Third Example - Adjusting
Third Example - Adjusting
The company prepares annual financial statements, and the following adjustments have been
gathered on December 31, 2011
Instructions:
1- Journalize the transactions above and post them to the appropriate accounts.
2- Prepare the trial balance.
3- Prepare the adjusting entries and post them to the appropriate accounts.
4- Prepare the adjusted trial balance.
5- Prepare the statements of income, retained earnings and financial position.
6- Prepare Closing Entries.
7- Prepare Post-Closing trial balance (opening balances for the next period)
Instructions:
1- Journalize the transactions above and post them to the appropriate accounts.
2- Prepare the trial balance.
3- Prepare the adjusting entries and post them to the appropriate accounts.
4- Prepare the adjusted trial balance.
5- Prepare the statements of income, retained earnings and financial position.
6- Prepare Closing Entries.
7- Prepare Post-Closing trial balance (opening balances for the next period)
Solution – Third Example:
General Journal
Date Account Title Dr. Cr.
Jan. 1 Cash 337,000
Capital 337,000
Jan. 1 Prepaid Rent 71,000
Cash 71,000
Jan. 1 Prepaid Insurance 48,000
Cash 48,000
Feb. 2 Office Supplies 14,000
Accounts Payable 14,000
Mar. 1 Cash 120,000
Unearned Service Revenue 120,000
Nov. 30 Salaries Expense 165,000
Utilities Expense 700
Cash 165,700
Dec. 15 Accounts Receivable – Irbid Co. 75,000
Service Revenue 75,000
Trial Balance
Account Title Dr. Cr.
Cash 172,300
Capital 337,000
Prepaid Rent 71,000
Prepaid Insurance 48,000
Office Supplies 14,000
Accounts Payable 14,000
Unearned Service Revenue 120,000
Salaries Expense 165,000
Utilities Expense 700
Accounts Receivable – Irbid Co. 75,000
Service Revenue 75,000
546,000 546,000
Adjusting Entries
Date Account Title Dr. Cr.
Office Supplies Expense 10,000
Office Supplies 10,000
Rent Expense 36,000
Prepaid Rent 36,000
31/12/2011
Unearned Service Revenue 60,000
Service Revenue 60,000
Salaries Expense 15,000
Salaries Payable 15,000
Interest Receivable 1,500
Interest Revenue 1,500
Insurance Expense 12,000
Prepaid Insurance 12,000
Income Statement
For 2011
Revenues
Service Revenue 135,000
Interest Revenue 1,500 136,500
Operating Expenses
Rent Expense 36,000
Salaries Expense 180,000
Insurance Expense 12,000
Office Supplies Expense 10,000
Utilities Expense 700 238,700
Dividends 0
Retained Earnings (Deficit), December 31, 2011 (102,200)
Assets
Prepaid Rent 35,000
Prepaid Insurance 36,000
Office Supplies 4,000
Accounts Receivable 75,000
Interest Receivable 1,500
Cash 172,300
Total Assets 323,800
Equity
Owner’s Capital 337,000
Retained Earnings (102,200)
Total Equity 234,800
Liabilities
Unearned Service Revenue 60,000
Salaries Payable 15,000
Accounts Payable 14,000
General Journal
Date Account Title Dr. Cr.
May 1 Cash 75,000
Accounts Receivable – Irbid Co. 75,000
Sep. 1 Unearned Service Revenue 60,000
Service Revenue 60,000
Oct. 1 Office Supplies 6,000
Accounts Payable 14,000
Cash 20,000
Nov. 15 Utilities Expense 680
Cash 680
Dec. 31 Salaries Expense 180,000
Salaries Payable 15,000
Cash 195,000
Trial Balance
Account Title Dr. Cr.
Cash (172,300 + 75,000 – 20,000 – 680 – 195,000) 31,620
Capital 337,000
Prepaid Rent 35,000
Prepaid Insurance 36,000
Office Supplies (4,000 + 6,000) 10,000
Salaries Expense 180,000
Utilities Expense 680
Interest Receivable 1,500
Service Revenue 60,000
Retained Earnings (Deficit) 102,200
397,000 397,000
Adjusting Entries
Date Account Title Dr. Cr.
Office Supplies Expense 6,000
Office Supplies 6,000
Rent Expense 36,000
31/12/2011 Prepaid Rent 35,000
Rent Payable 1,000
Insurance Expense 12,000
Prepaid Insurance 12,000
Income Statement
For 2012
Revenues
Service Revenue 60,000
Operating Expenses
Rent Expense 36,000
Salaries Expense 180,000
Insurance Expense 12,000
Office Supplies Expense 6,000
Utilities Expense 680 234,680
Assets
Prepaid Insurance 24,000
Office Supplies 4,000
Interest Receivable 1,500
Cash 31,620
Total Assets 61,120
Liabilities
Rent Payable 1,000
Closing Entries
Date Account Title Dr. Cr.
Service Revenue 60,000
Income Summary 60,000
Income Summary 234,680
Rent Expense 36,000
Salaries Expense 180,000
31/12/2011
Insurance Expense 12,000
Office Supplies Expense 6,000
Utilities Expense 680
Retained Earnings 174,680
Income Summary 174,680
Post-Closing Trial Balance
Account Title Dr. Cr.
Cash 31,620
Capital 337,000
Prepaid Insurance 24,000
Office Supplies 4,000
Interest Receivable 1,500
Rent Payable 1,000
Retained Earnings (Deficit) 276,880
338,000 338,000