PROBLEM $3-8($LO$1,2,3)$ Challenge Question $-$ Adjusting Entries

Below is an unadjusted trial balance for Smith and Smith Co$.,$ at June $30,2016.$

Smith and Smith Co$.$

Unadjusted Trial Balance

At June $30,2016$

Cash $-50,400($Debit$)$

Accounts receivable $-25,000($Debit$)$

Shop supplies $-1,500($Debit$)$

Prepaid insurance expense $-4,500($Debit$)$

Prepaid advertising expense $-2,000($Debit$)$

Prepaid rent expense $-$

Building $-74,000($Debit$)$

Accumulated depreciation, building $-$

Equipment $-10,000($Debit$)$

Accumulated depreciation, equipment $-2,000($Credit$)$

Accounts payable $-12,000($Credit$)$

Accrued salaries payable $-15,000($Credit$)$

Interest payable $-$

Income taxes payable $-$

Notes payable $-20,000($Credit$)$

Unearned service revenue $-30,000($credit$)$

Share capital $-1,000($Credit$)$

Retained earnings $-24,900($Credit$)$

Service revenue $-125,000($Credit$)$

Salaries expense $-22,000($Debit$)$

Insurance expense

Interest expense

Shop supplies expense $-200($Debit$)$

Advertising expense $-2,220($Debit$)$

Depreciation expense $-1,400($Debit$)$

Maintenance service expenses $-5,200($debit$)$

Rent expense $-20,000($Debit$)$

Income tax expense $-$

Utilities expense $-12,000($Debit$)$

Additional information for June not yet recorded:

a$.$ Un$-$billed and uncollected work to June $30$ totals $$45,000.$

b$.$ An analysis of prepaid advertising shows that $$500$ of the balance was consumed.

c$.$ A shop supplies count on June $30$ shows that $$1,200$ are on hand.

d$.$ Equipment has an estimated useful life of ten years and an estimated residual value of $$500.$

e$.$ The records show that fifty percent of the work, for a $$10,000$ fee received in advance from a customer and recorded last month, is now completed.

f$.$ Salaries of $$5,800$ for employees for work done to the end of June has not been paid.

g$.$ Utilities invoice for services to June $22$ totals $$3,500.$

h$.$ Accrued revenues of $$7,800$ previously recorded to accounts receivable were collected.

i$.$ A building was purchased at the end of May. It's estimated useful life is fifty years and has an estimated residual value of $$10,000.$

j$.$ Rent expense of $$5,000$ cash for July has been paid and recorded directly to rent expense.

k$.$ Interest for the $6\%$ note payable has not yet been recorded for June.

l$.$ Income taxes of $$3,000$ is owing but not yet paid.

m$.$ Unrecorded and uncollected service revenue of $$9,000$ has been earned.

n$.$ A two year, $$1,800$ insurance policy was purchased on June $1$ and recorded to prepaid insurance expense.

o$.$ The prior balance in the unadjusted prepaid insurance account $($excluding the insurance in item $($n$.$ above$),$ shows that $$300$ of that balance is not yet used.

Required:

$1.$ Prepare the Adjusting and Correcting entries for June.

$2.$ Prepare an adjusted trial balance at June $30,2016.$