E4-20 Preparing Adjusting Entries, an Adjusted Trial Balance, and Financial Statements [LO 4-1, LO 4-2, LO 4-3 and LO 4-4]

Bills Boards (BB) is an outdoor advertising company founded by William Longfall. William knows very little accounting so he hired a friend to keep the books. Unfortunately, William did not review his friend's work and now it seems his friend has made a mess of the accounting records. William has provided you the following list of unadjusted account balances at BB's September 30 fiscal year-end. You have reviewed the balances with William and made notes shown in the right column.

BILLS BOARDS

Unadjusted Trial Balance

At September 30

Account Name Debits Credits Notes

Cash $ 13,000 This balance equals the balance reported by the bank.

Accounts Receivable 1,000 A customer ordered $1,000 of advertising services to be provided in October. The accountant recorded this service by debiting Accounts Receivable and crediting Service Revenue.

Prepaid Rent 800 Starting January 1, BB agreed to pay $1,200 cash to rent the land on which its billboards are located, for the JanuaryDecember period. The accountant adjusted this account on April 30 but has not adjusted it since.

Supplies 0 BB still has supplies costing $200 on hand on September 30.

Equipment 6,000 BB bought scaffolding and billboards in October last year.

Accumulated Depreciation $ 0 Because the equipment was bought at the beginning of the fiscal year, no depreciation is carried forward from prior years.

Accounts Payable 2,000 BB purchased and received $2,000 of supplies used for creating advertising displays. The supplier is to be paid in October.

Deferred Revenue 1,500 This balance relates to $1,500 cash paid by a customer in August for advertising from September 1November 30.

Salaries and Wages Payable 0 BBs employees are still waiting to be paid for the last half of September.

Income Tax Payable 250 BB hasnt paid the $250 tax owed from the last fiscal year.

Common Stock 1,000 BB has issued 2,000 shares for $1,000 cash.

Retained Earnings 3,750 BB started business a few years ago, so this is the total accumulated earnings up to October 1 of last year.

Service Revenue 60,700 BB has provided $2,000 of services for which it hasnt yet billed customers or recorded in its accounting records.

Salaries and Wages Expense 46,000 BBs employees earn $4,000 per month. The employees were paid in full on August 31, and were paid again on September 15.

Depreciation Expense 0 About $1,500 of the usefulness of the equipments $6,000 cost has been used up during the current fiscal year.

Rent Expense 400 BB incurs a small cost to rent the land on which its billboards are located. Rent for the current year has been paid in full.

Supplies Expense 2,000 BBs accountant expensed $2,000 of supplies purchased during the year because he assumed the supplies would be completely used by year-end. As noted above, he was wrong.

Income Tax Expense 0 BBs tax rate is 20% of income before tax.

Totals $ 69,200 $ 69,200

E4-20 Part 1

E4-20 Preparing Adjusting Entries, an Adjusted Trial Balance, and Financial Statements [LO 4-1, LO 4-2, LO 4-3 and LO 4.4) Bill's Boards (BB) is an outdoor advertising company founded by William Longfoll. William knows very little accounting so he hired a friend to keep the books." Unfortunately, William did not review his friend's work and now it seems his friend has made a mess of the accounting records. William has provided you the following list of unadjusted account balances at BB's September 30 fiscal year-end. You have reviewed the balances with William and made notes shown in the right column. BILL'S BOARDS Unadjusted Trial Balance At September 30 Account Name Debits Credits Notes Cash $ 13,000 This balance equals the balance reported by the bank. Accounts Receivable 1,000 A customer ordered $1,000 of advertising services to be provided in October. The accountant recorded this service by debiting Accounts Receivable and crediting Service Revenue. Prepaid Rent 800 Starting January 1, BB agreed to pay $1,200 cash to rent the land on which its billboards are located, for the January-December period. The accountant adjusted this account on April 30 but has not adjusted it since. Supplies 0 BB still has supplies costing $200 on hand on September 30. Equipment 6,000 BB bought scaffolding and billboards in October last year. Accumulated Depreciation $ o Because the equipment was bought at the beginning of the fiscal year, no depreciation is carried forward from prior years. Accounts Payable 2,000 BB purchased and received $2,000 of supplies used for creating advertising displays. The supplier is to be paid in October. Deferred Revenue 1,500 This balance relates to $1,500 cash paid by a customer in August for advertising from September 1-November 30. Salaries and Mages Payable O's employees are still waiting to be paid for the last half of September. Income Tax Payable 250 BB hasn't paid the $250 tax oved from the last fiscal Year: Common Stock 1.000 b has issued 2,000 shares for $1,000 cash Retained Earnings 3,750 38 started business a few years ago, so this is the total accumulated earnings up to october 1 of last year. Service Revenue 60,700 h has provided $2,000 of services for which it hasn't yet billed customers or recorded in its accounting records Salaries and Wages Expense 46,000 employees earn $4,000 per month. The employees were paid in full on August 31, and were paid again on September 15. Depreciation Expense About $1,500 of the usefulness of the equipment's $6,000 cost has been used up during the current fiscal year.