Accounting Adjustment Entries Solution Sample

QUESTION

 

Preparing Adjusting Entries in a Worksheet

Following is the unadjusted trial balance of Skylar Gaming, Inc. at the end of its first year of operations, December 31, 20×7:

Account Name DR. CR.
Cash $71,550  
Accounts Receivable $25,200  
Supplies $550  
Prepaid Insurance $12,000  
Equipment $31,750  
Accumulated Depreciation-Equipment   $4,050
Accounts Payable   $6,700
Salaries Payable   $0
Unearned Revenue   $2,200
Common Stock   $45,700
Retained Earnings   $23,850
Dividends $3,500  
Revenue   $80,750
Depreciation Expense-Equipment $2,000  
Salaries Expense $4,750  
Insurance Expense $3,100  
Rent Expense $4,200  
Supplies Expense $2,500  
Utilities Expense $2,150  
$163,250 $163,250

The following additional information is available:

  1. Skylar Gaming, Inc. needs to accrue $2,000 in salaries that will not be paid until next month.
  2. Skylar Gaming, Inc. has earned $2,000 of the services that were paid for in advance as included in the unearned revenue account.
  3. At the end of the period, Skylar Gaming, Inc. has provided services in the amount of $500 to another customer (John Gartner). However, Skylar has not billed them yet since they only issue bills at the beginning of each month.
  4. Skylar Gaming, Inc. needs to record the annual $1,025 of depreciation on the equipment.
  5. One month of the 12-month insurance policy in prepaid insurance has been used up, and a journal entry is needed to reflect this.
  6. At the end of the period, $125 in supplies are remaining.

Required:

  1. Prepare all necessary adjusting entries at December 31, 20×7 Descriptions are not needed.
  2. Using the below linked template prepare an adjusted trial balance at December 31, 20×7.
  3. Using a worksheet template, prepare an income statement, statement of retained earnings, and a balance sheet.
  4. Prepare closing entries including descriptions.

 

ANSWER

 

 

ACT300 Principles of Accounting                    
Module 3: Critical Thinking Template                     
    Skylar Gaming, Inc. Work Sheet For Month Ended December 31, 201X            
Account (1) Unadjusted Trial balance Adjusting entries (2) Adjusted trial balance (3) Income statement (4) Balance sheet & Statement of Retained Earnings
  Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
                     
CASH 71,550   425   71,975       71,975  
ACCOUNTS RECEIVABLE 25,200   500 2,000 23,700       23,700  
SUPPLIES 550     425 125       125  
PREPAID INSURANCE 12,000     1,000.0 11,000       11,000  
EQUIPMENT 31,750       31,750       31,750  
ACCUMULATED DEPRECIATION-EQUIPMENT   4,050   1,025   5,075       5,075
ACCOUNTS PAYABLE   6,700       6,700       6,700
SALARIES PAYABLE   0   2,000   2,000       2,000
UNEARNED REVENUE   2,200 2,000     200   200    
COMMON STOCK   45,700       45,700       45,700
RETAINED EARNINGS   23,850       23,850       23,850
DIVIDENDS 3,500       3,500   3,500      
REVENUE   80,750   500   81,250   81,250    
DEPRECIATION EXP – EQUIPMENT 2,000   1,025   3,025   3,025      
SALARIES EXPENSE 4,750   2,000   6,750   6,750      
INSURANCE EXPENSE 3,100   1,000   4,100   4,100      
RENT EXPENSE 4,200       4,200   4,200      
SUPPLIES EXPENSE 2,500       2,500   2,500      
UTILITIES EXPENSE 2,150       2,150   2,150      
                     
                     
                     
                     
                     
                     
Totals 163,250 163,250     164,775 164,775 26,225 81,450 138,550 83,325
Net income             55,225     55,225
Totals             81,450 81,450 138,550 138,550
                   

 

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