Trial Balance to Adjusted Trial Balance Case Study

Trial Balance at November 30, 2017 (Statement Form)

format of trial balance

Note: Because the notes payable is not due for 24 months, it follows Unearned Revenue in the Balance Sheet

 

Adjustment Entries at the end of November, 2017

It is the end of November and Ms. Rabia has been in touch with her grandmother. Her grandmother asked Ms. Rabia how well things went in her first month of business. Ms. Rabia, too, would like to know if she has been profitable or not during November. Ms. Rabia realizes that in order to determine Cookie Creations’ income, she must first make adjustments. Ms. Rabia puts together the following additional information.

 

1. A count reveals that $60 of brochures and posters remain at the end of November

prepaid expense journal entry

 

2. A count reveals that $35 of baking supplies were used during November

prepaid insurance journal entry

 

3. Ms. Rabia estimates that all of her baking equipment will have a useful life of 5 years or 60 months and zero residual value. (Assume Ms. Rabia decides to record a full month’s worth of depreciation, regardless of when the equipment was obtained by the business round to the nearest dollar).

depreciation journal entry

 

4. Ms. Rabia’s grandmother has decided to charge interest of 6% on the note payable extended on November 16. The loan plus interest is to be repaid in 24 months. (Assume that half a month of interest accrued during November).

accrued expense journal entry

 

5. On November 30, a friend of Ms. Rabia’s asks her to teach a class at the neighborhood school. She agrees and teaches a group of 35 first-grade students how to make Santa Claus cookies. The next day, Ms. Rabia prepares an invoice for $300 and leaves it with the school principal. The principal says that he will pass the invoice along to the head office, and it will be paid sometime in December.

accounts receivable journal entry

 

6. Ms. Rabia receives a cell phone bill for $45. She uses her cell phone only for business. The bill is for services provided during November and is due December 15.

accounts payable journal entry

Updating Ledger accounts after Adjusting Entries at November 30, 2017

Cash Account

Share Capital _Ordinary Account

Advertising Supplies Account

Baking Supplies Account

Baking Equipment Account

Notes Payable Account

Teaching Revenue Account

Unearned Revenue Account

Prepaid Insurance Account

Advertising Supplies Expense Account

Baking Supplies Expense Account

Depreciation Expense Account

Accumulated Depreciation _ Baking Equipment Account

Interest Expense Account

Interest Payable Account

Accounts Receivable Account

Telephone Expense Account

Telephone Expense Payable Account

 

Prepare an Adjusted Trial Balance at November 30, 2017 (Statement Form)

adjusted trial balance

References

Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.

Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

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