salary payable
Karen Cabot, capital		38,000
Karen Cabot, withdrawals	3,600
Service revenue		9,400
Salary expense	1,400
Rent expense
Utilities expense	300
Depreciation expense
Supplies expense	_________	________
	53,200	53,200

Adjustment data:

1. Accrued service revenue at October 31, $2,000.
2. Prepaid rent expired during the month. The unadjusted prepaid balance of $6,000 relates to the period October 2002 through January 2003.
3. Supplies on hand October 31, $200.
4. Depreciation on equipment for the month. The equipment’s expected useful life is five years.
5. Accrued salary expenses at October 31 for one day only. The five-day weekly payroll is $2,000.

Required:

Write the trial balance on the work sheet provided below (part (a) answer was provided to serve as an example), prepare the adjusted trial balance of AEA Insurers at October 31, 20x2. Key each adjusting entry by letter.

Answer 1

Adjusting Entries Credit No a. Date Oct 31 Journal Entry Accounts and Explanation Accounts receivable Service Revenue (To record revenue earned but not received) Debit $2,000 $2,000 No Credit Date Oct 31 Journal Entry Accounts and Explanation Rent Expense Prepaid Rent (To adjust prepaid rent to reflect expired rent) Debit $1,500 b. $1,500 Working note: Expired Rent $6,000" 1/4 $1,500 No Credit Date Oct 31 Journal Entry Accounts and Explanation Supplies Expenses Supplies (To record adjustment for supplies used) Debit $400 C. $400 600 Working note: Beginning Balance of Supplies Less: Closing balance of Supplies Supplies Expense 200 400 Date Credit No d. Journal Entry Accounts and Explanation Depreciation Expense Accumulated Depreciation (To record depreciation on Equipment) Debit $450 Oct 31 $450 Working note: Cost of equipment $27,000 Salvage value 0 Depreciable Cost $27,000 Depreciation Depreciable per year Cost Useful life $27,000 5 $5,400 Depreciation expense $5,400 * 1 12 $450 No Credit Date Oct 31 Journal Entry Accounts and Explanation Salary Expense Salaries Payable (To record accrued wages at October 31) Debit $400 e. $400 Working note: Salaries for 5 days Salaries for 1 day $2,000 $2,000*1 5 $400

Credit $3,450 2,800 400 38,000 AEA Insurers Adjusted Trial Balance October 31, 20X2 Account Titles Debit Cash $6,300 Accounts Receivable 10,000 Prepaid Rent 4,500 Supplies 200 Equipment 27,000 Accumulated Depreciation Accounts Payable Salary Payable Karen Cobot, Capital Karen Cobot, Withdrawals 3,600 Service Revenue Salary Expense 1,800 Rent Expense 1,500 Utilities Expense 300 Depreciation Expense 450 Supplies Expense 400 $56,050 Working note: Accounts Receivable $8,000+$2,000 Prepaid Rent $6,000-$1,500 Accumulated Depreciation $3,000+$450 Salary Payable Service Revenue $9,400+$2,000 Salary Expense $1,400+$400 11,400 $56,050 $10,000 $4,500 $3,450 $400 $11,400 $1,800