Question

Adjusting Entries The Wheel Place, Inc., began operations on March 1 to provide automotive wheel alignment and balancing services. On March 31, 2012, the unadjusted balances of the firm's accounts are as follows: THE WHEEL PLACE, INC. Unadjusted Trial Balance March 31, 2012 Debit Credit Cash $1,900 Accounts Receivable 3,820 Prepaid Rent 4,780 Supplies 3,700 Equipment 36,000 Accounts Payable 2,340 Unearned Service Revenue 1,000 Common Stock 38,400 Service Revenue 12,360 Wages Expense 3,900 Totals $54,100 $54,100 The following information is also available: The balance in Prepaid Rent was the amount paid on March 1 for the first 4 months rent. Supplies on hand on March 31 were $1,750. The equipment, has an estimated life of 4 years. Unpaid wages at March 31 were $860. Utility services used during March were estimated at $420. A bill is expected early in April. The balance in Unearned Service Revenue was the amount received on March 1 from a new car dealer to cover alignment and balancing services on all new cars sold by the dealer in March and April. The Wheel Place agreed to provide the services at a fixed fee of $530 each month.

Answer 1

Step-by-step explanation:

The adjusting entries are shown below:

1. Rent Expenses A/c $1,195 ($4,780 ÷ 4 months)

To Prepaid rent A/c $1,195

(Being the prepaid rent is adjusted)

2. Supplies expense A/c Dr $1,950

To supplies A/c $1,950

(Being supplies account is adjusted)

The supplies expense is computed by

= Supplies balance - supplies on hand

= $3,700 - $1,750

= $1,950

3. Depreciation Expense A/c Dr $750

To Accumulated Depreciation - Equipment A/c $750

(Being depreciation expense is recorded)

The computation is shown below:

= ($36,000 ÷ 4 years) × 1 months ÷ 12 months

= $750

4. Wages expenses A/c $860

To wages payable A/c $860

(Being the wages are adjusted)

5. Utilities expense A/c Dr $400

To Utilities payable A/c $400

(Being the utilities are adjusted)

6. Unearned Service revenue A/c $530

To Service revenue A/c 530

(Being the unearned Service revenue is recorded)