Answer:
a. Journalize the adjusting entries necessary on June 30, 2019.
Fees earned but unbilled on June 30 were $9,070.
Dr Accounts receivable 9,070
Cr Fees earned 9,070
Supplies on hand on June 30 were $7,410.
Dr Supplies expense 12,630
Cr Supplies 12,630
The depreciation of equipment was estimated to be $12,530 for the year.
Dr Depreciation expense - equipment 12,530
Cr Accumulated depreciation - equipment 12,530
The balance in unearned fees represented the June 1 receipt in advance for services to be provided. During June $17,420 of the services was provided.
Dr Unearned fees 17,420
Cr Fees earned 17,420
Unpaid wages accrued on June 30 were $1,600.
Dr Wages expense 1,600
Cr Wages payable 1,600
b. Determine the revenues, expenses, and net income of Milbank Repairs& Service before the adjusting entries.
Fees Earned $501,120
- Wages Expense $116,260
- Rent Expense $88,700
- Utilities Expense $63,640
- Miscellaneous Expense $10,020
Net income $222,500
c. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries.
Fees Earned $527,610
- Wages Expense $117,860
- Rent Expense $88,700
- Utilities Expense $63,640
- Depreciation expense $12,530
- Miscellaneous Expense (including supplies) $22,650
Net income $222,230
d. Determine the effect of the adjusting entries on Nancy Townes, Capital.
Nancy Townes is the owner of Milbank Repairs & Service, and since this is a sole proprietorship (she is the sole owner), the retained earnings account does not exist. So any profits or losses will increase or decrease her capital account respectively. Since after the adjustments the net income decreased by $270, her capital account will also decrease by $270.
