Question 1 (11 marks)

As at 30 June 2022, the unadjusted trial balance of Red Ltd was noted as follows:

Red Ltd

TRIAL BALANCE

AS AT 30 JUNE 2022

Accounts	Debit ($)	Credit ($)
Cash at bank	10 270
Account receivables	31 200
Prepaid insurance	5 000
Office Supplies	4 680
Office equipment	14 250
Accumulated depreciation - equipment		2 850
Accounts payable		2,580
Salary payable
Unearned service revenue		1 500
Loan payable		10 500
Capital		33 300
Drawings	60 000
Service revenue		159 270
Salary expenses	66 000
Depreciation expenses - equipment
Miscellaneous expenses	18 600
TOTAL	210 000	210 000

The following additional information is available at the end of June for adjustments:

• A physical count of office supplies on 30 June shows $500 of unused supplies on hand
• Depreciation of the office equipment is 10% each year (straight line method is used)
• Of the $1500 unearned service revenue, $300 is still unearned
• Of prepaid insurance, 60% expired this period
• Salaries incurred for the month of June which was owed but not yet paid was $2,500
• Provided consultancy service of $7,500 on credit. This was not recorded for the month.

Required:

1. Prepare adjusting entries at the end of 30 June 2022. (6 marks)
2. Calculate the balance of the total revenue of the company after adjustment. (2 marks)
3. How do adjusting entries improve the usefulness of financial statements? (3 marks)