Final answer:
The student's question involved preparing a worksheet with unadjusted balances and adjusting entries for Ley Company's accounts, including adjustments for expired insurance, unbilled services, and accrued salaries. This example reflects the insurance company's need to match revenues with their corresponding expenses to determine accurate profits or losses.
Step-by-step explanation:
The student asked for assistance in creating a worksheet incorporating unadjusted balances and adjusting entries for an insurance company example from Ley Company. Here is an example of how such a worksheet could be structured:
- Prepaid Insurance: unadjusted balance of $3,000 with an adjustment for expired insurance of $1,200, resulting in an adjusted balance of $1,800.
- Service Revenue: unadjusted balance of $58,000 with an adjustment for services provided but unbilled of $1,100, bringing this to a total of $59,100.
- Salaries Expense: unadjusted balance of $25,000 with an accrued salaries payable adjustment of $800, totaling $25,800.
In addition, new accounts would be added to the worksheet:
- Accounts Receivable: No unadjusted balance, with an adjustment of $1,100 for services rendered but not yet billed.
- Salaries Payable: No unadjusted balance, with an accrued expense adjustment of $800.
- Insurance Expense: No unadjusted balance, with an expense adjustment of $1,200 reflecting the expired portion of prepaid insurance.
The adjusting entries effectively allocate expenses and revenues to the periods in which they occur, adhering to the matching principle in accounting. The worksheet reflects how the insurance company accounts for its expense flows, such as premiums and claims, and incorporates the adjustments necessary to account for the services provided and expenses incurred. Profits or losses are determined after these adjustments.