Question
The unadjusted trial balance of Jim's Mowing is shown below (ignore GST). Jim's Mowing Trial Balance As at 30 June 2019 Account Debit Credit Cash
The unadjusted trial balance of Jim's Mowing is shown below (ignore GST).
Jim's Mowing
Trial Balance
As at 30 June 2019
Account
Debit
Credit
Cash at bank
32,550
Accounts receivable
48,340
Supplies
5,640
Prepaid advertising
3,980
Prepaid insurance
3,600
Mowers
28,600
Accumulated Depreciation - Mowers
3,540
Vehicle
75,000
Accumulated Depreciation - Vehicle
7,000
Account payable
10,800
Unearned revenue
12,260
Loan payable
40,000
Jim, Capital
78,340
Jim, Drawings
40,600
Service revenue
198,800
Wages expense
81,620
Fuel and oil expense
15,680
Electricity expense
10,000
Mis. Expenses
5,130
350,740
350,740
Additional information
1.A physical count showed supplies totalling $1,340 were still on hand at 30 June.
2.Mowers are depreciated at 10% per year.
3.Vehiclewas purchased on 1 July 2017. It was estimated with a residual value of $5000 and a useful life of 10 years when it was initially purchased. Straight-line method is used.
4.Prepaid advertising has a balance of $1,600 at the end of the month.
5.Prepaid insurance which covers 2 years was purchased on 1 January 2019.
6.The balance in the unearned revenue account includes $3,600 received in May for mowing services completed in June.
7.Bank loan was borrowed on 1 January 2019. Interest is to be paid at the end of each year (31 December). Interest on bank loan is 6% per annum.
8.Received electricity bill of $1,400.
Required:
a) Prepare necessary adjusting entries. (8 marks)
b) Discuss why adjusting entries are necessary. (2 marks)
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