Question

The unadjusted trial balance of sketch star makers incorporated, prepared as of december 31, 2022, includes the following account balances. all of the accounts listed have normal balances.

cash $ 16,500
accounts receivable 3,300
supplies 3,600
prepaid insurance 7,400
equipment 23,000
accumulated depreciation 3,300
notes payable (long-term) 33,000
deferred revenue 11,500
service revenue 43,000
salaries and wages expense 36,500

The following information is also available:
A) A count of supplies revealed $2,100 worth on hand at December 31, 2022.
B) An insurance policy, purchased on January 1, 2022, covers five years.
C) The equipment depreciates at a rate of $2,700 per year; no depreciation has been recorded for 2022.
D) One half (or 50%) of the amount recorded as Deferred Revenue remains deferred as of December 31, 2022.
E) The accrued amount of salaries and wages at December 31, 2022 is $3,700. Required: Prepare the required adjustments for the company as of December 31, 2022

Answer 1

To prepare the required adjustments for Sketch Star Makers Incorporated as of December 31, 2022, adjustments for supplies, prepaid insurance, depreciation, deferred revenue, and salaries and wages need to be made.

Step-by-step explanation:

To prepare the required adjustments for Sketch Star Makers Incorporated as of December 31, 2022, we need to consider the information provided. Here are the adjustments:

1. Supplies Adjustment: The supplies on hand at December 31, 2022, are worth $2,100. We need to reduce the supplies account by $1,500 to reflect the actual supplies used.
2. Prepaid Insurance Adjustment: The insurance policy purchased on January 1, 2022, covers five years. Since one year has passed by December 31, 2022, we need to reduce the prepaid insurance account by $1,480 (7,400/5).
3. Depreciation Adjustment: The equipment depreciates at a rate of $2,700 per year. Since no depreciation has been recorded for 2022, we need to increase the accumulated depreciation account by $2,700.
4. Deferred Revenue Adjustment: One-half (or 50%) of the amount recorded as deferred revenue remains deferred. We need to reduce the deferred revenue account by $5,750 (11,500/2).
5. Salaries and Wages Adjustment: The accrued amount of salaries and wages at December 31, 2022, is $3,700. We need to increase the salaries and wages expense account and the salaries and wages payable account by $3,700 each.

After making these adjustments, the adjusted trial balance can then be prepared.