Question

For each of the following separate situations, prepare the necessary accounting adjustments using the financial statement effects template.
a. Unrecorded depreciation on equipment is $720.
b. The supplies account has a balance of $3,870. Supplies still available at the end of the period total $1,100.
c. On the date for preparing financial statements, an estimated utilities expense of $430 has been in- curred, but no utility bill has yet been received or paid.
d. On the first day of the current period, rent for four periods was paid and recorded as a $3,200 increase (debit) to prepaid rent and a $3,200 decrease (credit) to cash.
e. Nine months ago, a one-year service policy was sold to a customer and the seller recorded the cash received by crediting unearned revenue for $1,872. No accounting adjustments have been prepared during the nine-month period. The seller is now preparing annual financial statement.
f. At the end of the period, employee wages of $965 have been incurred but not paid or recorded.
g. At the end of the period, $300 of interest has been earned but not yet received or recorded.

Answer 1

Answer and Explanation:

The necessary accounting adjustments using the financial statement effects template is shown below:-

Balance sheet

Transaction   Cash    + Non-cash  =  Liabilities + Contributed   + Earned

                      Asset       Assets                             Capital           capital

a                                   -$720                                                        -$720  

b                                   -$2,770                                                   -$2,770

                        ($3,870 - $1,100)

c                                                            $430                               -$430

d                                   -$800                                                       -$800

                             ($3,200 ÷ 4 )

e                                                            $1,404                              $1,404

                                         ($1,872 ÷ 12 × 9)

f                                                             $965                                 $965

g                                     $300                                                       $300

Income Statement

Revenue            -         Expenses         =           Net income

                                     $720                             -$720

                                      $2,770                          -$2,770

                                       $430                            -$430

                                        $800                           -$800

$1,404                                                                   $1,404

                                        $965                             -$965

$300                                                                        $300