Question

The unadjusted trial balance of Cullumber Exposure Inc. had these balances for the following select accounts: Supplies $2,790, Unearned Service Revenue $7,380, and Prepaid Rent $1,080. At the end of the period, 1. A count showed $450 of supplies on hand. 2. Services of $2,610 had been performed related to the unearned revenue account. 3. One month's worth of rent, worth $360, had been consumed by Cullumber Exposure. Record the required adjusting entries related to these events. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1. 2. 3.

Answer 1

Adjusting Entries: Ref. No. 1) DEBIT $2,340 CREDIT Workings & Remarks [$2,790 - $450] $2,340 2) ACCOUNT TITLES Supplies Expense Supplies Unearned Service Revenue Service Revenue Rent Expense Prepaid Rent $2,610 3) $360 $2,610 [Given] [Prepaid rent for 1 month is expired] $360

NOTE: Adjusting entries are those journal entries that are required to be recorded at the end of respective reporting period in order to update firm's accounting records the actual revenue and expenditures for the period on accrual basis. For example, prepaid expense is an expense paid in advance by a firm for future period. It is recorded as an asset when it was paid initially. At the end of reporting period, expired portion of prepaid balance for the period shall be recorded as an expense by decreasing the prepaid expense balance to the same extent. Service revenue received in advance is 'advance received from customer(s)' by a firm for future period. It is recorded as liability (Unearned revenue) when it was received initially paid. At the end of reporting period, earned portion of service revenue for the period shall be recorded as an revenue by decreasing the advance received balance to the same extent. Accrued expenses refers to expenses incurred but payment for which are deferred as per trade agreements entered into with the vendors by customers. Irrespective of period of payments, accrued expense shall be expensed in the period in which such expense accrued. Accrued service revenue refers to service completed by by a firm during current period but payment for the same may be collected in future date as per terms agreed on the service contract entered into with the customers. It is recorded as an asset when it was accrued by recognizing revenue for the same as at the end of reporting period.