Case #3: Unadjusted trial balance and adjusting entries - Ralphie Co.

Unadjusted Trial Balance for Ralphie Co. for December 31, 2021

Account Debit Credit

Cash 15,000

Accounts Receivable 40,000

Allowance for Doubtful Accts 5,500

Prepaid Insurance 3,000

Inventory 30,000

Equipment 200,000

Accumulated Depreciation 60,000

Patent 80,000

Deferred Revenue 15,000

Note Payable 10,000

Common Stock 30,000

Retained Earnings 25,500

Sales Revenue 325,000

Utilities Expense 15,000

Wage Expense 45,000

Dividends 43,000

(1) Provide the adjusting entries for Manning Corp. at 12/31/21, identifying the impact to A/L/NI for each, and classifying each as an accrual or deferral.

(2) Create an adjusted trial balance 12/31/21.

(3) Provide closing entries.

(4) Create a post-closing trial balance 12/31/21.

Additional Information:

• The equipment is depreciated on a straight-line basis and was purchased on January 1, 2018. Its useful life is assumed to be 10 years with no salvage.
• The deferred revenue was booked on July 1, 2021 of this year when the client prepaid for services that will be rendered evenly over the course of one year.
• The patent was obtained on January 1, 2021 and will be amortized evenly over the course of 5 years with no salvage.
• The prepaid insurance account reflects a two-year contract that was originally paid for on July 1, 2020. For how much was the prepaid insurance contract originally purchased?

• The note payable was issued on April 1, 2021. Interest payments of 5% of the face value are due every year on March 31.
• Ralphie Co. faces a 40% tax rate and has a December 31^st fiscal year end.