The unadjusted trial balance for Veda's Video Arcade at its fiscal year end of May 31, 2014, is as follows:

Additional information:
1. On May 31, 2014, Veda's Video Arcade had earned but not collected or recorded $750 of revenue. On June 19, it collected this amount plus an additional $1,150 for revenue earned in June.
2. There was $765 of supplies on hand on May 31, 2014.
3. The equipment has an estimated useful life of 10 years.
4. Accrued salaries to May 31 were $1,390. The next payday is June 3 and the employees will be paid a total of $1,980 that day.
5. The note payable has a 6% annual interest rate. Interest is paid monthly on the first day of the month.
6. As at May 31, 2014, there was $700 of unearned revenue.
Instructions
(a) Prepare adjusting journal entries for the year ended May 31, 2014, as required.
(b) Prepare reversing entries where appropriate.
(c) Prepare journal entries to record the June 2014 cash transactions.
(d) Now assume reversing entries were not prepared as in (b) above. Prepare journal entries to record the June 2014 cash transactions.
Taking It Further
Why is it not appropriate to use reversing entries for all of the adjusting entries?

Transcribed Image Text:

VEDA'S VIDEO ARCADE Trial Balance May 31, 2014 DebitCredit Cash $ 5,940 2,910 115,000 Equipment Accumulated depreciation-equipment Notes payable Unearned revenue V. Gupta, capital V. Gupta, drawings Service revenue Rent expense Salaries expense Interest expense $ 46,000 1,500 32,200 35,400 81,250 12,600 45,800 3,300 950