Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Trial Balance and Adjusting Entries Image, Inc., a commercial photography studio, has just completed its first full year of operations on December 31. The general

Trial Balance and Adjusting Entries

Image, Inc., a commercial photography studio, has just completed its first full year of operations on December 31. The general ledger account balances before year-end adjustments follow. No adjusting entries have been made to the accounts at any time during the year. Assume that all balances are normal.

Cash $2,150 Accounts Payable $2,710
Accounts Receivable 3,600 Unearned Photography Fees 2,600
Prepaid Rent 12,600 Common Stock 24,000
Prepaid Insurance 2,970 Photography Fees Earned 34,480
Supplies 5,250 Wages Expense 11,000
Equipment 22,800 Utilities Expense 3,420

An analysis of the firm's records discloses the following items:

  1. Photography services of $1,250 have been rendered, but customers have not yet been billed. The firm uses the account Fees Receivable to reflect amounts due but not yet billed.
  2. The equipment, purchased January 1, has an estimated life of 10 years.
  3. Utilities expense for December is estimated to be $750 but the bill will not arrive until January of next year.
  4. The balance in Prepaid Rent represents the amount paid on January 1, for a 2 year lease on the studio.
  5. In November, customers paid $2,600 in advance for pictures to be taken for the holiday season. When received, these fees were credited to Unearned Photography Fees. By December 31, all fees are earned.
  6. A 3 year insurance premium paid on January 1, was debited to Prepaid Insurance.
  7. Supplies on hand at December 31 are $1,750.
  8. At December 31, wages expense of $650 has been incurred but not paid.

Required a. Prove that the sum of the debits equals the sum of the credits for Images unadjusted account balances by preparing an unadjusted trail balance as of December 31.

IMAGE, Inc. Unadjusted Trial Balance December 31
Debit Credit
Cash
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Supplies
Equipment
Accounts Payable
Unearned Photography Fees
Common Stock
Photography Fees Earned
Wages Expense
Utilities Expense
Totals

b. Record adjusting entries in the general journal.

General Journal
Date Description Ref. Debit Credit
Dec. 31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (1)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record revenue earned but not billed.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (2)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record depreciation for the year.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (3)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record estimated December utilities expense.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (4)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record rent expense for the year.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (5)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record advance payments earned during the year.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (6)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record insurance expense for the year.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (7)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record supplies expense for the year.
31 Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable (8)
Accumulated Depreciation - EquipmentAdvertising ExpenseDepreciation ExpenseFees ReceivableInsurance ExpenseInterest ExpenseInterest PayablePhotography Fees EarnedPrepaid AdvertisingPrepaid InsurancePrepaid RentRent ExpenseSuppliesSupplies ExpenseUnearned Photography FeesUtilities ExpenseUtilities PayableWages ExpenseWages Payable
To record unpaid wages at December 31.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microfinance

Authors: Gianfranco A. Vento, Mario La Torre

4th Edition

1403997896, 9781403997890

More Books

Students also viewed these Accounting questions

Question

Describe several models for organizing a human resources department

Answered: 1 week ago