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Although you printed the trial balance and financial statements to get an idea of how All About You Spa is doing financially, some accounts are not accurate. You need to make adjusting entries to provide a clearer picture of how the spa is doing. HOW TO COMPUTE THE ADJUSTMENTS Compute the adjustment amounts for the month of October, using the following information: Adjustment (a): Liability insurance for six months was purchased during the first days of the month. That protection for one month has been used or expended. Adjustments (b) and (c): Office equipment and spa equipment have depreciated. That means they have been in use for a month and have, for accounting purposes, lost some usefulness. This is an estimate, of course, which allows us to expense the depreciation and, in effect, lowers the book value (value on the books) of both types of equipment. (b): The owner, Anika Valli, purchased office equipment totaling $1,345. The office equipment will be depreciated using the straight-line method. The office equipment is estimated to have a salvage (trade-in) value of $550 and is expected to last five years. Remember, you want to compute the depredation for one month, not one year. (c): Anika Valli invested spa equipment totaling $9,125 in the business ($3,575 of her own spa equipment plus $5,550 of new spa equipment purchased). The spa equipment will be depreciated using the straight-line method. The spa equipment is estimated to have a trade-in, or salvage, value of $125 and is expected to last five years. Remember, you want to compute the depreciation for one month, not one year. Adjustment (d): All About You Spa owes one day of wages to its employees. The month's total wages paid in October amounted to $8,300. The employees worked 21 days but were paid for only 20 days because the payday for the last day worked is in the next pay period. Adjustments (e) and (f): After a count of supplies at the end of the month, All About You Spa has $125 remaining in Office Supplies and $255 remaining in Spa Supplies. Required 1. Complete a work sheet for the month (if required by your instructor). 2. Journalize the adjusting entries in the general journal. 3. Post the adjusting entries to the general ledger accounts. Ignore this step if you are using CLGL. 4. Prepare an adjusted trial balance as of October 31, 20--. 5. Prepare an income statement (after adjustment) for the month ended October 31, 20--. 6. Prepare a statement of owner’s equity (after adjustment) for the month ended October 31, 20--. 7. Prepare a balance sheet (after adjustment) as of October 31, 20--.

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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
Publisher: South-Western College Pub
ISBN: 9781337280570
BuyFind

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
Publisher: South-Western College Pub
ISBN: 9781337280570

Solutions

Chapter
Section
Chapter 4, Problem 1CP
Textbook Problem

Although you printed the trial balance and financial statements to get an idea of how All About You Spa is doing financially, some accounts are not accurate. You need to make adjusting entries to provide a clearer picture of how the spa is doing.

HOW TO COMPUTE THE ADJUSTMENTS

Compute the adjustment amounts for the month of October, using the following information:

Adjustment (a): Liability insurance for six months was purchased during the first days of the month. That protection for one month has been used or expended.

Adjustments (b) and (c): Office equipment and spa equipment have depreciated. That means they have been in use for a month and have, for accounting purposes, lost some usefulness. This is an estimate, of course, which allows us to expense the depreciation and, in effect, lowers the book value (value on the books) of both types of equipment.

(b): The owner, Anika Valli, purchased office equipment totaling $1,345. The office equipment will be depreciated using the straight-line method. The office equipment is estimated to have a salvage (trade-in) value of $550 and is expected to last five years. Remember, you want to compute the depredation for one month, not one year.

(c): Anika Valli invested spa equipment totaling $9,125 in the business ($3,575 of her own spa equipment plus $5,550 of new spa equipment purchased). The spa equipment will be depreciated using the straight-line method. The spa equipment is estimated to have a trade-in, or salvage, value of $125 and is expected to last five years. Remember, you want to compute the depreciation for one month, not one year.

Adjustment (d): All About You Spa owes one day of wages to its employees. The month's total wages paid in October amounted to $8,300. The employees worked 21 days but were paid for only 20 days because the payday for the last day worked is in the next pay period.

Adjustments (e) and (f): After a count of supplies at the end of the month, All About You Spa has $125 remaining in Office Supplies and $255 remaining in Spa Supplies.

Required

  1. 1. Complete a work sheet for the month (if required by your instructor).
  2. 2. Journalize the adjusting entries in the general journal.
  3. 3. Post the adjusting entries to the general ledger accounts.
    • Ignore this step if you are using CLGL.
  4. 4. Prepare an adjusted trial balance as of October 31, 20--.
  5. 5. Prepare an income statement (after adjustment) for the month ended October 31, 20--.
  6. 6. Prepare a statement of owner’s equity (after adjustment) for the month ended October 31, 20--.
  7. 7. Prepare a balance sheet (after adjustment) as of October 31, 20--.

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Chapter 4 Solutions

College Accounting (Book Only): A Career Approach
Show all chapter solutions
Ch. 4 - In which column of the work sheetIncome Statement...Ch. 4 - Why is it necessary to make an adjustment if wages...Ch. 4 - Define depreciation as it relates to a van you...Ch. 4 - Define an internal transaction and provide an...Ch. 4 - Why is it necessary to journalize and post...Ch. 4 - 1. List the following classifications of accounts...Ch. 4 - Classify each of the accounts listed below as...Ch. 4 - Place a check mark next to any account(s)...Ch. 4 - A partial work sheet for Marges Place is shown...Ch. 4 - Complete the work sheet for Ramey Company, dated...Ch. 4 - Journalize the adjusting entries from the partial...Ch. 4 - Journalize the adjusting entries from the partial...Ch. 4 - Journalize the following adjusting entries that...Ch. 4 - Determine on which financial statement each...Ch. 4 - The trial balance of Morgans Insurance Agency as...Ch. 4 - The trial balance of Clayton Cleaners for the...Ch. 4 - The trial balance for Game Time on July 31 is as...Ch. 4 - The trial balance for Benner Hair Salon on March...Ch. 4 - The trial balance for Masons Insurance Agency as...Ch. 4 - The trial balance of The New Decors for the month...Ch. 4 - The trial balance for Harris Pitch and Putt on...Ch. 4 - The trial balance for Wilson Financial Services on...Ch. 4 - Ride the Ducks of Seattle may seem like an...Ch. 4 - You are the bookkeeper for a small but thriving...Ch. 4 - Your supervisor just finished a work sheet for the...Ch. 4 - Your client is preparing financial statements to...Ch. 4 - Although you printed the trial balance and...

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