Question

Service Pro Corp. (SPC) is preparing adjustments for its September 30 year-end. For the following transactions and events, show the September 30 adjusting entries SPC would make. (if no entry is required for a transaction/event, select "No Journal Entry Require in the first account field.) a. Prepaid Insurance shows a balance of zero at September 30, but Insurance Expense shows a debit balance of $2,160, representing the cost of a three-year fire insurance policy that was purchased on September 1 of the current year b. On August 31 of this year, Cash was debited and Service Revenue was credited for $1,350. The $1,350 related to fees for a three- month period beginning September 1 of the current year. c. The company's income tax rate is 33% After making the above adjustments, SPC's net income before tax is $10,000. No income tax has been paid or recorded. View transaction list

Answer 1

Solution: A & B
	Journal Entries
	Sr. No.	Date	Account Title and Explanation	Debit	Credit
	A	September.30	Insurance Expenses ($ 2160/36 Month)	$                             60
			Prepaid Insurance		$                              60
			(To Record the insurance expenses)
	B	September.30	Uneaned Service Revenue ($1,250/3 Months)	$                          450
			Service Revenue		$                            450
			(To Record the service revenue earned)
Solution: C
	There is incorrect enries are made for insrance expenses and service earned
			Caclulation of correct Net income
			Net income before taxes	$                    10,000
			Add: Prepaid insurance shown as expenses	$                       2,160
			Less: Actual Insurance Expenses	$                           -60
			Less: Unearned Revenue credited to revenue	$                     -1,250
			Add: Actual Revenue earned	$                          450
			Corrected Net income	$                    11,300
			Income tax @ 33%	$                       3,729
	Journal entry for income tax is as below,
	Journal Entries
	Sr. No.	Date	Account Title and Explanation	Debit	Credit
	C	September.30	Income tax Expenses	$                       3,729
			Income tax Payable		$                        3,729
			(To Record the income tax expenses)