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Adjusting entries. You have been retained to examine the records of Mary's Day Care Center as of December 31, 20X3, the close of the current reporting period. In the course of your examination, you discover the following:
• On January 1, 20X3, the Supplies account had a balance of $1,350. During the year, $5,520 worth of supplies was purchased, and a balance of $1,620 remained unused on December 31.
• Unrecorded interest owed to the center totaled $275 as of December 31.
• All clients pay tuition in advance, and their payments are credited to the Unearned Tuition Revenue account. The account was credited for $65,500 on August 31. With the exception of $15,500 all amounts were for the current semester ending on December 31.
• Depreciation on the school's van was $3,000 for the year.
• On August 1, the center began to pay rent in 6-month installments of $24,000. Mary wrote a check to the owner of the building and recorded the check in Pre¬paid Rent, a new account.
• Two salaried employees earn $400 each for a 5-day week. The employees are paid every Friday, and December 31 falls on a Thursday.
• Mary's Day Care paid insurance premiums as follows, each time debiting Pre¬paid Insurance:

Date Paid Policy No. Length of Policy Amount
Feb. 1, 20X2 1033MCM19 1 year $540
Jan. 1, 20X3 7952789HP 1 year 912
Aug. 1, 20X3 XQ943675ST 2 years 840
Instructions

The center's accounts were last adjusted on December 31, 20X2. Prepare the adjusting entries necessary under the accrual basis of accounting.

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M942361

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