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.
