Question

On January 31, 2019, the general ledger of Palmer Company showed the following account balances.

ACCOUNTS
Cash	31,500
Accounts Receivable	11,250
Supplies	4,500
Prepaid Insurance	4,100
Equipment	45,750
Accum. Depr.—Equip.	0
Accounts Payable	8,350
Sadie Palmer, Capital	40,975
Fees Income	58,500
Depreciation Exp.—Equip.	0
Insurance Expense	0
Rent Expense	5,300
Salaries Expense	5,425
Supplies Expense	0

Additional information:

Supplies used during January totaled $2,850.

Expired insurance totaled $1,025.

Depreciation expense for the month was $925.

Complete the worksheet through the Adjusted Trial Balance section. Assume that every account has the normal debit or credit balance. The worksheet covers the month of January.

Answer 1

Adjusted trial balance is as under:

ACCOUNTS	Trial balance		Adjustment		Adjusted trial balance
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	31,500				31500
Accounts Receivable	11,250				11250
Supplies	4,500			2850	1650
Prepaid Insurance	4,100			1025	3075
Equipment	45,750				45750
Accum. Depr.—Equip.	0			925		925
Accounts Payable		8,350				8350
Sadie Palmer, Capital		40,975				40975
Fees Income		58,500				58500
Depreciation Exp.—Equip.	0		925		925
Insurance Expense	0		1025		1025
Rent Expense	5,300				5300
Salaries Expense	5,425				5425
Supplies Expense	0		2850		2850
Total	107825	107825	4800	4800	108750	108750

Supplies expense has to be debited and credit is given to supplies account. Hence $2850 of supplies used is given debit and credit effect both in the trial balance.

Prepaid insurance is to be credited and debit effect to be given to Insurance expense so that expired insurance effect is removed.

Depreciation expense is $925 is to be debited and accumulated depreciation is to be credited to give effect to the depreciation for the month.