P3-1 A Tony Masasi started his own consulting firm, Masasi Company, Inc., on June 1, 2008.
The trial balance at June 30 is shown on page 129.
MASASI COMPANY, INC.
Trial Balance
June 30, 2008
Account Number Debit Credit
101 Cash $7,150
112 Accounts Receivable 6,000
126 Supplies 2,000
130 Prepaid Insurance 3,000
157 Office Equipment 15,000
201 Accounts Payable $ 4,500
209 Unearned Service Revenue 4,000
311 Common Stock 21,750
400 Service Revenue 7,900
726 Salaries Expense 4,000
729 Rent Expense 1,000
$38,150 $38,150
In addition to those accounts listed on the trial balance, the chart of accounts for Masasi Company,
Inc. also contains the following accounts and account numbers:No. 158 Accumulated Depreciation—
Office Equipment, No. 212 Salaries Payable,No. 244 Utilities Payable,No. 631 Supplies Expense,
No. 711 Depreciation Expense,No. 722 Insurance Expense, and No. 732 Utilities Expense.
Other data:
1. Supplies on hand at June 30 are $600.
2. A utility bill for $150 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $2,500 of unearned service revenue has been earned at the end of the month.
5. Salaries of $2,000 are accrued at June 30.
6. The office equipment has a 5-year life with no salvage value. It is being depreciated at $250
per month for 60 months.
7. Invoices representing $1,000 of services performed during the month have not been recorded
as of June 30.
Instructions
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning
account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at June 30, 2008.
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To prepare the adjusting entries for the month of June, we need to consider the additional data provided. Let's go through the data and determine the necessary adjustments:
1. Supplies on hand at June 30 are $600.
- Since supplies are considered an asset, we need to record the decrease in supplies by adjusting the Supplies account. We will debit Supplies Expense for $1,400 ($2,000 - $600) and credit Supplies for $1,400.
2. A utility bill for $150 has not been recorded and will not be paid until next month.
- Since the utility bill has been incurred but not recorded or paid, we need to adjust for the expense. We will debit Utilities Expense for $150 and credit Accounts Payable for $150.
3. The insurance policy is for a year.
- Since the insurance policy covers a period of time, we need to allocate the portion of insurance that has expired. We will debit Insurance Expense for $250 ($3,000 / 12 months) and credit Prepaid Insurance for $250.
4. $2,500 of unearned service revenue has been earned at the end of the month.
- Since the unearned service revenue has now been earned, we need to record it as revenue. We will debit Unearned Service Revenue for $2,500 and credit Service Revenue for $2,500.
5. Salaries of $2,000 are accrued at June 30.
- Since the salaries have been earned but not yet paid, we need to record the expense and the corresponding liability. We will debit Salaries Expense for $2,000 and credit Salaries Payable for $2,000.
6. The office equipment has a 5-year life with no salvage value. It is being depreciated at $250 per month for 60 months.
- Since the office equipment is being depreciated over a period of time, we need to recognize the depreciation expense. We will debit Depreciation Expense for $250 and credit Accumulated Depreciation—Office Equipment for $250.
7. Invoices representing $1,000 of services performed during the month have not been recorded as of June 30.
- Since the services have been performed but not recorded, we need to recognize the revenue. We will debit Accounts Receivable for $1,000 and credit Service Revenue for $1,000.
Now that we've determined the adjusting entries, we can move on to posting them to the ledger accounts. We will use the account numbers provided to locate the appropriate accounts.
Finally, based on the adjusted ledger balances, we can prepare an adjusted trial balance at June 30, 2008 by listing all the account names and their adjusted balances. The adjusted trial balance should ensure that the total of the debit balances equals the total of the credit balances.
Please note that to complete the actual journal entries, posting, and adjusted trial balance, you would need the actual account balances and a ledger. The information provided is only a sample trial balance and additional data relevant to the adjusting entries.