Question

At the end of its fiscal year, Dickens Cleaners, Inc., had the following trial balance:


The following information is also available:
a. A study of the company’s insurance policies shows that $1,360 is unexpired at the end of the year.
b. An inventory of cleaning supplies shows $2,300 on hand.
c. Estimated depreciation on the building for the year is $25,600.
d. Accrued interest on the mortgage payable is $2,000.
e. On September 1, the company signed a contract, effective immediately, with Kings County Hospital to dry-clean, for a fixed monthly charge of $850, the uniforms used by doctors in surgery. The hospital paid for four months’ service in advance.
f. The company pays sales and delivery wages on Saturday. The weekly payroll is $6,120. September 30 falls on a Thursday, and the company has a six-day pay week.
g. Estimated federal income taxes for the period are $4,600.

REQUIRED
All adjustments affect one balance sheet account and one income statement account. For each of the above situations, show the accounts affected, the amount of the adjustment (using a + or – to indicate an increase or a decrease, respectively), and the balance of the account after the adjustment in the following format:





Amount of
Balance


Amount of
Balance






Adjustment
after
Income
Adjustment
after





Balance Sheet Account


(+ or –)
Adjustment
Statement Account


(+ or –)
Adjustment



















a.
Prepaid Insurance
–

$ 5,440
$ 1,360
Insurance Expense
+

$ 5,440
$ 5,440



















b.
Cleaning Supplies
–

12,448
2,300
Cleaning Supplies Expense
+

12,448
12,448



















c.
Accumulated Depreciation—




Depreciation Expense—









Building
+

25,600
116,800
Building
+

25,600
25,600



















d.
Interest Payable
+

2,000
2,000
Interest Expense
+

2,000
24,000



















e.
Unearned Cleaning Revenue
–

850
2,550
Cleaning Revenue
+

850
320,118



















f.
Wages Payable
+

4,080
4,080
Wages Expense
+

4,080
206,740



















g.
Income Taxes Payable
+

4,600
4,600
Income TaxesExpense


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  • CreatedSeptember 10, 2014
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