Preparing adjusting and closing entries [20 min]
Link Back to Chapter 3 (Adjusting Entries). Todd McKinney Magic Show’s accounting records include the following account balances as of December 31:
| 2011 | 2012 |
Prepaid rent | $ 200 | $ 3,100 |
Unearned service revenue | 1,000 | 500 |
During 2012, the business recorded the following:
a. Prepaid annual rent of $8,000.
b. Made the year-end adjustment to record rent expense of $5,100 for the year.
c. Collected $4,400 cash in advance for service revenue to be earned later.
d. Made the year-end adjustment to record the earning of $4,900 service revenue that had been collected in advance.
Requirements
1. Set up T-accounts for Prepaid rent, Rent expense, Unearned service revenue, and Service revenue. Insert beginning and ending balances for Prepaid rent and Unearned service revenue.
2. Journalize the adjusting entries a-d, and post to the accounts. Explanations are not required.
3. What is the balance in Service revenue after adjusting?
4. What is the balance in Rent expense after adjusting?
5. Journalize any required closing entries.
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