QUESTION SOALAN 3 Amanda Beauty Salons unadiusted trial bala

QUESTION SOALAN 3 Amanda Beauty Salon\'s unadiusted trial balance as at 31 December 2017 is as follows: Credit RM Debit RM 5,200 1,850 1,250 4,825 Cash Prepaid Insurance Shop supplies Shop equipment Accumulated depreciation-shop equipment Building Accumulated depreciation-building Land Unearned rental revenue Notes payable Capital, Amanda Rental revenue Service revenue Wages expense Utilities expense Property taxes expense Interest expense Total 1,000 71,875 4,800 68,750 2,000 62,500 62,325 3,000 29,250 4,000 875 750 5,500 164,875 164,875 Additional information: i)An insurance policy showed RM1,550 of expired insurance. ii An inventory count showed RM250 of unused shop supplies still available iii) Depreciation expense on shop equipment, RM500; building RM2,775. iv RM250 of accrued revenue was unrecorded at the timethe trial balance was prepared. v)RM1,000 of the unearned rent account balance was earned by vear-end. vi) The only employee, a receptionist, works a five-day workweek at RM62 per day. The emplovee was paid last week but has worked four days this week for which she has not been paid Three months\' property taxes, totaling RM625 have accrued. This additional amount vii) of property taxes expense has not been recorded vi One month\'s interest on the note payable, of RM750 has accrued but is unrecorded

Solution

a)

b)

c) Two industries in which businesses have unearned revenue are:

1. Aviation industry

2. Magazine subscriptions

1. Aviation industry:

In case of airline ticket sales, the tickets are booked and cash is received prior to the actual flight date and is recorded as unearned revenue. The revenue is recognized on the flight date.

An example would be when flight tickets are booked for $100 on December 27, 2017 for a flight to be taken on January 3, 2018, the $100 received on December 27 is recorded as unearned revenue till Janaury 3 when it is recognized as revenue.

For magazine subscriptions, an entire year\'s subscription may be received in advance which is recorded as unearned revenue. The revenue is then recognized proportionately on time basis over the period of the subscription.

For example, if an annual magazine subscription is bought for $60 on March 31, 2017 for the 12 months commencing April 1, 2017 to March 31, 2018, the same will be recorded as unearned revenue when received on March 31, 2017. Revenue will be recognized proportionately on time basis every month at the rate of $5 ($60/12) from April 1, 2017 to March 31, 2018 while the balance will continue to appear as unearned revenue.

Transaction	General Journal	Debit	Credit
i)	Insurance expense	1550
	Prepaid insurance		1550
	(To record expired insurance)
ii)	Shop supplies expense ($1250 - $250)	1000
	Shop supplies		1000
	(To record shop supplies used)
iii)	Depreciation expense	3275
	Accumulated depreciation-shop equipment		500
	Accumulated depreciation-building		2775
	(To record depreciation expense)
iv)	Accounts receivable	250
	Service revenue		250
	(To record accrued revenue)
v)	Unearned rental revenue	1000
	Rental revenue		1000
	(To record rental revenue earned)
vi)	Wages expense (4 days x RM62)	248
	Wages payable		248
	(To record wages accrued but not paid)
vii)	Property taxes expense	625
	Property taxes payable		625
	(To record property taxes accrued)
viii)	Interest expense	750
	Interest payable		750
	(To record accrued interest on note payable)