Problem 36 MARTINEZ PEREZ CONSULTING ENGINEER TRIAL BALANCE

Problem 3-6

MARTINEZ PEREZ, CONSULTING ENGINEER
TRIAL BALANCE
DECEMBER 31, 2017

Debit

Credit

$156,533

$156,533

No.

Account Titles and Explanation

Debit

Credit

Assets

Liabilities and Owner’s Equity

Open Show Work

Problem 3-6 The following are the trial balance and the other information related to Martinez Perez, a consulting engineer. MARTINEZ PEREZ, CONSULTING ENGINEER TRIAL BALANCE DECEMBER 31, 2017 Debit Credit Cash $29,500 Accounts Receivable 52,700 Allowance for Doubtful Accounts $701 Supplies 2,000 Prepaid Insurance 1,680 Equipment 26,300 Accumulated Depreciation-Equipment 6,575 Notes Payable 7,200 Owner’s Capital 34,581 Service Revenue 107,476 Rent Expense (13 months of rent) 9,113 Salaries and Wages Expense 32,990 Utilities Expenses 1,640 Office Expense 610 Totals $156,533 $156,533 1. Fees received in advance from clients $6,340, which were recorded as revenue. 2. Services performed for clients that were not recorded by December 31, $4,790. 3. Bad debt expense for the year is $1,371. 4. Insurance expired during the year $461. 5. Equipment is being depreciated at 10% per year. 6. Martinez Perez gave the bank a 90-day, 10% note for $7,200 on December 1, 2017. 7. Rent of the building is $701 per month. The rent for 2017 has been paid, as has that for January 2018, and recorded as Rent Expense. 8. Office salaries and wages earned but unpaid December 31, 2017, $2,428.

Solution

A. Journal Entries

Date

Particulars

Dr. Amount (in$)

Cr. Amount (in$)

1

Service Revenue Account

TO Unearned Revenue

6,340

6,340

2

Accounts Receivable

TO Service Revenue

4,790

4,790

3

Allowance for Doubtful Debts

Bad Debt Expense (1,371-701)

TO Accounts Receivable

701

670

1,371

4

Insurance Expense

TO Prepaid Insurance

461

461

5

Depreciation

TO Accumulated Depreciation

2,630

2,630

6

Interest Expense

TO Interest Payable

(7200 x 10% x 31 / 90)

248

248

7

Prepaid Rent

To Rent Expense

(Being rent for Jan 18 booked as expense now reversed)

701

701

8

Salaries & Wages Expense

To Salary Payable

2,428

2,428

Note 1: Advance received booked as income now reversed and booked under liability.

Note2: Services performed but not recorded during the year as income now booked

Note3: Allowance for doubtful debts is already given as 701 and therefore the same is debited and remaining bad debts are booked as expense in the given year.

Note 4: Insurance expense booked by crediting the prepaid insurance already paid in advance

Note5: Depreciation entry assumed not recorded till date now booked. Straight line method assumed.

Note6: Note payable entry already booked in books but interest payable for one month of Dec 2017 not booked, entry booked for same.

Note8: Office salaries unpaid are assumed not booked in books.

B. Format of other parts of the question are not clear, therefore the same are being completed. Kindly post clear formats.

Date	Particulars	Dr. Amount (in$)	Cr. Amount (in$)
1	Service Revenue Account TO Unearned Revenue	6,340	6,340
2	Accounts Receivable TO Service Revenue	4,790	4,790
3	Allowance for Doubtful Debts Bad Debt Expense (1,371-701) TO Accounts Receivable	701 670	1,371
4	Insurance Expense TO Prepaid Insurance	461	461
5	Depreciation TO Accumulated Depreciation	2,630	2,630
6	Interest Expense TO Interest Payable (7200 x 10% x 31 / 90)	248	248
7	Prepaid Rent To Rent Expense (Being rent for Jan 18 booked as expense now reversed)	701	701
8	Salaries & Wages Expense To Salary Payable	2,428	2,428