Hey! I have 2 somewhat long questions:
The following account balances taken on Dec 31, 2008
Accounts Payable=58000
Accounts Receivable=64000
Advertising Expense=14000
Building=54000
Cash=30000
Common Stock=94000
Cost of Goods Sold=45000
Dividends=12000
Equipment=68000
Income Tax Expense=17000
Interest Revenue=36000
Inventory=62000
Notes Payable=82000
Rent Expense=10000
Retained Earnings=40000
Sales Revenue=99000
Salaries Expense=22000
Salaries Payable=11000
Supplies=18000
Trademark=31000
Unearned Revenue=27000

The questions asks me to use the following adjusting entries and calculate both the Net Income and the Total Assets after the adjusting entries are recorded/posted.
1.Based on a physical count, the company determined there were only 10000 of supplies still on hand and available to be used as of Dec 31,2008
2. The unearned revenue relates to a 27,000 payment from a customer received May 1,2008 for work to be performed each month for the next 18 months.

Now I'll explain what I've done so far and hopefully someone can help get me on the right track again!
For the first adjusting entry I used the formula: beginning supplies +supplies purchased-ending supplies=Supplies expense (18000+0-10000=8000 supplies expense)
For the second adjusting entry I took 27,000 and divided it by 18 to see how much would be earned per month (1500). Since from May to Dec is 8 months I multiplied 1500 by 8 to get 12000 received in cash during 2008 and 15000 still considered unearned revenue.

I then calculated Net Income by subtracting all expenses from all revenue and got a figure of $31,000.

For total assets I used same adjusting entries and the equation Liability+equity=Assets.
However, my problem occurs because my liability plus equity and not equaling the same thing as my assets added up.

I'll provide the numbers I have for more info!

Liability=166000
15000-unearned revenue
58000-accounts payable
82000-notes payable
11000-salaries payable

Equity=153000
94000-common stock
59000-retained earnings (found from Beg retained earnings 40000+net income 31000(as found above)-dividends12000=ending retained earnings

Assets=329000
10000 Supplies
64000 Accounts receivable
54000 Building
30000 Cash
68000 Equipment
62000 inventory
31000 trademark
12000 cash from adjusting entry #2

Thank you for anything that could point me in the right direction :)

Quote:

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Originally Posted by Krissy57af

For the second adjusting entry I took 27,000 and divided it by 18 to see how much would be earned per month (1500). Since from May to Dec is 8 months I multiplied 1500 by 8 to get 12000 received in cash during 2008 and 15000 still considered unearned revenue.

Assets=329000
10000 Supplies
64000 Accounts receivable
54000 Building
30000 Cash
68000 Equipment
62000 inventory
31000 trademark
12000 cash from adjusting entry #2

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The issue is with that 12,000. That list doesn't actually add up to 329,000. It's 331,000. If you'd added that correctly, you might have noticed it's 12,000 off and figured it out. (Always re-add your numbers. And always figure out how much it's off by. That can give you a clue.)

Adjusting entries never involve cash. Furthermore, your statement above about the 12,000 being the amount of cash received during 2008 is false. If they had actually received that cash during the year, it would already be recorded. Adjusting entries always involve things that haven't yet been recorded, and cash should be recorded as it happens and not have to be adjusted.

They received 27,000. That's what unearned revenues are: you receive payment ahead of time for something not yet earned. So it was already received. The 12,000 is the amount they earned during the 8 months. Therefore, it has to be removed from the liability account (no longer "owed") and recognized as income.

The interesting thing is that your net income is right, meaning you did recognize the 12,000 as revenue (despite that you didn't indicate so). And you took it out of unearned revenue properly. But you involved an extra 12,000 (that doesn't balance) by sticking it into cash.