Chapter 3, Problem 3BPSB

To determine

Concept Introduction:

Adjustment entries - Adjustment entries are like the journal entries only and are basic for accounting. They are made in the closing period to adjust the expenses and incomes in the period in which they have occurred. To show the true and fair financial position, it is essential to pass the adjustment entries. This includes the adjustments for the accrued interest, unearned revenues, prepaid expenses and other such entries that can be termed as closing entries as well from the accounting perspective.

To Prepare:

1) T- Accounts (representing the ledger) with balances from the unadjusted trial balances.

2) Pass the necessary adjustment entries and post the same to the T- accounts.

3) Update balances in T-accounts and prepare an adjusted trial balance.

4) The company’s income statement and statement of owner’s equity for the year 2017, and the balance sheet as of December 31, 2017.

Explanation of Solution

1)

Cash Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	60,000

Accounts Receivable Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0

Teaching Supplies Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	70,000

Prepaid Insurance Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	19,000

Prepaid Rent Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	3,800

Professional Library Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	12,000

Accumulated Depreciation- Professional Library Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	2,500

Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	40,000

Accumulated Depreciation- Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	20,000

Accounts Payable Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	11,200

Salaries Payable Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	0

Unearned training fees Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	28,600

C. Alonzo Capital Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	71,500

C. Alonzo Withdrawals Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	20,000

Tuition fees Earned Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	129,200

Training fees Earned Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	68,000

Depreciation expense – Professional library Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0

Depreciation expense – Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0

Salaries expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	44,200

Insurance expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0

Rent expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	29,600

Teaching supplies expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0

Advertising expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	19,000

Utilities expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	13,400

2) Adjustment entries

Journal Entries
S. No.	Particulars	Debit ($)	Credit ($)
a.	Insurance Expense To Prepaid Insurance	9,500	9,500
b.	Teaching Supplies Expense To Teaching Supplies	50,000	50,000
c.	Depreciation Expense-Equipment To Accumulated Depreciation-Equipment	5,000	5,000
d.	Depreciation Expense-Professional Library To Accumulated Depreciation-Professional Library	2,400	2,400
e.	Unearned Training Fees To Training Fees Earned	28,600	28,600
f.	Accounts Receivable To Tuition Fees Earned	5,750	5,750
g.	Salaries Expense To Salaries Payable	450	450
h.	Rent Expense To Prepaid Rent	3,800	3,800

3. Updated T- balances are as under: `

Cash Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	60,000	By closing balance	60,000

Accounts Receivable Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0	By closing balance	5,750
To Tuition fees earned	5,750

Teaching Supplies Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	70,000	By Teaching Supplies expense	50,000
		By closing balance	20,000

Prepaid Insurance Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	19,000	By Insurance expense	9,500
		By closing balance	9,500

Prepaid Rent Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	3,800	By Rent expense	3,800
		By closing balance	0

Professional Library Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	12,000

Accumulated Depreciation- Professional Library Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	2,500
To closing balance	4,900	By depreciation expense- Professional library	2,400

Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	40,000	By closing balance	40,000

Accumulated Depreciation- Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	20,000
By closing balance	25,000	By Depreciation expense- Equipment	5,000

Accounts Payable Account

Particulars	Amount ($)	Particulars	Amount ($)
By closing balance	11,200	By opening balance	11,200

Salaries Payable Account

Particulars	Amount ($)	Particulars	Amount ($)
By closing balance	450	By opening balance	0
		By Salaries expense	450

Unearned training fees Account

Particulars	Amount ($)	Particulars	Amount ($)
To Training fees earned	28,600	By opening balance	28,600
To closing balance	0

C. Alonzo Capital Account

Particulars	Amount ($)	Particulars	Amount ($)
To closing balance	71,500	By opening balance	71,500

C. Alonzo Withdrawals Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	20,000	By closing balance	20,000

Tuition fees Earned Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	129,200
To closing balance	134,950	By Accounts receivable	5,750

Training fees Earned Account

Particulars	Amount ($)	Particulars	Amount ($)
		By opening balance	68,000
To closing balance	96,600	By unearned training fees	28,600

Depreciation expense – Professional library Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0
To Accumulated dep	2,400	By Profit & Loss	2,400

Depreciation expense – Equipment Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0
To Accumulated dep.	5,000	By Profit & Loss	5,000

Salaries expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	44,200
To Salaries Payable	450	By Profit & Loss	44,650

Insurance expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0	By Profit & Loss	9,500
To Prepaid expense	9,500

Rent expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	29,600
To Prepaid Rent	3,800	By Profit & Loss	33,400

Teaching supplies expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	0
To Teaching supplies	50,000	By Profit & Loss	50,000

Advertising expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	19,000	By Profit & Loss	19,000

Utilities expense Account

Particulars	Amount ($)	Particulars	Amount ($)
To opening balance	13,400	By Profit & Loss	13,400

Adjusted Trial balance
for the year ended December 31, 2017

S. No.	Particulars	Debit($)	Credit($)
1.	Cash	60,000
2.	Accounts receivable	5,750
3.	Teaching supplies	20,000
4.	Prepaid Insurance	9,500
5.	Prepaid rent	0
6.	Professional Library	12,000
7.	Accumulated dep. – Professional library		4,900
8.	Equipment	40,000
9.	Accumulated dep. – Equipment		25,000
10.	Accounts Payable		11,200
11.	Salaries Payable		450
12.	Unearned training fees	0
13.	C. Alonzo capital		71,500
14.	C. Alonzo withdrawals	20,000
15.	Tuition fees Earned		134,950
16.	Training fees Earned		96,600
17.	Depreciation expense- Professional library	2,400
18.	Depreciation expense- Equipment	5,000
19.	Salaries expense	44,650
20.	Insurance expense	9,500
21.	Rent expense	33,400
22.	Teaching supplies expense	50,000
23.	Advertising expense	19,000
24.	Utilities expense	13,400
	Totals	344,600	344,600

4.

Income statement
for the year ended December 31, 2017

Particulars	Amount ($)	Particulars	Amount ($)
To depreciation expense- Professional library	2,400	By Tuition Fees Earned	134,950
To depreciation expense- Equipment	5,000	By Training Fees Earned	96,600
To Salaries expense	44,650
To Insurance expense	9,500
To Rent expense	33,400
To Teaching supplies expense	50,000
To Advertising expense	19,000
To Utilities expense	13,400
To Net Profit (balancing figure)	54,200
Total	231,550	Total	231,550

Statement of owner’s equity for the year 2017

Particulars	Amount ($)
C. Alonzo capital at the beginning	71,500
Less: C. Alonzo withdrawals	(20,000)
Add: Net Profit	54,200
C. Alonzo capital at the end	105,700

Balance Sheet
as of December 31, 2017

Liabilities	Amount ($)	Assets		Amount ($)
C. Alonzo Capital	105,700	Non-current Assets
		Professional Library	12,000
Current Liabilities		Less: Accumulated dep. – Professional library	(4,900)	7,100
Accounts Payable	11,200	Equipment	40,000
Salaries Payable	450	Less: Accumulated dep. – Equipment	(25,000)	15,000
		Current Assets
		Cash		60,000
		Accounts receivable		5,750
		Teaching supplies		20,000
		Prepaid Insurance		9,500
Totals	117,350	Totals		117,350