Question P3-55: Preparing Accounting Adjustments

Wysocki Wheels began operations on March 1 to provide automotive wheel alignment and balancing services. On March 31, accounting records revealed the following account balances.

	Debit ($)	Credit ($)
Cash	2,900	-
Accounts Receivable	3,820	-
Prepaid Rent	4,770	-
Supplies	3,700	-
Equipment	36,180	-
Accounts Payable	-	3,510
Unearned Service Revenue	-	1,000
Common Stock	-	38,400
Service Revenue	-	12,360
Wages Expense	3,900	-
Totals	55,270	55,270

The following information is also available.

1. The balance in prepaid rent was the amount paid on March 1 to cover the first six months rent
2. Supplies available on March 31 amounted to $1,360
3. Equipment has an estimated life of nine years (or 108 months)
4. Unpaid and unrecorded wages at March 31 were $1,560
5. Utility services used during March were estimated at $390; a bill is expected early in April
6. The balance in unearned service revenue was the amount received on March 1 from a car dealer to cover alignment and balancing services on cars sold by the dealer in March and April. Wysocki Wheels agreed to provide the services at a fixed dee of $500 each month

Required: (a and b discuss)

1. Prepare the accounting adjustments at March 31 in a journal entry form
2. Set up T-accounts, and post the accounting adjustments to them
3. Prepare the income statement for March and its balance sheet at March 31
4. Prepare entries to close the temporary accounts in the journal entry form. Post the closing entries to the T-accounts.