Christopher Foster owns Estate Planning and Investments Company. The trial balance of the firm for June 30, 20X1, the first month of operations, is shown below.

INSTRUCTIONS
1. Complete the worksheet for the month.
2. Prepare an income statement, statement of owner’s equity, and balance sheet. No additional investments were made by the owner during the month.
3. Journalize and post the adjusting entries. Use 3 for the journal page number. 

End-of-month adjustments must account for the following:
a. The supplies were purchased on June 1, 20X1; inventory of supplies on June 30, 20X1, showed a value of $12,000.
b. The prepaid advertising contract was signed on June 1, 20X1, and covers a four-month period.
c. Rent of $12,000 expired during the month.
d. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of five years with no salvage value.
Analyze: Why are the costs that reduce the value of equipment not directly posted to the asset account Equipment?

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Cash Accounts Receivable ACCOUNT NAME 1 2 3 Supplies 4 Prepaid Advertising 5 Prepaid Rent 6 Equipment 7 Accumulated Depreciation-Equipment Accounts Payable 8 9 Christopher Foster, Capital 10 Christopher Foster, Drawing 11 Fees Income 12 Advertising Expense 13 Depreciation Expense-Equipment 14 Rent Expense Salaries Expense 15 16 Supplies Expense Utilities Expense 17 Totals 18 19 Estate Planning and Investments Company Worksheet (Partial) Month Ended June 30, 20X1 TRIAL BALANCE DEBIT 78 800 00 24 400 00 30 400 00 57 600 00 144 0 0 0 00 192 000 00 16 000 00 30 400 00 520000 578 800 00 CREDIT 43 20000 240 40000 295 200 00 578 8 0 0 00 DEBIT ADJUSTMENTS CREDIT