P4-2A Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012.
The trial balance at June 30 is as follows.
VOGEL CONSULTING
Trial Balance
June 30, 2012
Debit Credit
Cash $ 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,880
Supplies 2,000
Equipment 15,000
Accounts Payable $ 4,230
Unearned Service Revenue 5,200
Common Stock 22,000
Service Revenue 8,300
Salaries and Wages Expense 4,000
Rent Expense 2,000
$39,730 $39,730
In addition to those accounts listed on the trial balance, the chart of accounts for Vogel
also contains the following accounts: Accumulated Depreciation—Equipment, Utilities
Payable, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities
Expense, and Supplies Expense.
Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $4,100 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at
$250 per month for 60 months.
7. Invoices representing $3,900 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.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance
as beginning account balances. Use T accounts.
(c) Prepare an adjusted trial balance at June 30, 2012.
To prepare the adjusting entries for the month of June and the adjusted trial balance at June 30, 2012, we need to analyze the given information and apply the appropriate accounting principles. Let's go step-by-step:
(a) Adjusting Entries for June:
1. Supplies Expense: We need to calculate the supplies used during the month.
Supplies Expense = Beginning Supplies + Purchases - Ending Supplies
Supplies Expense = $2,000 + 0 - $720 = $1,280
Adjusting Entry: Debit Supplies Expense $1,280, Credit Supplies $1,280
2. Utilities Expense: We need to recognize the utility expense for the unbilled amount of $180.
Adjusting Entry: Debit Utilities Expense $180, Credit Utilities Payable $180
3. Insurance Expense: We need to allocate the prepaid insurance for the month.
Insurance Expense = Prepaid Insurance / Number of months in the policy * Number of months expired
Insurance Expense = $2,880 / 12 * 1 = $240
Adjusting Entry: Debit Insurance Expense $240, Credit Prepaid Insurance $240
4. Unearned Service Revenue: We need to recognize the revenue earned during the month.
Adjusting Entry: Debit Unearned Service Revenue $4,100, Credit Service Revenue $4,100
5. Salaries and Wages Expense: We need to accrue the unpaid salaries at the end of the month.
Adjusting Entry: Debit Salaries and Wages Expense $1,250, Credit Salaries and Wages Payable $1,250
6. Depreciation Expense: We need to record the monthly depreciation expense for the equipment.
Adjusting Entry: Debit Depreciation Expense $250, Credit Accumulated Depreciation—Equipment $250
(b) Post the Adjusting Entries to the Ledger Accounts:
To post the adjusting entries, we start with the beginning account balances from the trial balance and update them with the adjusting entry amounts.
(c) Prepare the Adjusted Trial Balance at June 30, 2012:
To prepare the adjusted trial balance, we take the ledger account balances (updated with the adjusting entries) and list them in a trial balance format.
Adjusted Trial Balance
June 30, 2012
Debit Credit
Cash $6,850
Accounts Receivable $7,000
Supplies $720
Equipment $15,000
Accumulated Depreciation—Equipment $250
Accounts Payable $4,230
Salaries and Wages Payable $1,250
Utilities Payable $180
Unearned Service Revenue $1,100
Common Stock $22,000
Service Revenue $12,400
Salaries and Wages Expense $5,250
Rent Expense $2,000
Depreciation Expense $250
Insurance Expense $240
Supplies Expense $1,280
Utilities Expense $180
Total $39,980 $39,980
Note: The total debit and credit amounts should equal each other in the adjusted trial balance if they are balanced correctly.
These are the steps required to prepare the adjusting entries, post them to the ledger accounts, and prepare an adjusted trial balance at June 30, 2012.
(a) Adjusting entries for the month of June:
1. Supplies Expense:
Debit: $2,000 (Supplies on hand – Supplies at the end of the month)
Credit: $2,000 (Supplies)
2. Utilities Expense:
Debit: $180 (Utilities Payable – Unrecorded utility bill)
Credit: $180 (Utilities Payable)
3. Insurance Expense:
Debit: $240 (Prepaid Insurance / 12 months remaining)
Credit: $240 (Insurance Expense)
4. Unearned Service Revenue:
Debit: $4,100 (Unearned Service Revenue)
Credit: $4,100 (Service Revenue)
5. Salaries and Wages Expense:
Debit: $1,250 (Salaries and Wages Payable)
Credit: $1,250 (Salaries and Wages Expense)
6. Depreciation Expense:
Debit: $250 (Accumulated Depreciation – Equipment)
Credit: $250 (Depreciation Expense)
7. Accounts Receivable:
Debit: $3,900 (Accounts Receivable)
Credit: $3,900 (Service Revenue)
(b) Posting the adjusting entries to the ledger accounts:
T accounts as of June 30, 2012:
Cash | Supplies | Accounts Payable | Unearned Service Revenue | Accumulated Depreciation—Equipment | Utilities Payable |
------------- | -------------- | ---------------- | ------------------------ | ---------------------------------- | ----------------- |
$ 6,850 | $ 280 | $ 4,230 | $ 1,100 | $ 250 | 180 |
------------- | -------------- | ---------------- | ------------------------ | ---------------------------------- | ----------------- |
Accounts Receivable | Prepaid Insurance | Equipment | Common Stock | Service Revenue | Salaries and Wages Expense | Rent Expense |
------------------- | ----------------- | --------- | ------------------- | --------------- | -------------------------- | ------------- |
$ 7,000 | $ 2,640 | $ 15,000 | $ 22,000 | $ 12,200 | $ 4,000 | $ 2,000 |
------------------- | ----------------- | --------- | ------------------- | --------------- | -------------------------- | ------------- |
(c) Adjusted trial balance at June 30, 2012:
VOGEL CONSULTING
Adjusted Trial Balance
June 30, 2012
Debit Credit
Cash $ 6,850
Accounts Receivable 10,900
Prepaid Insurance 2,640
Supplies 280
Equipment 15,000
Accumulated Depreciation—Equipment 250
Accounts Payable $ 4,230
Unearned Service Revenue 1,100
Common Stock 22,000
Service Revenue 12,200
Salaries and Wages Expense 5,250
Rent Expense 2,000
Utilities Payable 180
Depreciation Expense 250
Insurance Expense 240
Supplies Expense 2,000
Utilities Expense 180
$49,640 $49,640