Question

The unadjusted trial balance of Sketch Star Makers Inc., prepared as of December 31, 2018, includes the following account balances. All of the accounts listed have normal balances.Cash 14,500Accounts Receivable 2,900Supplies 2,800Prepaid Insurance 6,600Equipment 19,000Accumulated Depreciation 2,900Notes Payable (long term) 29,000Deferred Revenue 9,500Service Revenue 39,000Salaries and Wages Expense 34,500The following information is also available:A) A count of supplies revealed $1,300 worth on hand on December 31, 2018.B) An insurance policy, purchased on January 1, 2018, covers five years.C) The equipment depreciates at a rate of $1,900 per year; no depreciation has been recorded for 2018.D) One half (or 50%) of the amount recorded as Deferred Revenue remains deferred as of December 31, 2018.E) The accrued amount of salaries and wages on December 31, 2018, is $2,900.Required:Prepare the required adjustments for the company as of December 31, 2018

Answer 1

Answer:

Explanation:

The adjusting entries are shown below:

1. Supplies expense A/c Dr $1,500

         To supplies A/c $1,500

(Being supplies account is adjusted)

The supplies expense is computed by

= Supplies balance - supplies on hand

= $2,800 - $1,300

= $1,500

2. Insurance expense A/c Dr $1,320                 ($6,600 ÷ 5 years)

                To Prepaid Insurance $1,320

(Being prepaid insurance is adjusted)

3. Depreciation Expense A/c Dr $1,900

            To Accumulated Depreciation - Equipment A/c $1,900

(Being depreciation expense is recorded for 2018)

4.  Deferred revenue A/c $4,750        ($9,500 × 50%)

          To Service revenue $4,750

(Being Deferred revenue is recorded)

5. Salaries and wages expense A/c Dr $2,900

          To Salaries and wages payable A/c $2,900

(Being accrued salaries and wages are recorded)