Sam Buckley started his own cycle repair shop, Sam's Cycles, on September 1, 2017. Sam wants to prepare monthly financial statements, so adjusting journal entries are required on September 30. Selected transactions for September follow:
1. $1,100 of supplies were used during the month.
2. Utilities expense incurred but not yet recorded or paid on September 30, 2017, is $775.
3. Paid cash of $2,360 for a one-year insurance policy on September 1, 2017. The policy came into effect on this date.
4. On September 1, purchased repair equipment for $9,600 cash. It is being depreciated over 48 months.
5. On September 1, Sam signs a note payable for $15,000, 4.5% interest.
6. September 30 is a Saturday and employees are paid on Wednesdays for the preceding week. Sam's Cycles has three employees, who are paid $1,000 each for a five-day workweek that ends on Saturday.
7. Invoices representing $950 of services performed have not been recorded as at September 30.
Instructions
Prepare adjusting entries for the items above.
TAKING IT FURTHER
Sam has been reading about a recent accounting scandal where the company overstated its revenue on purpose. He now argues that it is never appropriate to make adjusting entries to accrue for revenue. Do you agree? Why or why not?