Chapter 5, Problem 2PB

1.

To determine

Record adjusted trial balance in the adjusted trial balance column of the worsheet.

Explanation of Solution

Trial Balance:

Trial balance is the summary of all the accounts affected in a financial year. Financial statements are prepared with the help of trial balance.

The adjusted trial balance column of the worksheet of KN:

Account Title	Unadjusted Trial balance		Adjustments		Adjusted Trial balance
	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
Cash					70,100
Accounts receivable					17,000
Supplies					13,600
Prepaid rent					81,600
Equipment					132,000
Accumulated depreciation-equipment						1,100
Accounts payable						34,000
KN, capital						160,000
KN, drawing					12,000
Fees income						171,400
Depreciation expense–equipment					1,100
Rent expense					6,800
Salaries expense					21,600
Supplies expense					7,200
Utilities expense					3,500
Total					366,500	366,500

Table (1)

2.

To determine

Prepare adjustments entries in the adjustment column of the worksheet

Explanation of Solution

The adjustment column of the worksheet of KN:

Account Title	Unadjusted Trial balance		Adjustments		Adjusted Trial balance
	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
Cash					70,100
Accounts receivable					17,000
Supplies				7,200	13,600
Prepaid rent				6,800	81,600
Equipment					132,000
Accumulated depreciation-equipment				1,100		1,100
Accounts payable						34,000
KN, capital						160,000
KN, drawing					12,000
Fees income						171,400
Depreciation expense–equipment			1,100		1,100
Rent expense			6,800		6,800
Salaries expense					21,600
Supplies expense			7,200		7,200
Utilities expense					3,500
Total			15,100	15,100	366,500	366,500

Table (2)

3.

To determine

Complete the trial balance columns of the worksheet and find the contra asset account on the adjusted trial balance.

Explanation of Solution

The complete trial balance columns of the worksheet of KN:

Account Title	Unadjusted Trial balance		Adjustments		Adjusted Trial balance
	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
Cash	70,100				70,100
Accounts receivable	17,000				17,000
Supplies	20,800			7,200	13,600
Prepaid rent	88,400			6,800	81,600
Equipment	132,000				132,000
Accumulated depreciation-equipment				1,100		1,100
Accounts payable		34,000				34,000
KN, capital		160,000				160,000
KN, drawing	12,000				12,000
Fees income		171,400				171,400
Depreciation expense–equipment			1,100		1,100
Rent expense			6,800		6,800
Salaries expense	21,600				21,600
Supplies expense			7,200		7,200
Utilities expense	3,500				3,500
Totals	365,400	365,400	15,100	15,100	366,500	366,500

Table (3)

Accumulated depreciation-equipment is the contra account on the adjusted trial balance.

Working Note: Calculate balance of prepaid rent prior to the adjusting entry of expired rent:

$\begin{array}{c}\mathrm{Unadjusted}prepaidinsurancebalance=\mathrm{Adjusted}balance+\mathrm{Expired}rent\\ =\$21,000+\$3,500\\ =\$24,500\end{array}$