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prepaid expenses – www.savvyessaywriters.net
On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow.
| DATE | TRANSACTIONS | |
| July | 1 |
Signed a lease for an office and issued Check 101 for $12,150 to pay the rent in advance for six months. |
| 1 |
Borrowed money from Second National Bank by issuing a four-month, 6 percent note for $40,800; received $39,984 because the bank deducted the interest in advance. |
|
| 1 |
Signed an agreement with Carter Corp. to provide accounting and tax services for one year at $5,300 per month; received the entire fee of $63,600 in advance. |
|
| 1 |
Purchased office equipment for $26,400 from Office Outfitters; issued a two-month, 6 percent note in payment. The equipment is estimated to have a useful life of six years and a $1,920 salvage value. The equipment will be depreciated using the straight-line method. |
|
| 1 |
Purchased a one-year insurance policy and issued Check 102 for $1,692 to pay the entire premium. |
|
| 3 |
Purchased office furniture for $15,100 from Furniture Warehouse; issued Check 103 for $10,400 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of five years and a $1,600 salvage value. The office furniture will be depreciated using the straight-line method. |
|
| 5 |
Purchased office supplies for $1,930 with Check 104. Assume $860 of supplies are on hand July 31, 2019. |
|
Required:
- Record the transactions in the general journal. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability for the year 2019.
- Record the adjusting journal entries that must be made on July 31, 2019.
Analyze:
What balance should be reflected in Unearned Accounting Fees at July 31, 2019?
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