Question

- Accrual Accounting Concepts Question 1 of 1 - /100 E Sheridan Travel Court was organized on July 1, 2021, by Betty Johnson, Betty is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Betty prepared the following income statement for her fourth quarter, which ended June 30,2022 SHERIDAN TRAVEL COURT Income Statement For the Quarter Ended June 30, 2022 Revenues Rent revenue $217,400 Operating expenses Advertising expense $4265 Salaries and wages expense 84,905 Utilities expense 920 Depreciation expense 3,020 Maintenance and repairs expense 4.125 Total operating expenses 97.235 Net income $120.165 Betty suspected that something was wrong with the statement because net income had never exceeded $30,000 in any one quarter, Knowing that you are an experienced accountant, she asks you to review the income statement and other data You first look at the trial balance. In addition to the account balances reported above in the income statement the trial balance contains the following additional selected balances at June 30, 2022 Supplies $8,600 Prepaid insurance 14400 Notes Payable 14,000

Answer 1

Adjusting entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Rent revenue			57,380
	Unearned revenue				57,380
	(for advance revenue received)
b.	Supplies expense			6755
	Supplies (8,600-1,845)			6,755
	(for supplies used)
c.	Insurance expense			3,600
	Prepaid insurance (14400*3/12)			3,600
	(for insurance expired)
d.	Advertisement expense		150
	Maintenance and repairs expense		4,675
	Utilities expense			255
	Accounts payable				5,080
	(for expense due and unpaid)
e.	Salaries and wages expense		1,240
	Salaries and wages payable	(310*4)		1240
	(for salaries and wages due)
f.	Interest expense (14,000*6%*2/12)	140
	Interest payable				140
	(for interest expense due)
g.	Income tax expenses			13,830
	Income tax payable				13,830
	(for income tax due and unpaid)
Income Statement
Revenue
Rent revenue (217,400-57,380)			160020
Operating expense
Advertisement expense (4265+150)	4415
Salaries and wages expense (84,905+1240)	86145
Utilities expense (920+255)		1175
Supplies expense			6,755
Insurance expense			3,600
Depreciation expense			3020
Maintenance and repairs expense (4125+4675)	8800
Interest expense			140
Income tax expense			13830
Total Operating expense			-1,27,880
Net Income				32,140