) The balance in Prepaid insur
) The balance in Prepaid insurance represents a 24-month policythat went into effect on December 1, 2019. Review the unadjustedbalance in Prepaid insurance, and prepare the necessary adjustingentry, if any. 2) Based on a physical count, supplies on hand total$3,600. Review the unadjusted balance in Supplies, and prepare thenecessary adjusting entry, if any. 3) The equipment is expected tohave a 5-year useful life, and be worth about $11,000 at the end offive years. Review the unadjusted balance in Accumulateddepreciation, and prepare the necessary adjusting entry to recordthe monthly depreciation, if any. 4) On December 26, the clientpaid a $12,000 60-day fee in advance, covering December 27 toFebruary 24. Review the unadjusted balance in Unearned ConsultingRevenue, and prepare the necessary adjusting entry, if any. 5)Landscape Dreams’s employee earns $170 per day for a five-dayworkweek beginning on Monday and ending on Friday. The employee waslast paid on Friday, December 26. Review the unadjusted balance inSalaries expense, and prepare the necessary adjusting entry, ifany. 6) In the second week of December, Landscape Dreams agreed toprovide 30 days of consulting services to a local fitness club fora fixed fee of $5,100. The terms of the initial agreement call forLandscape Dreams to provide services from December 12, 2019,through January 10, 2020, or 30 days of service. The club agrees topay Landscape Dreams $5,100 on January 10, 2020, when the serviceperiod is complete. Review the unadjusted balance in Consultingrevenue, and prepare the necessary adjusting entry, if any
Answer:
1. The adjusting entry for Prepaid Insurance
December 31, 2019 Dr. Insurance Expense A/C
Cr. Prepaid Insurance A/C
(To record the insurance expenses from Dec. 1st to Dec. 31st,2019)
Note: As the amount of policy is not given in the question, tocalculate the amount of prepaid insurance, divide the policy amountby 24 as the policy is for 24 months and only one month hasexpired
2. The adjusting entry for supplies consumed during the year
December 31, 2019 Dr. Supplies Expense A/C
Cr. Supplies A/C
(To record the amount of supplies consumed duringthe period)
Note: The amount of supplies on hand total $3,600 and hence thebalance in Supplies A/C will need to be reduced to 3600. Deduct3600 from the balance in Supplies A/C and the resulting amount willbe the amount of this adjusting entry
3. The adjusting entry for Depreciation Of Equipment:
December 31, 2019 Dr. Depreciation Expense A/C
Cr. Accumulated Depreciation A/C
(To record the depreciation onequipment for December 31st, 2019)
Note: The method of depreciation given in the question appearsto be by Straight Line. To calcutae the monthly depreciation, usethe formula:
(Cost of equipment – 11000) / 5
The resulting figure will be annual depreciation. Divide annualdepreciation by 12 to get monthly depreciation.
4. The adjusting entry for unearned consulting revenue:
December 31, 2019 Dr. Unearned Consulting Revenue A/C 1000
Cr. Consulting Revenue A/C1000
(To record consultingrevenue received in advance recognizedas earned from Dec. 27 to Dec. 31st)
Note: There are 5 days from Dec. 27to Dec. 31st and the contract is for 60 days. Hence, theconsulting revenue recognizedas earned is calculated as = ($12000/60) * 5 = $1000
5. The adjusting entry for unpaid salary
December 31, 2019 Dr. Salaries Expense A/C 510
Cr. Unpaid Salaries A/C 510
(To record the unpaid salary @ $170 for3 days)
Note: The employee was lastpaid on Friday, December 26th. Dec. 27and 28 were weekend days. Hence, the adjusting entry forunpaid salary will be recorded for 3days from Dec. 29 to Dec. 31st
6. The adjusting entry for consulting revenue earned :
December 31, 2019 Dr. Accounts Receivale A/C3400
Cr. Consulting Revenue A/C3400
(To record consultingrevenue earned from Dec. 12 to Dec.31st)
Note: There are 20 days from Dec.12 to Dec. 31st and the contract is for 30 days. Hence, theconsulting revenue will be recognized as earned is calculated as = (5100 /30) * 20 = $3400
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