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You are employed to investigate whether any accrual entries are needed in the business of Safe Security Services (SS
of your investigation on 30 June, you have discovered that the following items need attention:
1. Employee salaries owed but not recorded,
2. Prepaid insurance expired,
3. Interest revenue accrued but not recorded,
4. Unearned security services revenue now earned,
5. Depreciation not recorded,
9200
900
10000
4600
16000
Required
A. Prepare the adjusting entries for items 1 to 5 at 30 June, the end of the accounting period.
B. Suppose the adjusting entries in requirement A were not made. Calculate the total overstatement or understatemen
profit as a result of the omission of these adjustments.
SOLUTION:
Journal Entries
Particulars
Salary Expense
Salaries Payable
Debit
9200
Credit
9200
Insurance Expense
Prepaid Insurance
900
Interest Receivable
Interest Revenue
10000
Unearned Security Services Revenu
Security services revenue
4600
Depreciation Expens
Accumulated Depreciation
16000
900
10000
4600
16000
B.
Salary Expense
Insurance Expense
Depreciation Expens
Total overstated
9200
900
16000
26100
Interest Revenue
10000
Security services revenue
Total understated
4600
14600
The net overstatement of profit is therefore 26100 - 14600 = 11500
e Security Services (SSS). On completion
ement or understatement of
Selected accounts of Rikki’s Real Estate are shown below at 30 June of the current year before any adjusting entries h
Debit
1200
550
6000
Prepaid Insurance
Supplies
Office Equipment
Unearned Rental Fees
Salaries Expense
Rental Fees Revenue
Credit
4200
29800
Additional information
(a) Prepaid insurance represents premiums for 1 year paid on 1 June.
(b) Supplies of $200 were on hand at 30 June.
(c) Office equipment, which had been purchased on 1 April, is expected to last 5 years.
(d) Rikki collected 4 months’ rent in advance on 1 June from a number of tenants.
(e) Accrued salaries not recorded as at 30 June are $3500.
Supplies
Office equipment
Rikki collection
Accrued salaries
200
5
4
35000
Years
Month
Required:
Record in the general journal the necessary adjusting entries on 30 June.
SOLUTION:
a
Journal Entries
Particulars
Insurance Expense (1200 / 12)
Prepaid Insurance
Debit
600
b
Supplies Expense (550-200)
Supplies
350
c
Depreciation Expense – Office Equipment (6000/5)*(3/12)
Accumulated Depreciation – Office Equipment
300
d
Unearned Rental Fees (4200 /4 month)
Rental Fees Revenue
1050
e
Salaries Expense
3500
Salaries Payable
ore any adjusting entries have been made.
13200
Credit
600
350
300
1050
3500
Subiaco Rental Services ends its financial year on 30 June.
Required
A. Using the following information, make the necessary adjusting entries.
1. Rent of office premises of $609 for the 3-month period ending 31 July is due to be paid in July.
2. The telephone expense of $147 is unpaid and unrecorded at 30 June.
3. The Supplies account had a $287 debit balance on 1 July of the preceding year. Supplies costing $1372 were purch
year, and $252 of supplies are on hand as at 30 June.
4. Subiaco Rental Services borrowed $13300 from ABC Bank on 15 February. The principal, plus 8% interest, is pay
August. Accrued interest on 30 June has not been recorded.
5. Annual depreciation on equipment is estimated to be $6580. The balance in Accumulated Depreciation at the begin
6. The office assistant earns $280 a day. He will be paid in July for the 5-day period ending 3 July.
7. On 1 June, Subiaco Rental Services received 2 months’ rent in advance, to...