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Starbellies Tattoo Parlor LLC is completing the accounting process for its year ended 12/31/11....

Question:

Starbellies Tattoo Parlor LLC is completing the accounting process for its year ended 12/31/11. The transactions for the year have been journalized and posted. Information for adjusting entries appears below.

a. The supplies account shows a balance of $1,050. A count of supplies revealed $310 worth on hand at 12/31/11

b. A one-year insurance policy was purchased for $1,500 on 12/1/11. It was recorded as Prepaid Insurance at that time.

c. Office equipment depreciates at a rate of $600 per year. The equipment has been owned all year

d. A client paid $11,000 in advance for services to be rendered later. Three-tenths (30%) of the amount recorded as Unearned Revenue was earned as of 12/31/11

e. Accrued salaries at 12/31/11 are $1,500

f. Starbellies has completed $440 of work for which it has neither received cash nor billed the client.

(a) For each of the adjusting items (a-f prepare the adjusting journal entry that would be required at 12/31/11. (Omit the "$" sign in your response.)

Adjusting Entries

Adjusting entries are the set of journal entries made at the end of the accounting period or after the trial balance has been prepared, to update and reflect the correct income and expense balances in the income statement.

Answer and Explanation:

a. The supplies account shows a balance of $1,050. A count of supplies revealed $310 worth on hand at 12/31/11

Accounts Debit Credit
Supplies Expense (1,050 - 310) 740
Prepaid Supplies 740

b. A one-year insurance policy was purchased for $1,500 on 12/1/11. It was recorded as Prepaid Insurance at that time.

Accounts Debit Credit
Insurance Expense (1,500 x 1/12) 125
Prepaid Insurance 125

c. Office equipment depreciates at a rate of $600 per year. The equipment has been owned all year

Accounts Debit Credit
Depreciation Expense 600
Accumulated Depreciation 600

d. A client paid $11,000 in advance for services to be rendered later. Three-tenths (30%) of the amount recorded as Unearned Revenue was earned as of 12/31/11

Accounts Debit Credit
Unearned Revenue (11,000 x 30%) 3,300
Service Revenue 3,300

e. Accrued salaries at 12/31/11 are $1,500

Accounts Debit Credit
Salaries Expense 1,500
Salaries Payable 1,500

f. Starbellies has completed $440 of work for which it has neither received cash nor billed the client.

Accounts Debit Credit
Accounts Receivable 440
Service Revenue 440

Learn more about this topic:

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Adjusting Entries: Definition, Types & Examples

from Introduction to Business: Homework Help Resource

Chapter 22 / Lesson 16
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