Problem

Preparing Adjusting Entries and Determining Account BalancesMate Ease is an Internet datin...

Preparing Adjusting Entries and Determining Account Balances

Mate Ease is an Internet dating service. All members pay in advance to be listed in the database. Advance payments are credited to an account entitled Unearned Member Dues. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31,2011, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2011, but not for December.)

MATE EASE

UNADJUSTED TRIAL BALANCE

DECEMBER 31, 2011

Cash

$169,500

 

Unexpired insurance

12,800

 

Prepaid rent

14,600

 

Office supplies

2,160

 

Computer equipment

108,000

 

Accumulated depreciation: computer equipment

 

$ 54,000

Accounts payable

 

4,300

Notes payable

 

90,000

Interest payable

 

6,750

Income taxes payable

 

7,500

Unearned member dues

 

36,000

Capital stock

 

40,000

Retained earnings

 

28,000

Client fees earned

 

508,450

Advertising expense

17,290

 

Insurance expense

35,200

 

Rent expense

80,300

 

, Office supplies expense

18,400

 

Internet connection expense

24,000

 

Depreciation expense: computer equipment

33,000

 

Salaries expense

239,000

 

Interest expense

6,750

 

Income taxes expense

14,000

 

 

$775,000

 $775,000

Other Data

1. Records show that $21,000 of cash receipts originally recorded as unearned member dues had been earned as of December 31,2011.

2. The company purchased a six-month insurance policy on October 1,2011, for $19,200.

3. On November 1,2011, the company paid $21,900 for rent through January 31,2012.

4. Office supplies on hand at December 31 amount to $440. 

5. All computer equipment was purchased when the business first formed. The estimated life of the equipment at that time was three years (or 36 months).

6. On March 1, 2011, the company borrowed $90,000 by signing a 12-month, 10 percent note payable. The entire note, plus 12 months’ accrued interest, is due on March 1,2012.

7. Accrued but unrecorded salaries at December 31 amount to $10,500.

8. Estimated income taxes expense for the entire year totals $16,000. Taxes are due in the first quarter of 2012.

Instructions

a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation).

b. Determine that amount at which each of the following accounts will be reported in the company’s balance sheet dated December 31, 2011:

1.

Cash

7.

Accounts Payable

2.

Unexpired Insurance

8.

Notes Payable

3.

Prepaid Rent

9.

Salaries Payable

4.

Office Supplies

10.

Interest Payable

5.

Computer Equipment

11.

Income Taxes Payable

6.

Accumulated Depreciation: Computer Equipment

12.

Unearned Member Dues

c. Why doesn’t the company immediately record advance payments from customers as revenue?

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search