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oee [108]
3 years ago
9

On January 1, 2018, the general ledger of Dynamite Fireworks includes the following account balances: Accounts Debit Credit Cash

$ 24,100 Accounts Receivable 5,500 Supplies 3,400 Land 53,000 Accounts Payable 3,500 Common Stock 68,000 Retained Earnings 14,500 Totals $ 86,000 $ 86,000 During January 2018, the following transactions occur: January 2 Purchase rental space for one year in advance, $6,900 ($575/month). January 9 Purchase additional supplies on account, $3,800. January 13 Provide services to customers on account, $25,800. January 17 Receive cash in advance from customers for services to be provided in the future, $4,000. January 20 Pay cash for salaries, $11,800. January 22 Receive cash on accounts receivable, $24,400. January 29 Pay cash on accounts payable, $4,300. The following information is available on January 31, 2018. Rent for the month of January has expired. Supplies remaining at the end of January total $3,100. By the end of January, $3,425 of services has been provided to customers who paid in advance on January 17. Unpaid salaries at the end of January are $5,590.1Purchase rental space for one year in advance, $6,900 ($575/month).2Purchase additional supplies on account, $3,800.3Provide services to customers on account, $25,800.4Receive cash in advance from customers for services to be provided in the future, $4,000.5Pay cash for salaries, $11,800.6Receive cash on accounts receivable, $24,400.7Pay cash on accounts payable, $4,300.8Record the adjusting entry for rent. Rent for the month of January has expired.9Record the adjusting entry for supplies. Supplies remaining at the end of January total $3,100.10Record the services provided to customers who paid in advance. By the end of January, $3,425 of services has been provided to customers who paid in advance on January 17.11Record the adjustment for salaries payable. Unpaid salaries at the end of January are $5,590.12Record the entry to close the revenue accounts.13Record the entry to close the expense accounts.
Business
1 answer:
Elena-2011 [213]3 years ago
6 0

Answer:

8. Adjusting for Rent    

Rent Expense  575  

Prepaid Rent            575

9. Adjusting for suppliers    

Supplies Expense 4,100  

Supplies                           4,100

10. Adjusting for Unearned Revenue    

Unearned Revenue; 3425  

Service Revenue           3425

11. Adjusting for salaries payable    

Salaries Expense     5590  

Salaries Payable           5590

12. Closing Revenue accounts    

Service Revenue   29225  

Income Summary            29225

13. Closing expense accounts  

Income Summary    18665  

Salaries expense       17390

Supplies Expense       700

Rent Expense        575

Explanation:

8. Rent per month is $575. Since the month ended, the advance payment was expired. Therefore, prepaid rent for the first month becomes credit, and rent expense is debit. Prepaid rent is an advance payment paid to the owner for using the store temporarily. Generally, rent has to be paid at the beginning of the month. Therefore, whenever the month ends, the advance payment becomes an expense for a company.

9. Supplies Expense calculations for the month of January:

Beginning supplies      = $3,400

Add: Purchase              <u>= $3,800</u>

Total supplies at hand  = $7,200

Less: Ending supplies   <u>= $3,100</u>

Total Supplies expense= $4,100

10. Unearned and service revenue calculation:

Unearned Revenue for the month of January            = $4,000

Service provided by the company during the month = $3,425

Unearned Revenue at the end of the month               = $   575

Since the company provided services for which they took advance payment, the unearned revenue (a liability account), reduced. Therefore, unearned revenue is reversed to debit.

11. Salaries expense is an expense, therefore, it is a debit. Salaries payable is a liability, therefore, it is a credit entry. Salaries payable arises due to unpaid salaries for the employees. As there are no calculations regarding salaries expense, the amount of $5,590 is the debit for expenses (Salaries), and credit for liabilities (Salaries payable).

12. To close the revenue account, the account must be reversed. Closing entry is generally given for revenue and expense accounts. Therefore, all the revenues must be debit to income summary's credit to close the accounts. Total service revenues:

3. Provided service to the customer = $25,800

10. (ADD): Service provided to the customer who paid in advance = $ 3,425

Total: $(25,800 + 3,425) = 29,225.

13. Since the expense accounts deduct from income, therefore, income summary needs to be debit, and expense accounts need to be a credit to close the account. Therefore, all the expense accounts (Rent, salary, and supplies expenses) must be a credit to close them. Adding all the items, we can get the income summary balance.

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