Case 1. (Learning Objective 3: Adjusting and correcting the accounts) The unadjusted trial balance of Good Times, Inc., at January 31, 20X6, does not balance. In addition, the trial balance needs to be adjusted before the financial statements at January 31, 20X6, can be prepared.

Requirements 1. How much out of balance is the trial balance? Notes Payable (the only error) is understated.
2. Good Times needs to make the following adjustments at January 31:

a. Supplies of $600 were used during January.

b. The balance of Prepaid rent was paid on January 1 and covers the whole year 20X6. No adjustment was made on January 31.

c. At January 31, Good Times owed employees $1,200.

d. Unearned service revenue of $300 was earned during January.
Prepare a corrected, adjusted trial balance. Give Notes Payable its correct balance.

Transcribed Image Text:

Cash........... 8,200 Accounts receivable......... 4,300 Supplies.......... 900 Prepaid rent.. 1,200 Land.......... 43,000 Accounts payable......... 12,100 Salary payable.......... 0 Unearned service revenue. 500 Note payable, due in three years........ 23,400 Share capital........... 5,000 Retained earnings. 9,500 Service revenue. 9,900 Salary expense. 3,600 Rent expense... Advertising expense..... Supplies expense... 0 800 0