Making Adjustments & Adjusted Trial Balance

Example

1. Financial Accounting Demo 05: Making Adjustments & Adjusted Trial Balance Chapter 3

2. 2 /25 Demonstration Problem DP1 To illustrate how to prepare adjusting entries, post them to ledger & prepare adjusted trial balance.

3. 3 /25 The Amber Nestor Art Gallery opened for business on Jan 1, 2008. It’s trial balance before adjustment on Dec. 31 is as follows.

4. 4 /25 AMBER NESTOR ART GALLERY Unadjusted Trial Balance December 31, 2008 Debits Credits Cash $ 50,400 Supplies 6,790 Display equipment 15,000 Loan payable $ 7,500 Capital stock 37,000 Service Revenues 48,590 Rent expense 11,000 Salaries expense 4,000 Travel expense 500 Utilities expense 5,400 Total $ 93,090 $ 93,090

5. 5 /25 Adjustments The Display equipment was purchased near the beginning of the year. It has a 3-year life and no salvage value. Its cost should be depreciated equally over its life. Amber is entitled to receive $17,900 of commissions for art sold. This revenue has not yet been recorded, but it is fully expected that the artists will soon be making payment. Supplies on hand at year end were counted, and amount to $3,400. December's rent of $1,000 has not yet been paid.

6. 6 /25 The Display equipment was purchased near the beginning of the year. It has a 3-year life and no salvage value. Its cost should be depreciated equally over its life.

7. 7 /25 Amber is entitled to receive $17,900 of commissions for art sold. This revenue has not yet been recorded, but it is fully expected that the artists will soon be making payment.

8. 8 /25 Supplies on hand at year end were counted, and amount to $3,400.

9. 9 /25 December's rent of $1,000 has not yet been paid.

10. 10 /25 CASH A/C

11. 11 /25 LOAN PAYABLE A/C

12. 12 /25 CAPITAL STOCK A/C

13. 13 /25 TRAVEL EXPENSE A/C

14. 14 /25 UTILITIES EXPENSE A/C

15. 15 /25 ACCOUNTS RECEIVABLE A/C

16. 16 /25 SERVICE REVENUES A/C

17. 17 /25 SUPPLIES A/C

18. 18 /25 SUPPLIES EXPENSE A/C

19. 19 /25 RENT EXPENSE A/C

20. 20 /25 RENT PAYABLE A/C

21. 21 /25 DISPLAY EQUIPMENT A/C

22. 22 /25 DEPRECIATION EXPENSE A/C

23. 23 /25 ACCUMULATED DEPRECIATION A/C

24. 24 /25 Adjusted Trial Balance LO1 To illustrate how to prepare adjusted trial balance

25. 25 /25 AMBER NESTOR ART GALLERY Adjusted Trial Balance December 31, 2008 Debits Credits Cash $ 50,400 Supplies (6,790 -3,390) 3,400 Display equipment 15,000 Loan payable $ 7,500 Capital stock 37,000 Service Revenues (48,590+17,900) 66,490 Rent expense (11,000 +1,000) 1 2,000 Salaries expense 4,000 Travel expense 500 Supplies expense 3,390 Utilities expense 5,400 Depreciation Expense 5,000 Accumulated Depreciation 5,000 Accounts Receivable 17,900 Rent Payable 1,000 Total $ 104,990 $ 104,990

26. End of Demo 05 THANK YOU ALL…