Question

The unadjusted trial balance of the Sweet Homes Company as of December 31,2021 is found on the trial balance tab. The following information is required to prepare the necessary adjusting entries for the Sweet Homes Company. 1) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1, 2021. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, if any. 2) Based on a physical count, supplies on hand total \$4.200. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any. 3) The equipment is expected to have a 5 -year useful life, and be worth about $11,000 at the end of five years. Review the unadjusted balance in Accurmulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if any. 4) On December 26, the client paid a $7,20060-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any. 5) Sweet Homes's employee earns $130 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last paid on Friday, December 26 . Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry. if any. 6) In the second week of December, Sweet Homes agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of \$6,060. The tems of the initial agreement call for Sweet Homes to provide services from December 12, 2021, through January 10,2022 , or 30 days of service. The club agrees to pay Sweet Homes $6,060 on January 10,2022 , when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, if any The unadjusted trial balance of the Sweet Homes Company as of December 31,2021 is found on the trial balance tab. The following information is required to prepare the necessary adjusting entries for the Sweet Homes Company. 1) The balance in Prepaid insurance represents a 24 -month policy that went into effect on December 1, 2021. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, If any. 2) Based on a physical count, supplies on hand total $4,200. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any. 3) The equipment is expected to have a 5 -year useful life, and be worth about $11,000 at the end of five years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if any 4) On December 26, the client paid a \$7,200 60-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any. 5) Sweet Homes's employee earns $130 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last pald on Friday, December 26. Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry. if any. 6) In the second week of December. Sweet Homes agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $6,060. The terms of the initial agreement call for Sweet Homes to provide services from December 12, 2021, through January 10,2022 , or 30 days of service. The club agrees to pay Sweet Homes $6,060 on January 10,2022 , when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, If any. Use the drop-downs to select the accounts properly included on the income statement. The unadjusted or adjusted balances will appear for each account, based on your selection.

Answer 1

The student needs to prepare adjusting entries for prepaid insurance, supplies, depreciation, unearned consulting revenue, salaries expense, and consulting revenue to reflect Sweet Homes Company's financial position as of December 31, 2021.

Step-by-step explanation:

The student's question pertains to the preparation of adjusting entries for the Sweet Homes Company's financial statements at the end of the fiscal year.

The adjusting entries are needed for accrued items such as prepaid insurance, supplies, depreciation, unearned revenue, salaries expense, and consulting revenue.

Each entry must reflect the correct financial position of the company as of December 31, 2021.

For prepaid insurance, an adjusting entry is required to account for the insurance expense of the current month from a 24-month policy starting December 1, 2021.

This will involve a debit to Insurance Expense and a credit to Prepaid Insurance for one month's worth of insurance.

The supplies account must be adjusted to reflect the physical count of supplies on hand.

This involves a debit to Supplies Expense and a credit to Supplies for the amount of supplies used.

An entry to record monthly depreciation of equipment is calculated based on the equipment's useful life and residual value.

This will be a debit to Depreciation Expense and a credit to Accumulated Depreciation.

Unearned Consulting Revenue needs an adjusting entry to recognize the portion of the service that has been performed up to December 31.

This requires a debit to Unearned Consulting Revenue and a credit to Consulting Revenue.

For salaries expense, an adjusting entry is needed to account for the salary earned by the employee from the last payment through December 31.

This entry will be a debit to Salaries Expense and a credit to Salaries Payable.

Lastly, for the consulting revenue, an adjusting entry will recognize the revenue earned from December 12, 2021, to December 31, 2021, with a debit to Accounts Receivable and a credit to Consulting Revenue.

It is important to carefully calculate each adjusting entry to ensure the income statement reflects an accurate representation of the company's financial activities for the period.

Answer 2

Adjusting Entries for Sweet Homes Company as of December 31, 2021:

Prepaid Insurance:

• Debit Insurance Expense $600
• Credit Prepaid Insurance $600

Supplies:

• Debit Supplies Expense $1,800
• Credit Supplies $1,800

Accumulated Depreciation:

• Debit Depreciation Expense $366.67
• Credit Accumulated Depreciation $366.67

Unearned Consulting Revenue:

• Debit Unearned Consulting Revenue $3,600
• Credit Consulting Revenue $3,600

Salaries Expense:

• Debit Salaries Expense $3,250
• Credit Salaries Payable $3,250

Consulting Revenue:

• Debit Accounts Receivable $6,060
• Credit Consulting Revenue $6,060

Adjusting Entries for Sweet Homes Company as of December 31, 2021:

Prepaid Insurance:

Unadjusted balance: $14,400 (24-month policy that went into effect on December 1, 2021)

Adjusting entry: Debit Insurance Expense $600 and credit Prepaid Insurance $600 ([$14,400 ÷ 24 months] × 1 month = $600)

Supplies:

Unadjusted balance: $6,000

Adjusting entry: Debit Supplies Expense $1,800 and credit Supplies $1,800 ($6,000 - $4,200 = $1,800)

Accumulated Depreciation:

Unadjusted balance: $22,000

Adjusting entry: Debit Depreciation Expense $366.67 and credit Accumulated Depreciation $366.67 ($22,000 ÷ 60 months = $366.67)

Unearned Consulting Revenue:

Unadjusted balance: $7,200

Adjusting entry: Debit Unearned Consulting Revenue $3,600 and credit Consulting Revenue $3,600 ($7,200 ÷ 2 months = $3,600)

Salaries Expense:

Unadjusted balance: $0

Adjusting entry: Debit Salaries Expense $3,250 and credit Salaries Payable $3,250 ($130 × 5 days × 5 weeks = $3,250)

Consulting Revenue:

Unadjusted balance: $0

Adjusting entry: Debit Accounts Receivable $6,060 and credit Consulting Revenue $6,060

Income Statement for Sweet Homes Company for the Six Months Ending December 31, 2021:

Category Amount

Revenues $6,060

Insurance Expense $600

Supplies Expense $1,800

Depreciation Expense $366.67

Salaries Expense $3,250

Total Expenses $6,016.67

Net Income $43.33