Question 27 A partial trial balance of Sheffield Corporation

Question 27 A partial trial balance of Sheffield Corporation is as follows on December 31, 2018. Dr Cr. Supplies Salaries and wages payable nterest Receivable Prepaid Insurance Unearned Rent Interest Payable $2,500 $1,500 5,100 95,100 15,400 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2018, totaled $1,000 2. Through oversight, the Salaries and Wages Payable account was not changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to $4,300 3. The Interest Receivable account was also left unchanged during 2018. Accrued interest on investments amounts to $4,100 on December 31, 2018 4. The unexpired portions of the insurance policies totaled $70,900 as of December 31, 2018. 5. $28,600 was received on January 1, 2018, for the rent of a building for both 2018 and 2019. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,200 rather than the correct figure of $52,000 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,600 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

Solution

SOLUTION

1. The adjusting entries are as follows:

2. The adjusting entries assuming books have been closed are as follows:

3. The adjusting entries with income tax effects are as below:

S. No.	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Supplies Expense (2,500 - 1,000)	1,500
	Supplies on Hand/Supplies		1,500
2.	Salaries and Wages Expense (4,300 - 1,500)	2,800
	Salaries and Wages Payable		2,800
3.	Interest Revenue (5,100 - 4,100)	1,000
	Interest Receivable on Investments		1,000
4.	Insurance Expense (95,100 - 70,900)	24,200
	Prepaid Insurance		24,200
5.	Rent Revenue (28,600/2)	14,300
	Unearned Rent		14,300
6.	Depreciation Expense (52,000 - 5,200)	46,800
	Accumulated Depreciation		46,800
7.	Retained Earnings	7,600
	Accumulated Depreciation		7,600