Rainmaker Environmental Consultants is just finishing its second year of operations. The company's unadjusted trial balance at October 31, 2014, follows

Rainmaker Environmental Consultants is just finishing its second year of operations. The company's unadjusted trial balance at October 31, 2014, follows:

Rainmaker prepares adjustments each October 31. The following additional information is available on October 31, 2014.

a. It was determined that $12,000 of the unearned consulting fees had not yet been earned.

b. It was discovered that $14,000 of the balance in the Consulting Fees Earned account was for services to be performed in November.

c. The balance in the Prepaid Rent account represents three months of rent beginning September 1, 2014.

d. Accrued wages at October 31 totalled $6,800.

e. The office furniture was purchased on March 1, 2013, and has an estimated useful life of two years. After two years of use, it is expected that the furniture will be worthless.

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f. Accrued consulting fees at year-end totalled $4,200.

g. interest of $85 had accrued on the note receivable for the month of October.

h. The balance in the Prepaid Insurance account represents the remaining balance of a two-year policy purchased on April 1, 2013.

i. A count of the supplies on October 31 revealed a balance remaining of $620.

Required

Prepare the annual adjusting journal entries for October 31, 2014. Based on the above.

SOLUTION

		General Journal	Page G9
Date		Account Titles and Explanations	PR Debit Credit
2014
a) Oct.	31	Unearned Consulting Fees............................................	14,000
		Consulting Fees Earned...............................................	14,000
		To record unearned consulting fees earned;
		26,000 – 12,000 = 14,000 earned.
b)	31	Consulting Fees Earned.................................................	14,000
		Unearned Consulting Fees...........................................	14,000
		To record as unearned an amount incorrectly
		recorded as earned.
c)	31	Rent Expense..................................................................	18,000
		Prepaid Rent..................................................................	18,000
		To record expired prepaid rent;
		27,000/3 = 9,000/month × 2 months = 18,000 used.
d)	31	Wages Expense..............................................................	6,800
		Wages Payable..............................................................	6,800
		To record accrued wages.
e)	31	Depreciation Expense, Office Furniture.......................	42,000
		Accumulated Depreciation, Office Furniture..............	42,000
		To record depreciation expense;
		84,000/2 years = 42,000/year.
f)	31	Accounts Receivable......................................................	4,200
		Consulting Fees Earned...............................................	4,200
		To record accrued fees.
g)	31	Interest Receivable.........................................................	85
		Interest Revenue...........................................................	85
		To record accrued interest revenue.
h)	31	Insurance Expense.........................................................	2,400
		Prepaid Insurance.........................................................	2,400
		To record expired prepaid insurance; 3,400  17
		months = 200/month × 12 months = 2,400.
i)	31	Supplies Expense...........................................................	4,680
		Supplies.........................................................................	4,680
		To record the use of supplies;
		5,300 – 620 = 4,680 used.