Adjusting entries and financial statements. The following information pertains to Sally Corporation:
• The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned.
• Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31.
• Salaries owed to employees at year-end amounted to $1,000.
• The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.
• The company paid $18,000 on October 1 of the current year to Vantage Property Management. The payment was for 6 months' rent of Sally Corporation's headquarters, beginning on November 1.
Sally Corporation's accounting year ends on December 31.
Instructions
Analyze the five preceding cases individually and determine the following:
a. The type of adjusting entry needed at year-end (Use the following codes: A, adjust¬ment of a prepaid expense; B, adjustment of an unearned revenue; C, adjustment to record an accrued expense; or D, adjustment to record an accrued revenue.)
b. The year-end journal entry to adjust the accounts
c. The income statement impact of each adjustment (e.g., increases total revenues by $500)
The company previously collected $1,500 as an advance payment for services to
be rendered in the future. By the end of December, one half of this amount had been
earned.
B, adjustment of an unearned revenue
Unearned service revenue
Debit $750
Service revenue
Credit
$750
Increase total revenue by $750
Sally Corporation provided $1,500 of services to Artech Corporation; no billing had
been made by December 31.
D, adjustment to record an accrued revenue.)
Accounts receivable
Debit $1,500
Service revenue
Credit
$1,500
Increase total revenue by $1,500
Salaries owed to employees at year-end amounted to $1,000.
C, adjustment to record an accrued expense
Salary expense
Debit $1,000
Salary Payable
Credit
$1,000
Increase total expense by $1,000
The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies
were actually on hand at the end of the period.

A, adjustment of a prepaid expense
Supplies expense
Debit $5,500
Supplies
Credit
$5,500
Increase total expense by $5,500
The company paid $18,000 on October 1 of the current year to Vantage Property
Management. The payment was for 6 months rent of Sally Corporations
headquarters, beginning on November 1.
Sally Corporations accounting year ends on December 31.
A, adjustment of a prepaid expense
Rent expense
Debit $6,000
Prepaid Rent
Credit
$6,000
Increase total expense by $6,000