Refer to the information in P3-45.

Required

a. Prepare journal entries to record the accounting adjustments.

b. Set up T-accounts for each account and post the journal entries to them.

Q3-45

Pownall Photomake Company, a commercial photography studio, completed its first year of operations on December 31. General ledger account balances before year-end adjustments follow; no adjustments have been made to the accounts at any time during the year. Assume that all balances are normal.

An analysis of the firm's records discloses the following (business began on January 1).
1. Photography services of \(\$ 1,850\) have been rendered, but customers have not yet paid or been billed. The company uses the account Fees Receivable to reflect amounts due but not yet billed.

2. Equipment, purchased January 1, has an estimated life of 10 years.
3. Utilities expense for December is estimated to be \(\$ 400\), but the bill will not arrive or be paid until January of next year. (All prior months' utilities bills have been received and paid.)
4. The balance in Prepaid Rent represents the amount paid on January 1, for a 2-year lease on the studio it operates from.
5. In November, customers paid \(\$ 2,600\) cash in advance for photos to be taken for the holiday season. When received, these fees were credited to Unearned Photography Fees. By December 31, all of these fees are earned.
6. A 3-year insurance premium paid on January 1, was debited to Prepaid Insurance.
7. Supplies still available at December 31 are \(\$ 1,020\).
8. At December 31, wages expense of \(\$ 375\) has been incurred but not yet paid or recorded.
Required

a. Prepare Pownall Photomake's unadjusted trial balance at December 31.

b. Prepare its adjusting entries using the financial statement effects template.

Transcribed Image Text:

Cash.... Accounts Receivable. Prepaid Rent.... Prepaid Insurance Supplies..... Equipment $4,300 Accounts Payable.... 3,800 12,600 Common Stock...... Photography Fees Earned Wages Expense. Utilities Expense.. Uneared Photography Fees .. 2,970 4,250 22,800 $ 4,060 2,600 24,000 34,480 11,000 3,420