Answer:
North Star
a. Accounting equation effects of each required adjustment:
1. Assets (Prepaid Rent decrease by $1,300) = Liabilities + Equity (Retained Earnings decreased by $1,300).
2. Assets ( with Accumulated Depreciation - a contra account - decreased by $1,100) = Liabilities + Equity (Retained Earnings decreased by $1,100).
3. Assets = Liabilities (Utilities Payable increased by $10,000) + Equity (Retained Earnings decreased by $10,000)
4. Assets = Liabilities (Income Tax Payable increased by $490) + Equity (Retained Earnings decreased by $490).
b. Adjusting Journal Entries at December 31:
1)
Debit Rent Expense $1,300
Credit Prepaid Rent $1,300
To record rent expense for the year.
2)
Debit Depreciation Expense $1,100
Credit Accumulated Depreciation $1,100
To record depreciation expense for the year.
3)
Debit Utilities Expense $10,000
Credit Utilities Payable $10,000
To accrue utilities expense for the year.
4)
Debit Income Tax Expense $490
Credit Income Tax Payable $490
To accrue income tax expense for the year.
Step-by-step explanation:
a) Data and Calculations:
Account Titles Debit Credit
Cash $13,000
Accounts Receivable 7,000
Prepaid Rent 2,600
Equipment 22,000
Accumulated Depreciation $1,100
Accounts Payable 1,100
Income Tax Payable 0
Common Stock 25,800
Retained Earnings 3,100
Sales Revenue 53,000
Salaries and Wages Expense 26,000
Utilities Expense 13,500
Rent Expense 0
Depreciation Expense 0
Income Tax Expense 0
Totals $84,100 $84,100