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Question
All of the transactions of Starfish Tattoo Parlor Inc. for the year have been journalized and posted. The following information has been gathered for the adjustment process as of December 31, 2016:
A) The Supplies account shows a balance of $900. A count of supplies revealed $400 on hand.
B) The $1,200 premium relating to a oneyear insurance policy was paid on December 1, 2016.
C) The companys equipment, which was purchased last year, depreciates at a rate of $1,000 per year.
D) On September 30, 2016, a customer paid $10,000 in advance for services; as of December 31, 2016, services in the amount of $3,000 had been performed for this customer.
E) Employees are paid $5,000 on Fridays for the 5-day work week, which ends on that Friday. However, December 31, 2016 falls on a Thursday.
F) The company has completed $500 of work for customers; the customers have not yet been billed and the related revenue has not been recorded.
Required:
Part a. Prepare the required adjusting entries required at December 31, 2016.
Part b. For each of the adjusting items, indicate the amount and the direction of effects of the adjusting journal entry on the elements of the balance sheet and income statement. Complete the following table by entering the amount and the direction (+ or ) or NE if the adjustment has no effect on the related financial statement item.
| Transaction | Balance Sheet | Income Statement | ||||
| Total Assets | Total Liabilities | Stockholders Equity | Revenues | Expenses | Net Income | |
| A | ||||||
| B | ||||||
| C | ||||||
| D | ||||||
| E | ||||||
| F | ||||||
Answer
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