Question

Q3. Consider the unadjusted trial balance of Aztec Ltd. at October 31, 2017, and the related month-end adjustment data. Aztec Inc. Trial Balance October 31, 2017 Credit Debit $ 16,300 7,000 4,000 600 36,000 $ 3,000 8,800 Account Cash Accounts receivable Prepaid rent Supplies Computers Accumulated depreciation Accounts payable Salary payable Share capital Retained earnings Dividend Advertising revenue Salaries expense Rent expense Utilities expense Depreciation expense Supplies expense Total 15,000 21,000 4,600 25,400 4,400 300 $ 73,200 $ 73,200 Adjustment data:

Adjustment data:

a. Accrued advertising revenue at October 31, $2,900

b. Prepaid rent expired during the month: The unadjusted prepaid balance of $4,000 relates to the period October 2017 through January 2018.

c. Supplies used during October, $200

d. Depreciation on computers for the month: The computers’ expected useful life is three years.

e. Accrued salary expense at October 31 for Monday through Thursday; the five-day weekly payroll is $2,000.

Required:

• Prepare the adjusting journal entries.
• On the worksheet (draw on EXCEL or use the template from Moodle): complete the columns for a. unadjusted TB; b. Adjusted JEs; c. Adjusted TB; d. Income Statement; e. Trial Balance after closing JEs.

Answer 1

			Unadjusted Trial balance	Item	Adjusted JEs	Adjusted trial balance	Income statement	Closing JEs	Post closing trial balance
Account title			Debit	Credit		Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash			16300					16300						16300
Accounts receivable			7000		a.	2900		9900						9900
Prepaid rent			4000		b.		1000	3000						3000
Supplies			600		c.		200	400						400
Computer			36000					36000						36000
Accumulated depreciation				3000	d.		1000		4000						4000
Accounts payable				8800					8800						8800
Salary payable					e.		1600		1600						1600
Share capital				15000					15000						15000
Retained earnings				21000					21000			4600	19800		36200
Dividends			4600					4600					4600	0
Advertising revenue				25400	a.		2900		28300		28300	28300			0
Salaries expense			4400		e.	1600		6000		6000			6000	0
Rent expense					b.	1000		1000		1000			1000	0
Utilities expense			300					300		300			300	0
Depreciation expense					d.	1000		1000		1000			1000	0
Supplies expense					c.	200		200		200			200	0
Totals			73200	73200		6700	6700	78700	78700	8500	28300
Net income										19800
Totals										28300	28300	32900	32900	65600	65600

a. Adjusting entries: Ref. Decsription Debit Credit Accounts receivable 2900 Advertising revenue 2900 (Revenue accrued) b. Rent expense (4000/4) 1000 Prepaid rent 1000 (Rent expired for October month) Supplies expense 200 Supplies 200 (Supplies used) d. Depreciation expense (36000/3)*(1/12) 1000 Accumulated depreciation 1000 (Depreciation recorded) Salaries expense 2000*(4/5) 1600 Salary payable 1600 (Salary expense accrued for 4 days-Mon to Thursday) C. e.

Debit Credit 28300 28300 8500 6000 1000 300 Closing entries: Decsription Advertising revenue Income summary (To close revenue accounts) Income summary Salaries expense Rent expense Utilities expense Depreciation expense Supplies expense (To close expense accounts) Income summary (28300-8300) Retained earnings (To close income summary) Retained earnings Dividends (To close dividend) 1000 200 19800 19800 4600 4600