Financial Accounting BMBA $140$ Assignment #$3$

Name $($first and last name$)$: $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

PART I $$ ADJUSTING JOURNAL ENTRIES $(20$ points$)$

You recently started to work for an accounting firm in town as a bookkeeper and one of your clients, Billy Bob Mechanical, has come in to discuss the company$$s year end transactions. The company has a year ending December $31,2020.$ The meeting took place on December $30,2020$ and at the meeting with Billy Bob the following transaction notes were taken.

Instructions: Please prepare all the required adjusting journal entries using the existing accounts in the Unadjusted Trial Balance Provided:

Unadjusted Trial Balance:

Account Number Account Name Debit Balance Credit Balance

$1000$ Cash $25,904$

$1010$ Accounts Receivable $7,899$

$1015$ Interest Receivable $-$

$1020$ Supplies $7,519$

$1030$ Prepaid Insurance $12,000$

$1040$ Truck $25,000$

$1045$ Accumulated Amortization $$ Truck $6,000$

$1050$ Equipment $15,000$

$1055$ Accumulated Amortization $$ Equipment $-$

$2000$ Accounts Payable $17,287$

$2010$ Salaries Payable $-$

$2020$ Line of Credit $6,750$

$2025$ Interest Payable $-$

$2030$ Unearned Revenue $4,000$

$3000$ Billy Bob, Capital $34,000$

$4000$ Services Revenue $107,589$

$4010$ Interest Revenue $2,224$

$5000$ Salary and Wages Expense $37,159$

$5010$ Supplies Expense $24,135$

$5020$ Insurance Expense $-$

$5030$ Amortization Expense $-$

$5040$ Advertising Expense $2,275$

$5050$ Rent Expense $15,500$

$5060$ Repairs Expense $2,700$

$5070$ Interest Expense $2,759$

Total Balance $177,850177,850$

Transaction Notes:

$1)$ Billy Bob estimated that Supplies were worth around $$2,500$ at the end of the period.

$2)$ Billy Bob confirmed that insurance was purchased in October for the $$12,000$ and is recorded in the TB$.$ The insurance policy coverage started on the first of October and covers a $12-$month period.

$3)$ Billy Bob state that new equipment was purchased on January $1,2020$ and has not been depreciated before. It was purchased for $$15,000$ and is expected to last $5$ years. The equipment dealer suggested at that time it would have a value of $$2,500.$

$4)$ The company truck also needs to be amortized, it was originally purchased for $$25,000$ and had a useful life of $10$ years, and a residual value expected to be $$5,000.$ It was purchased $3$ years, ago please record this years$$ amortization expense.

$5)$ Billy Bob had cash in his wallet at the time of the meeting for an unrecorded payment that has not been reflected in the TB$.$ Billy Bob said he would deposit the cash that day and that it should be recorded in this period. The payment was $$3,000$ and was deposited on December $31.$ Billy Bob confirmed the payment was for services to be provided in $2021$ to a customer.

$6)$ A separate customer prepaid $$4,000$ for services in the previous year, based on internal analysis Billy Bob confirmed that approximately $$1,300$ remains outstanding to be completed.

$7)$ There is $$200$ in interest charges that have not been charged to customers with outstanding account balances.

$8)$ The company is in the middle of a kitchen repair due to a leak that is spanning year end, the total contract was worth $$2,000.$ As at year end the contractor estimated that half of the kitchen needed to be completed.

$9)$ The company had to borrow from their line of credit to help company cashflow in the last quarter, they borrowed $$6,750($see loan balance$)$ on June $30.$ Their line of credit carries an interest rate of $3\%$ per year, please calculate and record the interest expense.

$10)$ The final pay period at year end did not fall on December $31,$ it was January $5(5$ days$)$ later, assuming all employees earn salary totalling $$1,235$ per week, and that the previous pay period was $1$ week prior, please record the salary accrual

Journal Entry Template:

Entry # Date Account Number Account Name Debit or Credit Amount

$1$

$2$

$3$

$4$

$5$

$6$

$7$

$8$

$9$

$10$

$$

PART II $$ Adjusted Trial Balance $(25$ points$)$

Answers to Part II:

Instructions: Prepare an Adjusted Trial balance using the Trial Balance provided above and the Adjusting journal entries you have prepared. Please use the following template for your final answer.

Note: for accounts with multiple entries please include a T$-$Account to show your work, T$-$Account templates are included below. For any other calculations please include below as well. Part marks may be awarded if support is provided.

T Accounts:

Supplies

DR CR

Total:

Acc. Amortization $-$ Truck

DR CR

Total:

Acc. Amortization $-$ Equipment

DR CR

Total:

Unearned Revenue

DR CR

Total:

Amortization Expense

DR CR

Total:

Room for Calculations: