PROBLEM 4.7B Preparing Adjusting Entries from a Trial Balance E L04-1, 5 L04-2, 4 L04-3, E L04-4, @ L04-5, @ L04-6 104-7. @L04-9 Clint Stillmore operates a private investigating agency called Stillmore Investigations. Some clients pay in advance for services; others are billed after services have been performed. Advance payments are credited to an account entitled Unearned Retainer Fees. Adjusting entries are performed on a monthly basis. Below is an unadjusted trial balance dated December 31 of the current year. (Bear in mind that adjusting entries have already been made for the first 11 months, but not for December.) Other Data 1. Accrued but unrecorded client fees earned at December 31 amount to $1.500. 2. Records show that $2,500 of cash receipts originally recorded as Unearned Retainer Fees had been earned as of December 31. 3. Office supplies on hand at December 31 amount to $110. 4. The company purchased all of its office equipment when it first began business. At that time, the equipment's estimated useful life was six years (or 72 months). 5. On October 1 of the current year the company renewed its rental agreement paying $1,800 cash for six months' rent in advance. 6. On March 1 of the current year, the company paid $1,080 cash to renew its 12-month insurance policy. 7. Accrued but unrecorded salaries at December 31 amount to $1.900. 8. On June 1 of the current year the company borrowed money from the bank by signing a $9,000, 8 percent, 12-month note payable. The entire note, plus 12 months' accrued interest, is due on May 31 of the upcoming year.

Instructions a. For each of the numbered paragraphs, prepare the necessary adjusting entry (including an explanation). b. Prepare the company's adjusted trial balance dated December 31 of the current vear. c. Using figures from the adjusted trial balance prepared in b, compute net income for the year ended December 31 of the current year. d. How much was the company's average monthly rent expense in January through September of the current year? Explain your answer. e. How much was the company's average monthly insurance expense in January and February of the current year? Explain your answer. f. If the company purchased all of its office equipment when it first began operations, for how many months has it been in business? Explain your answer. g. Indicate the effect of each adjusting entry prepared in part a on the major elements of the company's income statement and balance sheet. Organize your answer in tabular form using the column headings shown. Use the symbols I for increase. D for decrease, and NE for no effect. The answer for adjusting entry number 1 is provided as an example. Income Statement Adjusting Entry Revenue T Net Income Expenses NE Assets T Balance Sheet Liabilities NE Owners' Equity T

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