Q 36PGA-2 - Horngren'S Financial And Managerial Accounting

Question

The unadjusted trial balance of Guthrie Inn Company at December 31, 2018, and the data needed for the adjustments follow. Adjustment data at December 31 follow: GUTHRIE INN COMPANY Unadjusted Trial Balance December 31, 2018   Account Title Prepaid Insurance Cash Debit Credit Accounts Receivable Office Supplies Building Accumulated Depreciation—Building Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Insurance Expense Depreciation Expense—Building Advertising Expense Supplies Expense Total Balance \( 13,500 \) 569,760 \( 569,760 530,000 288,950 3,600 15,500 15,100 4,600 800 \) 260,000 1,710 2,340 2,800 620 G  a. As of December 31, Guthrie had \(700 of Prepaid Insurance remaining. b. At the end of the month, Guthrie had \)500 of office supplies remaining. c. Depreciation on the building is \(1,200. d. Guthrie pays its employees weekly on Friday. Its employees earn \)1,800 for a five-day workweek. December 31 falls on Wednesday this year. e. On November 20, Guthrie contracted to perform services for a client receiving \(3,600 in advance. Guthrie recorded this receipt of cash as Unearned Revenue. As of December 31, Guthrie has \)1,600 still unearned. Requirements 1. Journalize the adjusting entries on December 31. 2. Using the unadjusted trial balance, open the accounts (use a four-column ledger) with the unadjusted balances. Post the adjusting entries to the ledger accounts. 3. Prepare the adjusted trial balance. 4. Assuming the adjusted trial balance has total debits equal to total credits, does this mean that the adjusting entries have been recorded correctly? Explain

Step-by-Step Solution

Answer

T accounts are as follows:

Cash
	$13,500
Bal.	$13,500

 

Accounts Receivable
	$15,100
Bal.	$15,100

 

Office Supplies
	$800	$300	(b)
Bal.	$500

 

Prepaid Insurance
	$4,600	$3,900	(a)
Bal.	$700

 

Building
	$530,000
Bal.	$530,000

 

Accumulated Depreciation- Equipment
		$260,000
		$1,200	(c)
		$261,200	Bal.

 

Accounts Payable
		$1,710
		$1,710	Bal.

 

Salaries Payable
		$1,080	(d)
		$1,080	Bal.

 

Unearned Revenue
(e)	$2,000	$3,600
		$1,600	Bal.

 

Common Stock
		$288,950
		$288,950	Bal.

 

Dividends
	$2,340
Bal.	$2,340

 

Service Revenue
		$15,500
		$2,000	(e)
		$17,500	Bal.

 

Salaries Expense
	$2,800
(d)	$1,080
Bal.	$3,880

 

Insurance Expense
(a)	$3,900
Bal.	$3,900

 

Depreciation Expense-Building
(c)	$1,200
Bal.	$1,200

 

Advertising Expense
	$620
Bal.	$620

 

Supplies Expense
(b)	$300
Bal,	$300

Step-by-Step-Solution Step 1: Explanation on T account

T account is prepared in the T style fortmat, which records the changes in the accounts.

Step 2: Explanation on Adjusting Entries

Adjusting entries are the year end entries, which are recorded to record the accrued revenues and expenses for the period.