Question: On December 31 2014 the following unadjusted trial balance was

On December 31, 2014, the following unadjusted trial balance was prepared, and the
following data were accumulated to assist the accountant in preparing the adjusting
entries and adjusted trial balance for Stark Advertising. When Henny Stark, the owner,
realized the unadjusted trial balance did not balance, the records were reviewed and
errors were identified.
a. The purchase of supplies on April 1, 2014, was incorrectly posted as a $748 debit to
Supplies Expense and a $748 debit to Prepaid Supplies. Supplies used in 2014 were
valued at $8,470.
b. The one-year insurance policy was purchased and incorrectly fully expensed on
May 1, 2014. It is the only item in insurance expense.
c. The $418 September hydro payment was incorrectly posted as a debit to Cash and
a credit to Utilities Expense.
d. A $17,250 deposit for a contract beginning in January 2015 was incorrectly recorded
as revenue on December 15, 2014.
e. As at December 31, 2014, $52,750 fees are earned but unbilled. Of the unearned
revenue posted, $34,500 was earned in December.
f. Stark Advertising has 10 employees with a combined daily salary of $5,300. Year-end
falls halfway through a two-week pay period. Assume that all employees worked
every day during the period.
g. The vehicle was purchased in 2012 and has an estimated useful life of 10 years. The
estimated life of the building is 15 years. Straight-line depreciation is used.
1. Correct any identified errors by creating both a reversing journal entry and a
correcting journal entry.
2. Determine the balances of the accounts affected by the correcting entries and prepare
another unadjusted trial balance.
3. Journalize the year-end adjusting entries. Add additional accounts as needed.
4. Determine the balances of the accounts affected by the adjusting entries and prepare
an adjusted trial balance. Assume no additional investments during the period.

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  • CreatedSeptember 15, 2015
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