Question

North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31. Account Titles Debit Credit Cash $ 12,800 Accounts Receivable 6,800 Prepaid Rent 2,560 Equipment 21,800 Accumulated Depreciation $ 1,080 Accounts Payable 1,080 Income Tax Payable 0 Common Stock 25,600 Retained Earnings 2,900 Sales Revenue 52,400 Salaries and Wages Expense 25,800 Utilities Expense 13,300 Rent Expense 0 Depreciation Expense 0 Income Tax Expense 0 Totals $ 83,060 $ 83,060 Other data not yet recorded at December 31: Rent expired during the year, $1,280. Depreciation expense for the year, $1,080. Utilities used and unpaid, $9,800. Income tax expense, $470. Prepare the adjusting journal entries required at December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

North Star

Adjusting Journal Entries:

December 31:

Rent Expense      $1,280

Prepaid Rent                      $1,280

To accrue rent for the period.

Depreciation Expense $1,080

Accumulated Depreciation           $1,080

To accrue Depreciation charge for the year.

Utilities Expense $9,800

Utilities Payable            $9,800

To accrue unpaid utilities.

Income Tax Expense $470

Income Tax Payable         $470

To accrue income tax liability.

Explanation:

Adjusting entries are journal entries that are made at the end of an accounting period to ensure that all expenses and incomes pertaining to the period are recognized in accordance with the accrual concept and the matching principle.  These accounting concepts require that all expenses incurred whether paid for or not and income whether received or not, which relate to the period, are matched respectively.