North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31. Account Titles Debit Credit
Cash $13,000
Accounts Receivable 7,000
Prepaid Rent 2,600
Equipment 22,000
Accumulated Depreciation $1,100
Accounts Payable 1,100
Income Tax Payable 0
Common Stock 25,800
Retained Earnings 3,100
Sales Revenue 53,000
Salaries and Wages Expense 26,000
Utilities Expense 13,500
Rent Expense 0
Depreciation Expense 0
Income Tax Expense 0
Totals $84,100 $84,100

Other data not yet recorded at December 31:

a. Rent expired during the year, $1,300.
b. Depreciation expense for the year, $1,100.
c. Utilities used and unpaid, $10,000.
d. Income tax expense, $490.

Required:
a. Indicate the accounting equation effects of each required adjustment.
b. Prepare the adjusting journal entries required at December 31.

North Star

a. Accounting equation effects of each required adjustment:

1. Assets (Prepaid Rent decrease by $1,300) = Liabilities + Equity (Retained Earnings decreased by $1,300).

2. Assets ( with Accumulated Depreciation - a contra account - decreased by $1,100) = Liabilities + Equity (Retained Earnings decreased by $1,100).

3. Assets = Liabilities (Utilities Payable increased by $10,000) + Equity (Retained Earnings decreased by $10,000)

4. Assets = Liabilities (Income Tax Payable increased by $490) + Equity (Retained Earnings decreased by $490).

b. Adjusting Journal Entries at December 31:

1)

Debit Rent Expense $1,300

Credit Prepaid Rent $1,300

To record rent expense for the year.

2)

Debit Depreciation Expense $1,100

Credit Accumulated Depreciation $1,100

To record depreciation expense for the year.

3)

Debit Utilities Expense $10,000

Credit Utilities Payable $10,000

To accrue utilities expense for the year.

4)

Debit Income Tax Expense $490

Credit Income Tax Payable $490

To accrue income tax expense for the year.

Explanation:

a) Data and Calculations:

Account Titles                           Debit       Credit

Cash                                          $13,000

Accounts Receivable                   7,000

Prepaid Rent                                2,600

Equipment                                 22,000

Accumulated Depreciation                         $1,100

Accounts Payable                                         1,100

Income Tax Payable                                 0

Common Stock                                        25,800

Retained Earnings                                      3,100

Sales Revenue                                        53,000

Salaries and Wages Expense 26,000

Utilities Expense                      13,500

Rent Expense                           0

Depreciation Expense             0

Income Tax Expense               0

Totals                                     $84,100  $84,100

d. the economy will face inflation.

a recipe serves 8 people, and calls for 5 lbs of apples and 2 cups of flour. you want to prepare it for 24 people. divide 24 by 8 to get 3, and then multiply your ingredients by 3.

so for 24 people, you'll need 15 lbs of apples, and 6 cups of flour.