Assessing Financial Statement Effects of Adjustments Across Two Periods

(LO1, 2)

The following selected accounts appear in Sloan Company’s unadjusted trial balance at December 31,

the end of its ?scal year (all accounts have normal balances).

Prepaid Advertising ............... $ 1,200 Unearned Service Fees ........... $ 5,400

Wages Expense .................. 43,800 Service Fees Earned.............. 87,000

Prepaid Insurance ................ 3,420 Rental Income................... 4,900

Required

a. Prepare Sloan Company’s accounting adjustments at December 31, using the ?nancial statement effects template and the following additional information.

1. Prepaid advertising at December 31 is $800.

2. Unpaid wages earned by employees in December are $2,600.

3. Prepaid insurance at December 31 is $2,280.

4. Unearned service fees at December 31 are $3,000.

5. Rent revenue of $1,000 owed by a tenant is not recorded at December 31.

b. Prepare entries on January 4, of the following year, using the ?nancial statement effects template to record

1. Payment of $4,800 cash in wages.

2. Cash receipt from the tenant of the $1,000 rent revenue.