Medical Massage, Inc., has the following account balances at the end of the year (partial list of accounts):
Service revenue ......... $34,320
Prepaid insurance ........ $4,000
Unearned service revenue ...... 3,200
Salaries payable ........ 2,550
Equipment .......... 40,000
Accumulated depreciation ..... 12,000
Taxes expense ......... 3,650
Depreciation expense ...... 5,000
Salaries expense ......... 8,250
The following information is also available:
a. The company accountant forgot to depreciate a new deluxe massage table that was purchased at the beginning of the year.
The table cost $4,000, has a useful life of four years, and has no expected residual value.
b. The unearned service revenue consists of gift certificates sold during the year. Medical Massage has lost track of customers redeeming certificates, but only $1,200 of the gift certificates have not been redeemed.
c. The company currently owes employees $200 of salaries in addition to the amount already recorded.
d. The company owes $1,075 in real estate taxes in addition to the taxes already recorded.
e. Half of the $4,000 insurance policy has expired.

1. Prepare the adjusting journal entries necessary at year end.
2. Use T-accounts to compute and present the balances in these accounts after the adjustments have been posted.
3. Prepare the closing journal entries.

  • CreatedSeptember 01, 2014
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