4.24 Adjusting entries and impact on financial statements LO3, 4

The financial year for Bankstown Rental Services ends on 30 June.

Required

1. Using the following information, make the necessary adjusting entries.

   1. The $765 telephone expense is unpaid and unrecorded at 30 June.

   2. The balance in Accumulated Depreciation at the beginning of the financial year was $51 300. Annual depreciation on equipment is estimated to be $34 200.

   3. Rent of office premises of $3165 for the 3-month period ending 31 July is due to be paid in July.

   4. Bankstown Rental Services borrowed $70 000 from Bank on 15 March. The principal, plus 8% interest, is payable on 15 September. Accrued interest on 30 June has not been recorded.

   5. Bankstown Rental Services purchased a 12-month insurance policy for $2940 on 1 November. A 24-month policy was purchased on 1 April for $6600. Both purchases were recorded by debiting Prepaid Insurance.

   6. The Supplies account had a $1500 debit balance on 1 July of the preceding year. Supplies costing $7100 were purchased during the year, and $1310 of supplies are on hand as at 30 June.

   7. On 1 June, Bankstown Rental Services received 2 months rent in advance, totalling $4660. This was recorded by a credit to Unearned Rental Revenue.

   8. The office assistant earns $280 a day. He will be paid in July for the 5-day period ending 2 July.

2. As you know, all adjusting entries affect one balance sheet account and one income statement account. Based on your adjusting entries prepared in requirement (a):

   1. calculate the increase or decrease in profit

   2. calculate the increase or decrease in total assets, total liabilities and total equity.