Milbank Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Milbank  Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Milbank Repairs & Service Unadjusted Trial Balance June 30, 2019 Debit   Balances Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,350 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,500 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,200 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,100 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,750 Unearned Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Nancy Townes, Capital  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,500 Nancy Townes, Drawing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500 Fees Earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294,750 Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,500 Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000 Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,750 Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100 500,000 500,000

For preparing the adjusting entries, the following data were assembled:

• Fees earned but unbilled on June 30 were $7,380.

• Supplies on hand on June 30 were $2,775.

• Depreciation of equipment was estimated to be $11,000 for the year.

• The balance in unearned fees represented the June 1 receipt in advance for services to be provided. During June, $16,500 of the services were provided.

• Unpaid wages accrued on June 30 were $3,880.

Instructions

1. Journalize the adjusting entries necessary on June 30, 2019.

2. Determine the revenues, expenses, and net income of Milbank Repairs & Service before the adjusting entries.

3. Determine the revenues, expenses, and net income of Milbank Repairs & Service after the adjusting entries. 

4. Determine the effect of the adjusting entries on Nancy Townes, Capital.

Answer:

1. a. Accounts Receivable7,380

Fees Earned7,380 Accrued fees earned.b. Supplies Expense13,425 Supplies13,425 Supplies used ($16,200 – $2,775). c. Depreciation Expense11,000 Accumulated Depreciation—Equipment 11,000 Equipment depreciation. d. Unearned Fees16,500 Fees Earned16,500 Fees earned. e. Wages Expense3,880 Wages Payable3,880 Accrued wages.

2. Revenues................................. $294,750 Expenses................................. 226,350 ($94,500 + $72,000 + $51,750 + $8,100) Net Income.................................$ 68,400

3. Revenues................................. $318,630 ($294,750 + $7,380 + $16,500) Expenses................................. 254,655 ($226,350 + $13,425 + $11,000 + $3,880) Net Income.................................$ 63,975

4. The effect of the adjusting entries on Nancy Townes, Capital is the difference in netincome in (2) and (3) of $4,425 ($68,400 – $63,975). The adjusting entries reduced net income by $4,425.