Question

4. On December 31, 2018, Krug Company reported total liabilities of $95,000 prior to the following adjusting entries: • Depreciation expense was $25,000; • Accrued service revenues totaled $18,000; • Accrued expenses totaled $16,000; • Used up insurance worth $10,000, the insurance was prepaid; • Rent revenue earned was $7,000; the rent was prepaid by the tenant. How much are Krug's total liabilities after adjusting entries? a. $88,000 b. $102,000 c. $104,000 d. $111,000 e. $118,000 f. $129,000

Answer 1

Answer:. c. $104,000 Working Notes: Depreciation Expenses - $25,000 Depreciation Expenses $ 25,000 Expenses debited to Income Statement Accumulated depreciation $ 25,000 Contra Account to asset side of Balance sheet Accured service Revenues - $18000 Accounts Receivables S 18.000 Current asset side of Balance sheet Service Revenue $ 18,000 Income credited to Income statement Accured expenses - 16,000 Expenses $ 16,000 Expenses debited to Income Statement Accounts Payable $ 16,000 Current liabilities side of Balance sheet Used up insurance worth $10,000 Insurance Expenses $ 10,000 Expenses debited to Income Statement Prepaid Insurance $ 10,000 Current asset side of Balance sheet Rent revenue earned was - $7,000 - Prepaid rent by tenant Unearned Rent revenue S 7,000 Current liabilities side of Balance sheet Rent Revenue S 7,000 Income credited to Income statement Current liabilities after Adjustment = Opening balance before adjustments + Accured expenses - unearned rent Revenue = $95.000+$16,000-$7,000 = $104,000