Ask Me Help Desk - Trial balance

Trial balance

I have this question about a trial balance, every time I try to balance it I come with debits 42,110 and credits 42,390. I really do not enjoy trial balances and my teacher has not explained one in class yet, but it is in my homework. The subtractions and additions are my attempts to balance them not the book

Josh Stein started his own consulting firm, Astromech Consulting, on June 1, 2007. The trial balance at June 30 is as follows.

ASTROMECH CONSULTING
Trial Balance
June 30, 2007
Debit Credit
Cash $ 6,850-180
Accounts Receivable 7,000+3000
Prepaid Insurance 2,640-220
Supplies 2,000-980
Office Equipment 15,000-250
Accounts Payable $ 4,540
Unearned Service Revenue 5,200+2900
Common Stock 21,750
Service Revenue 8,000
Salaries Expense 4,000
Rent Expense 2,000
$39,490 $39,490

In addition to those accounts listed on the trial balance, the chart of accounts for Astromech also contains the following accounts: Accumulated Depreciation—Office Equipment, Utilities Payable, Salaries Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.

Other data:

1.
Supplies on hand at June 30 total $980.

2.
A utility bill for $180 has not been recorded and will not be paid until next month.

3.
The insurance policy is for a year. So I guess it is 2640/12=220 a month

4.
$2,900 of unearned service revenue has been earned at the end of the month.

5.
Salaries of $1,250 are accrued at June 30.

6.
The office equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.

7.
Invoices representing $3,000 of services performed during the month have not been recorded as of June 30.

Quote:

Originally Posted by cahitmanhart

Josh Stein started his own consulting firm, Astromech Consulting, on June 1, 2007. The trial balance at June 30 is as follows.

In addition to those accounts listed on the trial balance, the chart of accounts for Astromech also contains the following accounts: Accumulated Depreciation—Office Equipment, Utilities Payable, Salaries Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.

It is important to note the names of the other accounts above that you also have the ability to use.

To make the Trial Balance easier to read on AskMeHelpDesk, I will simply divide them into 2 categories, Debits and Credits.

ASTROMECH CONSULTING
Trial Balance
June 30, 2007

Debits
Cash 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,640
Supplies 2,000
Office Equipment 15,000
Salaries Expense 4,000
Rent Expense 2,000

Credits
Accounts Payable 4,540
Unearned Service Revenue 5,200
Common Stock 21,750
Service Revenue 8,000

Since you said you have not been taught how to do a trial balance, I will try to show you.

First, what you would like to do is with each adjuting entry belwow (number 1 -7), write out the Journal Entry that you need to do and therefore, it will become a simple matter of making the changes up top to the trial balance.

As you can see, I have changed the form, but that is simply because the spacing functions of a trail balance does not translate online to AskMeHelpDesk.

Quote:

Originally Posted by cahitmanhart

1. Supplies on hand at June 30 total $980.

Our unadjusted trial balance shows we have $2,000 worth of supplies. However, we are only suppose to have $980. Therefore, we have USED (2,000-980) $1,020 worth of Supplies.

Dr. Supplies Expense 1,020
Cr. Supplies 1,020

Quote:

Originally Posted by cahitmanhart

2. A utility bill for $180 has not been recorded and will not be paid until next month.

Just because we haven't paid the bill, doesn't mean we don't record it.

Dr. Utilities Expense 180
Cr. Utilities Payable 180

A payable is set up because we owe the money, just haven't' paid it yet.

Quote:

Originally Posted by cahitmanhart

3. The insurance policy is for a year. so i guess it is 2640/12=220 a month

Your calculation is correct. So since it has only been 1 month…

Dr. Insurance Expense 220
Cr. Prepaid Insurance 220

Quote:

Originally Posted by cahitmanhart

4. $2,900 of unearned service revenue has been earned at the end of the month.

Dr. Unearned Service Revenue 2,900
Cr. Service Revenue 2,900

A simple transfer of money from 1 account to another.

Quote:

Originally Posted by cahitmanhart

5. Salaries of $1,250 are accrued at June 30.

Just because we have not paid out the salaries, it is still a cost and we must make the appropriate Journal Entry to record it

Dr. Salaries Expense 1,250
Cr. Salaries Payable 1,250

Quote:

Originally Posted by cahitmanhart

6. The office equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.

Here it is telling us how much depreciation expense to use, $250.

So, the JE would be:

Dr. Depreciation Expense 250
Cr. Accumulated Depreciation—Office Equipment 250

Quote:

Originally Posted by cahitmanhart

7. Invoices representing $3,000 of services performed during the month have not been recorded as of June 30.

We forget to record invoices for services, so:

Dr. Accounts Receivable 3,000
Cr. Service Revenue 3,000

Ok, now that we have done all that, we now go back to our trial balance and make the appropriate changes to it.

ASTROMECH CONSULTING
Adjusted Trial Balance
June 30, 2007

Debits
Cash 6,850
Accounts Receivable 7,000 + 3,000 = 10,000
Prepaid Insurance 2,640 – 220 = 2,420
Supplies 2,000 – 1,020 = 980
Office Equipment 15,000
Salaries Expense 4,000 + 1,250 = 5,250
Rent Expense 2,000
Supplies Expense 1,020
Utilities Expense 180
Insurance Expense 220
Depreciation Expense 250
Total Debits 44,170

Credits
Accounts Payable 4,540
Unearned Service Revenue 5,200 – 2,900 = 2,300
Common Stock 21,750
Service Revenue 8,000 + 2,900 + 3,000 = 13,900
Utilities Payable 180
Salaries Payable 1,250
Accumulated Depreciation—Office Equipment 250
Total Credits 44,170

As you can see, you now have an adjusted trial balance.

Wow, that makes so much sense, thank you so much

You're welcome