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Financial Accounting BMBA 140 Assignment #3
Name (first and last name): ________________________
PART I — ADJUSTING JOURNAL ENTRIES (20 points)
You recently started to work for an accounting firm in town as a bookkeeper and one of your clients, Billy Bob Mechanical, has come in to discuss the company’s year end transactions. The company has a year ending December 31, XXXXXXXXXXThe meeting took place on December 30, 2020 and at the meeting with Billy Bob the following transaction notes were taken.
Instructions: Please prepare all the required adjusting journal entries using the existing accounts in the Unadjusted Trial Balance Provided:
Unadjusted Trial Balance:
Account Numbe
Account Name
Debit Balance
Credit Balance
1000
Cash
25,904
1010
Accounts Receivable
7,899
1015
Interest Receivable
-
1020
Supplies
7,519
1030
Prepaid Insurance
12,000
1040
Truck
25,000
1045
Accumulated Amortization – Truck
6,000
1050
Equipment
15,000
1055
Accumulated Amortization – Equipment
-
2000
Accounts Payable
17,287
2010
Salaries Payable
-
2020
Line of Credit
6,750
2025
Interest Payable
-
2030
Unearned Revenue
4,000
3000
Billy Bob, Capital
34,000
4000
Services Revenue
107,589
4010
Interest Revenue
2,224
5000
Salary and Wages Expense
37,159
5010
Supplies Expense
24,135
5020
Insurance Expense
-
5030
Amortization Expense
-
5040
Advertising Expense
2,275
5050
Rent Expense
15,500
5060
Repairs Expense
2,700
5070
Interest Expense
2,759
Total Balance
177,850
177,850
Transaction Notes:
1) Billy Bob estimated that Supplies were worth around $2,500 at the end of the period.
2) Billy Bob confirmed that insurance was purchased in October for the $12,000 and is recorded in the TB. The insurance policy coverage started on the first of October and covers a 12-month period.
3) Billy Bob state that new equipment was purchased on January 1, 2020 and has not been depreciated before. It was purchased for $15,000 and is expected to last 5 years. The equipment dealer suggested at that time it would have a value of $2,500.
4) The company truck also needs to be amortized, it was originally purchased for $25,000 and had a useful life of 10 years, and a residual value expected to be $5,000. It was purchased 3 years, ago please record this years’ amortization expense.
5) Billy Bob had cash in his wallet at the time of the meeting for an unrecorded payment that has not been reflected in the TB. Billy Bob said he would deposit the cash that day and that it should be recorded in this period. The payment was $3,000 and was deposited on December 31. Billy Bob confirmed the payment was for services to be provided in 2021 to a customer.
6) A separate customer prepaid $4,000 for services in the previous year, based on internal analysis Billy Bob confirmed that approximately $1,300 remains outstanding to be completed.
7) There is $200 in interest charges that have not been charged to customers with outstanding account balances.
8) The company is in the middle of a kitchen repair due to a leak that is spanning year end, the total contract was worth $2,000. As at year end the contractor estimated that half of the kitchen needed to be completed.
9) The company had to bo
ow from their line of credit to help company cashflow in the last quarter, they bo
owed $6,750 (see loan balance) on June 30. Their line of credit ca
ies an interest rate of 3% per year, please calculate and record the interest expense.
10) The final pay period at year end did not fall on December 31, it was January 5 (5 days) later, assuming all employees earn salary totalling $1,235 per week, and that the previous pay period was 1 week prior, please record the salary accrual
Journal Entry Template:
Entry #
Date
Account Numbe
Account Name
Debit or Credit
Amount
1
2
3
4
5
6
7
8
9
10
PART II — Adjusted Trial Balance (25 points)
Answers to Part II:
Instructions: Prepare an Adjusted Trial balance using the Trial Balance provided above and the Adjusting journal entries you have prepared. Please use the following template for your final answer.
Note: for accounts with multiple entries please include a T-Account to show your work, T-Account templates are included below. For any other calculations please include below as well. Part marks may be awarded if support is provided.
T Accounts:
Supplies
DR
CR
Total:
Acc. Amortization - Truck
DR
CR
Total:
Acc. Amortization - Equipment
DR
CR
Total:
Unearned Revenue
DR
CR
Total:
Amortization Expense
DR
CR
Total:
Room for Calculations:
Adjusted Trial Balance:
Account Numbe
Account Name
Debit Balance
Credit Balance
1000
Cash
1010
Accounts Receivable
1015
Interest Receivable
1020
Supplies
1030
Prepaid Insurance
1040
Truck
1045
Accumulated Amortization – Truck
1050
Equipment
1055
Accumulated Amortization – Equipment
2000
Accounts Payable
2010
Salaries Payable
2020
Line of Credit
2025
Interest Payable
2030
Unearned Revenue
3000
Billy Bob, Capital
4000
Services Revenue
4010
Interest Revenue
5000
Salary and Wages Expense
5010
Supplies Expense
5020
Insurance Expense
5030
Amortization Expense
5040
Advertising Expense
5050
Rent Expense
5060
Repairs Expense
5070
Interest Expense
Total Balance
2
1