Question

The December 31, 2018, unadjusted trial balance for Demon Deacons Corporation is presented below.

Accounts Debit Credit
Cash 10,000
Accounts Receivable 15,000
Prepaid Rent 7200
Supplies 4000
Deferred Revenue 3000
Common Stock 11000
Retained Earnings 6000
Service Revenue 51,200
Salaries Expense 35,000
71,200 71,200


At year-end, the following additional information is available:

a. The balance of Prepaid Rent, $7,200, represents payment on October 31, 2021, for rent from November 1, 2021, to April 30, 2022.
b. The balance of Deferred Revenue, $3,000, represents payment in advance from a customer. By the end of the year, $750 of the services have been provided.
c. An additional $700 in salaries is owed to employees at the end of the year but will not be paid until January 4, 2022.
d. The balance of Supplies, $4,000, represents the amount of office supplies on hand at the beginning of the year of $1,700 plus an additional $2,300 purchased throughout 2021. By the end of 2021, only $800 of supplies remains.

Required:
1. Update account balances for the year-end information by recording any necessary adjusting entries. No prior adjustments have been made in 2018.
2. Prepare an adjusted trial balance as of December 31, 2018.

Answer 1

Demon Deacons Corporation

1. Adjusting entries:

a. Debit Rent Expense $2,400

Credit Prepaid Rent $2,400

To record Rent Expense for 2 months.

b. Debit Deferred Revenue $3,000

Credit Service Revenue $3,000

To record service revenue earned.

c. Debit Salaries Expense $700

Credit Salaries Payable $700

To accrue salaries expense.

d. Debit Supplies Expense $3,200

Credit Supplies $3,200

To record supplies expense.

2. Adjusted Trial Balance

as of December 31, 2018

Accounts Debit Credit

Cash 10,000

Accounts Receivable 15,000

Prepaid Rent 4,800

Supplies 800

Rent Expense 2,400

Supplies Expense 3,200

Deferred Revenue 2,250

Common Stock 11,000

Retained Earnings 6,000

Service Revenue 51,950

Salaries Expense 35,700

Salaries Payable 700

71,900 71,900

Step-by-step explanation:

a) Data and Calculations:

Unadjusted Trial Balance

Accounts Debit Credit

Cash 10,000

Accounts Receivable 15,000

Prepaid Rent 7,200

Supplies 4,000

Deferred Revenue 3,000

Common Stock 11,000

Retained Earnings 6,000

Service Revenue 51,200

Salaries Expense 35,000

71,200 71,200

a. Rent Expenses = $2,400

Prepaid Rent = $4,800

b. Deferred Revenue = $3,000 - 750 = 2,250

Service Revenue = 51,200 + 750 = 51,950

c. Salaries Expense 35,000 + 700 = 35,700

Salaries Payable = 700

d. Supplies Account = $4,000 - 3,200 = $800

Supplies Expense = $3,200