Solo Ltd began operations on 1 June 2016. The trial balance at 30 June is as follows. 

In addition to those accounts listed on the trial balance, the chart of accounts for Solo Ltd also contains the following accounts: 131 Accumulated Depreciation—Office Equipment, 218 Electricity Payable, 215 Salaries Payable, 520 Depreciation Expense, 515 Insurance Expense, 530 Electricity Expense, and 505 Supplies Expense. 

Other data:

1. Supplies on hand at 30 June total $1300.

2. An electricity bill for $150 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. Services were performed during the period in relation to $2500 of Revenue Received in Advance.

5. Salaries of $1500 are owed at 30 June.

6. The office equipment has a 5-year life with no resale value and is being depreciated at $250 per month for 60 months.

7. Invoices representing $3000 of services performed during the month have not been recorded as of 30 June.

Required

(a) Prepare the adjusting entries for the month of June.

(b) Using T accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts.

(c) Prepare an adjusted trial balance as at 30 June 2016.

(d) Calculate the profit for the month

(e) Discuss the impact on profit for the current period and year and future years if the equipment was depreciated over 2 years instead of 5 years and yet the business used the equipment for 5 years.

Transcribed Image Text:

SOLO LTD Trial balance as at 30 June 2016 No. Account name 100 Cash 104 Accounts Receivable 112 113 130 200 Accounts Payable 213 Service Revenue Received in Advance 300 Share Capital 400 Service Revenue 500 Salaries Expense Rent Expense 510 Prepaid Insurance Supplies Office Equipment Debit $ 7750 6000 2 400 2 000 15 000 4 000 1 000 $38 150 Credit $ 4500 4000 21 750 7900 $38 150