This exercise will test your ability to detect adjusting entries by comparing an adjusted trial…

This exercise will test your ability to detect adjusting entries by comparing an adjusted trial balance with an unadjusted trial balance.

The trial balance and the subsequent adjusted trial balance at December 31, 2014, for the Bradley Company appear below. The accounting period coincides with the calendar year.

Before Adjustment

After Adiustment

nehit

Credit

nehit

Credit

Cash

$30,000

$30,000

Accounts Receivable

8,000

8,700

Note Receivable (8%)

10,000

10,000

Interest Receivable

0

200

Prepaid Rent

8,400

1,200

Prepaid Licenses

3,200

800

Office Supplies

2,000

300

Office Equipment

12.000

12.000

Accumulated Depreciation—Equipment

$3,000

$4,000

Accounts Payable

3,400

3,400

Unearned Service Fees

5.000

1.300

Salaries and Wages Payable

0

1.800

Common Stock

20,000

20,000

Retained Earnings

42,000

42,000

Dividends

36,000

36,000

Fees Earned

82,100

86,500

Interest Earned

0

200

Salaries and Wages Expense

45.900

47.700

Rent Expense

0

7,200

Licenses Expense

0

2,400

Office Supplies Expense

0

1,700

Depreciation Expense

0

1.000

$155,500

$155,500

$159,200

$159,200

Instructions Journalize the adjusting entries recorded on December 31, 2014. Answer the following questions: How many months was the note receivable outstanding during 2014? If the rent is a constant amount each month, how many months rent is prepaid as of December 31, 2014? How much is the monthly license fee assuming the monthly amount has remained unchanged during the whole year? If the depreciation is a constant amount each year, for how many years has the office equipment been in use? Assuming the balance of Salaries and Wages Payable at January 1, 2014 was $0, how much cash was paid to employees during 2014?

 

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