Queens Dairy Bars opened for business on May 1, 2020. Its trial balance before adjustments on July 31, 2020 includes the following selected accounts:

	Debit	Credit
Cash	$ 1,400
Prepaid Insurance	800
Cleaning Supplies	900
Milk Products Inventory	1,480
Building	250,000
Equipment	30,000
Accounts Payable		$3,200
Unearned Revenue		400
Note Payable		50,000
Rent Expense	6,300
Salaries Expense	1,587
Utilities Expense	2,478

Other data:

1. Monthly amortization is $400 on the building and $200 on the equipment.

2. Certain dairy treats for which the customer had paid $400 in June, were delivered in July.

3. An inventory count of cleaning supplies at July 31 shows $900 on hand.

4. Rent for July of $900 was unpaid at July 31.

5. Insurance is paid at the rate of $200 per month.

6. Milk products worth $400 were delivered to the company on July 31, but the bill has not been received yet.

7. The note payable has an interest rate of 7% per year and is paid at the end of every calendar quarter.

Instructions:

1. Journalize the adjusting entries for July on July 31.

2. Create an adjusted trial balance.

3. Prepare the following financial statements:

   1. Balance sheet

   2. Income statement

Action Plan

• Prepare separate journal entries for each adjusting entry. Make sure debits equal credits.

• Note the adjustments are made for one month.

• Look at how the amounts are currently recorded in the accounts before trying to determine what adjustments are necessary.

• Choose account titles carefully. Use existing titles where possible.

• Record debits first and indent credits.