Question

Jake Thomas began Thomas Refinishing Service on July 1, 2019. Selected accounts are shown below as of July 31, before any adjusting entries have been made.

Unadjusted Account Balances	Debit	Credit
Prepaid rent	$5,700
Prepaid advertising	630
Supplies inventory	3,000
Performance obligation liability		$600
Refinishing fees revenue		2,500

Using the following information, prepare the adjusting entries necessary on July 31 (a) using the financial statement effects template and (b) in journal entry form. (c) Set up T-accounts for each of the ledger accounts, enter the balances above, and post the adjusting entries to them.

1. On July 1, the firm paid one year’s advance rent of $5,700 in cash.
2. On July 1, $630 cash was paid to the local newspaper for an advertisement to run daily for the months of July, August, and September.
3. Supplies still available at July 31 total $1,100.
4. At July 31, refinishing services of $800 have been performed but not yet recorded or billed to customers. The firm uses the account Fees Receivable to reflect amounts due but not yet billed.
5. A customer paid $600 in advance for a refinishing project. At July 31, the project is one-half complete.

Balance Sheet Income Statement Noncash Asset Cash Asset + 0 + 0 + Liabilities + 0 + Contrib. Capital + 0 + Earned Capital 0 Revenues - Expenses = Net Income 0 0 = 0 0 = 0 = 0 + 0 + 0 0 0 = 0 Transaction 1. Adjusting entry for rent expense. 2. Adjusting entry for advertisement expense. 3. Adjusting entry for supplies expense. 4. Adjusting entry for fees revenue. 5. Adjusting entry for fees revenue. TOTALS 0 + 0 = 0 + 0 + 0 0 - 0 = 0 0 + 0 = 0 + 0 + 0 0 - 0 = 0 0 + 0 = 0 + 0 + 0 0 = 0 0 - 0 - 0 + 0 = 0 + 0 + 0 0 = 0 0 Please answer all parts of the question.

Answer 1

1)				Balance sheet				Income statement
	Transaction (Adjustment entries only )	cash asset +	Non cash	,=	liabilities     +	contribution	earned	Revenue      -	Expenses    =	Net
			asset			capital       +	capital       +			Income
	Rent expense	0	-475						-475
	Advertisement expense	0	-210						-210
	supplies expense		-1900						-1900
	fees revenue		800					800
	fees revenue	0			-300			300
	Total	0	-1785	,=	-300			1100	-2585

2)		Journal entries
	Particular	debit	credit
1	Rent expenses A/C	475
	To prepaid rent (5700/12)		475
	To record july rent expense
2	Advertising expenses	210
	To Prepaid advertising(630/3)		210
	To record july advertisement expense
3	Supplies expenses A/C	1900
	To supplies inventory (3000-1100)		1900
	To record supplies expenses for july
4	Fees receivable	800
	To refinishing fees revenue		800
	To record unbilled revenue earned in july
5	Performance Obligation liability	300
	To fees revenue (600/2)		300
	To record advance fees earned in july

3)	Prepaid rent
Particular	Debit	Particular	Credit
Balance	5700	By rent expenses	475
		By balance	5225
	5700		5700
	Prepaid advertising
Particular	Debit	Particular	Credit
Balance	630	By adv expense	210
		by balance	420
	630		630
	Fees receivable
Particular	Debit	Particular	Credit
To refinishing fees revenue	800	by bal	800
	800		800

	Supplies
Particular	Debit	Particular	Credit
Balance	3000	By supplies expense	1900
		By balance c/d	1100
	3000		3000
	Refinishing fees reveune
Particular	Debit	Particular	Credit
To bal c/d	3600	Balance	2500
		By fees receivable	800
		By performance obligation liability	300
Performance obligation liability
Particular	Debit	Particular	Credit
To fees revenue	300	Balance	600
to balance	300
	600		600
	Supplies expenses
Particular	Debit	Particular	Credit
To supplies inventory	1900	Balance	1900
	Advertising expense
Particular	Debit	Particular	Credit
To prepaid210	balance	210
	Rent expense
Particular	Debit	Particular	Credit
To prepaid	475	balance	475