Question

The unadjusted trial balance as of December 31, 2021, for the Bagley Consulting Company appears below. December 31 is the company's reporting year-end. Credits Debits 8,000 9,000 3,000 200,000 50,000 20,000 100,000 40,000 35,050 Account Title Cash Accounts receivable Prepaid insurance Land Buildings Accumulated depreciation-buildings Office equipment Accumulated depreciation-office equipment Accounts payable Salaries payable Deferred rent revenue Common stock Retained earnings Service revenue Interest revenue Rent revenue Salaries expense Depreciation expense Insurance expense Utilities expense Maintenance expense Totals 200,000 56,450 90,000 3,000 7,500 37,000 0 8 30,000 15,000 452,000 452,080 Information necessary to prepare the year-end adjusting entries appears below. a. The buildings have an estimated useful life of 50 years with no salvage value. The company uses the straight-line depreciation method. b. The office equipment is depreciated at 10 percent of original cost per year. c. Prepaid insurance expired during the year, $1,000. d. Accrued salaries at year-end, $1,500. e. Deferred rent revenue at year-end should be $1,200. Required: 1. From the trial balance and Information given, prepare adjusting entries. 2. Pnst the beninninn halances and adinistinn entries into the annrnriate tarrunte Prey 1 of 1 BH Nout

Answer 1

Solution

Bagley Consulting Company

1. Adjusting Entries:

Account Title and Explanation Ref. No. Debit Credit Depreciation Expense - Office Equipment $10,000 Accumulated Depreciation - Office Equipment $10,000 (To record depreciation on office equipment, 100,000 x10% = 10,000) Depreciation Expense - Building $1,000 Accumulated Depreciation - Buildings $1,000 (Depreciation on buildings; 50,000 x 1/50 = $1,000) Insurance Expense $1,000 Prepaid Insurance $1,000 (To record insurance expense) Salaries and Wages Expense $1,500 Salaries and Wages Payable $1,500 (To record unpaid salaries) Cash $1,200 Deferred Rent Revenue $1,200 (To record deferred rent revenue)

2. T- Accounts for adjusting entries; Accumulated Depreciation - Building Depreciation Expense - Building Debit Date Credit Amount Credit Amount Description Amount Date Dec 31, 2021 Description Depreciation Expense - Building Debit Date Dec 31, 21 Description Accumulated Depreciation-Building Amount Date Dec 31, $1,000 21 Description Income Summary $1,000 $1,000 Accumulated Depreciation - Equipment Depreciation Expense - Equipment Credit Debit Date Credit Debit Amount Date Description Amount Date Description Amount Date Description Amount Description Accumulated Depreciation- Equipment Dec 31, 2021 Depreciation Expense - Building Dec 31, 21 Dec 31, $10,000 21 Income Summary $10,000 $10,000 Insurance Expense Prepaid Insurance Credit Amount Credit Amount Debit Date Dec 31, 2021 Description Prepaid Insurance Description Amount Date Dec 31, $1,000 2021 Debit Date Dec 31, 21 Description Income Summary Description Amount Date Dec 31, Balance $2,000 21 $1,000 Insurance Expense $1,000

Salaries and Wages Expense Salaries and Wages Payable Debit Date Dec 31, Credit Amount Credit Amount Amount Date Description Salaries and Wages Payable Debit Date Dec 31, 21 Description Income Summary Dec 31, 2021 Description Salaries and Wages Expense 2021 $1,500 $1,500 Description Amount Date Dec 31, 21 Dec 31, 21 Deferred Rent Revenue $1,500 Balance $1,500 Cash Credit Amount Date Description Amount Debit Date Credit Amount Description Amount Date Debit Date Dec 31, 2021 Description Description Description Deferred Rent Revenue $1,200 Dec 31, 2021 Dec 31, 21 Dec 31, 21 Dec 31, 21 Cash Balance $1,200 $1,200

Bagley Consulting Adjusted Trial Balance as on Dec 31 Account Titles Debit Credit Cash $9,200 Accounts Receivable $9,000 Prepaid Insurance $2,000 Land $200,000 Buildings $50,000 Accumulated Depreciation - Buildings $21,000 Office Equipment $100,000 Accumulated depreciation - Office Equipment $50,000 Accounts Payable $35,050 Deferred Rent Revenue $1,200 Salaries Payable $1,500 Common Stock $200,000 Retained Earnings $56,450 Sales Revenue $90,000 Rent Revenue $3,000 Interest Revenue $7,500 Salaries and Wages Expense $38,500 Utility Expense $30,000 Insurance Expense $1,000 Depreciation Expense - Buildings $1,000 Depreciation Expense - Office Equipment $10,000 Maintenance Expense $15,000 Totals $465,700 $465,700

Closing Entries: Date Account Titles and Explanation Ref. No. Debit Credit 31- Dec-21 Sales Revenue $90,000 Interest Revenue $3,000 Rent Revenue $7,500 31- Dec-21 Income Summary $100,500 (To close sales revenue, rent revenue and interest revenue accounts to income summary) 31- Dec-21 Income Summary $95,500 Depreciation Expense - Office Equipment $10,000 Depreciation Expense - Buildings $1,000 Salaries and Wages Expense $38,500 Insurance Expense $1,000 Utility Expense $30,000 Maintenance Expense $15,000 (To close all expenses accounts to income summary) 31- Dec-21 Income Summary $5,000 Retained Earnings $5,000 (To transfer net income to retained earnings account)