24E_2 - Horngren'S Financial And Managerial Accounting

Question

Question : The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation—Equipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense—Equipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.

Step-by-Step Solution

Answer

Adjusting entries are as follows:

	Journal entry
Transactions	Accounts and Explanation	Debit	Credit
(a)	Accounts Receivable	$700
	Service Revenue		$700
	To record service revenue accrued
(b)	Unearned Revenue	$100
	Service Revenue		$100
	To record service revenue earned
(c)	Supplies Expense	$400
	Office Supplies		$400
	To record office supplies used
(d)	Salaries Expense	$200
	Salaries Payable		$200
	To record accrued salaries expense
(e)	Insurance Expense	$560
	Prepaid Rent		$560
	To record insurance expense
(f)	Depreciation Expense—Equipment	$120
	Accumulated Depreciation—Equipment		$120
	To record depreciation on equipment

Step-by-Step-Solution Step1: Explanation on Adjusting Entries

Adjustries entries are used to record the accrued revenues and expenses at the end of the period. 

Step2: Explanation on Adjusted Trial Balance

After the adjusting entries are recorded, it is posted into the ledger account, then the balance of these account is used to prepare adjusted trial balance.