Question

Allentown Services Inc. is preparing adjusting entries for the year ending December 31, 2019. The following data are available: a. Interest is owed at December 31, 2019, on a 6-month, 8% note. Allentown borrowed $106,800 from NBD on September 1, 2019 b. Allentown provides daily building maintenance services to Mack Trucks for a quarterly fee of $2,900, payable on the fifteenth of the month following the end of each quarter. No entries have been made for the services provided to Mack Trucks during the quarter ended December 31, and the related bill will not be sent until January 15, 2020, c. At the beginning of 2019, the cost of office supplies on hand was $820. During 2019, office supplies with a total cost of $6,480 were purchased from Office Depot and debited to office supplies inventory. On December 31, 2019, Allentown determined the cost of office supplies on hand to be $970 d. On September 23, 2019, Allentown received a $7,695 payment from Bethlehem Steel for months of maintenance services beginning on October 1, 2019. The entire amount was credited to unearned service revenue when received Required: 1. Prepare the appropriate adjusting entries at December 31, 2019. Dec. 31 Interest Expense Interest Payable (Record accrued interest) b. Dec. 31 Accounts Receivable Service Revenue (Record earned revenue) 0 c Dec 31 Supplies Expense Supplies (Record use of supplies)

Answer 1

No.	Account Titles	Debit	Credit
a	Interest Expense	$              2,848		=106800*8%*4/12
	Interest Payable		$              2,848
	(Interest accrued but not paid)
b	Accounts receivable	$              2,900
	Service Revenue		$              2,900
	(Service provided but unbilled)
c	Supplies Expense	$ 6,330		=820+6480-970
	Supplies		$ 6,330
	(Office Supplies consumed during the period)
d	Unearned Revenue	$              2,565		=7695/9*3
	Service Revenue		$              2,565
	(Service revenue recognized for services provided)

2.

a	Net Income and Stockholder's Equity would be overstated and liabilities would be understated
b	Net Income and Stockholder's Equity would be understated and assets would be understated
c	Net Income and Stockholder's Equity would be overstated and assets would be overstated
d	Net Income and Stockholder's Equity would be understated and liabilities would be overstated