1. The People CPA Ltd. (Company) is an accountancy firm which provides tax advisory services to Audio World. Adjusting entries are performed on a monthly basis. Below is the unadjusted trial balance for The People CPA dated December 31, 2020. According to the balances given in this trial balance and transactions below, please fulfill following instructions;

a- (35 points)

• Prepare adjusting entries in journal and post to ledger (T accounts).

• Describe the type of adjusting entries in transactions 1 and 6.

• State the effect on the Financial Statements if adjusting entries (1&6) were not performed.

explanation

1. The company prepaid its seven-month rent agreement on July 1,2020.

2. Office supplies on hand at the end of December are found $130.

3. Depreciation for December is $300.

4. Accrued salaries but not recorded for December are $250. This amount will be paid in January 2021.

5. Accrued income taxes but not recorded for December are $500. This amount will be paid in April 2021.

6. Revenues earned but not billed and recorded in December totalled $700. This amount will be collected later.

7. Company provided tax advisory services to Audio World in December totalled $370. This amount has been paid before by Audio World.

Unadjusted Trial Balance of The People CPA.	31-Dec-2020
Accounts	Debit Balance	Credit Balance
Cash	5,515
Accounts Receivable	2,500
Office Supplies	360
Prepaid Rent	480
Equipment	6,800
Accumulated Depreciation		1,200
Accounts Payable		1,400
Unearned Revenue		460
Capital Stock		4,475
Retained Earnings		6,870
Dividends	800
Service Revenue		5,850
Rent Expense	800
Salaries Expense	3,000
Total	20,255	20,255