Mate Ease is an Internet dating service. All members pay in advance to b e listed in the database. Advance payments are credited to an account entitled Unearned Member Dues. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31, 2015, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2015, but not for December.)

Other Data
1. Records show that $21,000 of cash receipts originally recorded as unearned member dues had been earned as of December 31, 2015.

2. The company purchased a six-month insurance policy on October 1, 2015, for $19,200.

3. On November 1, 2015, the company paid $21,900 for rent through January 31, 2016.

4. Office supplies on hand at December 31 amount to $440.

5. All computer equipment was purchased when the business first formed. The estimated life of the equipment at that time was three years (or 36 months).

6. On March 1, 2015, the company borrowed $90,000 by signing a 12-month, 10 percent note payable. The entire note, plus 12 months’ accrued interest, is due on March 1, 2016.

7. Accrued but unrecorded salaries at December 31 amount to $10,500.

8. Estimated income taxes expense for the entire year totals $16,000. Taxes are due in the first quarter of 2016.

Instructions

a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation).

b. Determine that amount at which each of the following accounts will be reported in the company’s balance sheet dated December 31, 2015:

1. Cash

2. Unexpired Insurance

3. Prepaid Rent

4. Office Supplies

5. Computer Equipment

6. Accumulated Depreciation: Computer Equipment

7. Accounts Payable

8. Notes Payable

9. Salaries Payable

10. Interest Payable

11. Income Taxes Payable

12. Unearned Member Dues

c. Why doesn’t the company immediately record advance payments from customers as revenue?

Transcribed Image Text:

MATE EASE UNADJUSTED TRIAL BALANCE DECEMBER 31, 2015 $169,500 Cash Unexpired insurance Prepaid rent . Office supplies . Computer equipment Accumulated depreciation: computer equipment Accounts payable Notes payable . Interest payable . Income taxes payable 12,800 14,600 2,160 108,000 $ 54,000 4,300 90,000 6,750 7,500 Unearned member dues 36,000 Capital stock ... Retained earnings 40,000 28,000 Client fees earned 508,450 Advertising expense 17,290 Insurance expense 35,200 Rent expense 80,300 ... Office supplies expense Internet connection expense 18,400 24,000 Depreciation expense: computer equipment 33,000 Salaries expense 239,000 Interest expense 6,750 Income taxes expense 14,000 $775,000 $775,000