Mate Ease is an Internet dating service. All members pay in advance to be listed in the database.

Advance payments are credited to an account entitled Unearned Member Dues. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31, 2011, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2011, but not for December.)

Other Data

1. Records show that $21,000 of cash receipts originally recorded as unearned member dues had been earned as of December 31, 2011.

2. The company purchased a six-month insurance policy on October 1, 2011, for $19,200.

3. On November 1, 2011, the company paid $21,900 for rent through January 31, 2012.

4. Office supplies on hand at December 31 amount to $440.

5. All computer equipment was purchased when the business first formed. The estimated life of the equipment at that time was three years (or 36 months).

6. On March 1, 2011, the company borrowed $90,000 by signing a 12-month, 10 percent note payable. The entire note, plus 12 months’ accrued interest, is due on March 1, 2012.

7. Accrued but unrecorded salaries at December 31 amount to $10,500.

8. Estimated income taxes expense for the entire year totals $16,000. Taxes are due in the first quarter of 2012.

Instructions

a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation).

b. Determine that amount at which each of the following accounts will be reported in the company’s balance sheet dated December 31, 2011:

1. Cash

2. Unexpired Insurance

3. Prepaid Rent

4. Office Supplies

5. Computer Equipment

6. Accumulated Depreciation: Computer Equipment

7. Accounts Payable

8. Notes Payable

9. Salaries Payable

10. Interest Payable

11. Income Taxes Payable

12. Unearned Member Dues

c. Why doesn’t the company immediately record advance payments from customers as revenue?

MATE EASE UNADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash Unexpired insurance Prepaid rent Office supplies Computer equipment Accumulated depreciation: computer equipment. $169,500 12,800 14,600 2,160 :...108,000 54,000 4,300 90,000 6,750 7,500 36,000 40,000 28,000 508,450 Notes payable Interest payable Unearned member dues. -.. Capital stock. Retained earnings. . Client fees eaned Advertising expense. .. Insurance expense.... Rent expense Office supplies expense Internet connection expense. . Depreciation expense: computer equipment. Salaries expense Interest expense. Income taxes expense . 17,290 35,200 80,300 18,400 24,000 33,000 239,000 6,750 14,000 $775,000 $775,000