Brothers Ltd began operations on 1 February 2016. The trial balance at 30 June is as follows. 

In addition to those accounts listed on the trial balance, the chart of accounts for Brothers Ltd also contains the following accounts: 131 Accumulated Depreciation—Office Equipment, 218 Electricity Payable, 215 Salaries Payable, 520 Depreciation Expense, 515 Insurance Expense, 530 Electricity Expense, and 505 Supplies Expense. 

Other data:

1. Supplies on hand at 30 June total $490.

2. An electricity bill for $110 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year, commencing 1 February 2016. 

4. Services were performed during the period in relation to $800 of Revenue Received in Advance.

5. Salaries of $770 are owed at 30 June.

6. The office equipment has a 5-year life with no resale value and is being depreciated at $375 per month for 60 months.

7. Invoices representing $1500 of services performed during the month have not been recorded as of 30 June.

Required

(a) Prepare the adjusting entries for the month of June.

(b) Using T accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts.

(c) Prepare an adjusted trial balance as at 30 June 2016.

(d) If the business wanted to report a higher profit which of the adjusting entries would be avoided? Which stakeholders would be affected by the misreported profit?   

Transcribed Image Text:

BROTHERS LTD Trial balance as at 30 June 2016 No. Account name 100 Cash 104 Accounts Receivable 112 Prepaid Insurance 113 Supplies 130 Office Equipment 200 Accounts Payable 213 Service Revenue Received in Advance 300 Share Capital 400 Service Revenue 500 Salaries Expense 510 Rent Expense Debit $9480 3150 2520 2350 22 500 3 295 5 250 $48545 Credit $ 1550 1500 20 000 25 495 $48545