Summer Design Company was organized on January 1, 2014, by Corinne Burien. Summer Design records all prepaid costs as expenses and all revenues received in advance as revenue. At the end of the first year of operations, the trial balance had the following accounts:

Analysis reveals the following additional information:
1. A one-year, 5% note payable was issued January 2, 2014. Interest is payable monthly on the first of the month.
Principal is payable at maturity.
2. Equipment was purchased on January 3, 2014, and has an estimated useful life of 12 years.
3. On April 1, 2014, the company purchased a one-year insurance policy.
4. During the year, Summer Designs collected $6,000 cash from customers before providing services to them. At
December 31, 2014, $4,500 of this amount has been earned.
5. A count at December 31, 2014, showed $445 of supplies on hand.
6. Salaries of $850 are owed at December 31, 2014.
7. January 2015 rent of $625 was paid on December 31, 2014, and is included in Rent Expense.
Instructions
(a) Journalize the adjusting entries at December 31. (Adjustments are recorded annually.)
(b) Prepare an adjusted trial balance.
TAKING IT FURTHER If Summer Designs recorded all prepaid costs as assets and all revenue received in advance as a liability, would this result in different numbers in the adjusted trial balance than in (b)?

Transcribed Image Text:

SUMMER DESIGN COMPANY Trial Balance December 31,2014 Debit Credit Cash Accounts receivable Equipment Accounts payable $ 8,790 12,970 45,900 $ 5,500 32,400 28,000 Note payable C. Burian, capital C. Burian, drawings Service revenue Insurance expense Interest expense Rent expense Salaries expense Supplies expense 16,800 64,300 1,980 1,485 8,125 28,800 5,350 $130,200 $130,200