Question - Investment Guru provides investment advice to customers for fees. On 30 June 2016, it completed its first year of operations.
Some of the ledger account balances of the business, before any year-end adjustments, are given below:
Advertising Prepaid $1200
Investment Fees Revenue 350000
Rent Expense 17280
Computer Database Expense 1240
Wages Expense 113800
Electricity Expense 6840
No adjusting entries have been made to these accounts at any time during the year. An analysis of the business records reveals the following.
1. The balance in Advertising Prepaid represents the amount paid for an advertisement in an investment magazine for 1 year. The agreement with the publisher stipulates the same amount of space each month and covers the period 1 September 2015 to 31 August 2016.
2. The firm's lease in respect of the premises stipulates a rent of $1440 per month payable on the first day of each month, plus an annual amount equal to 0.5% of the annual fees earned. The extra rental is payable within 15 days of the end of the reporting period.
3. The computer database expense relates to an annual subscription to web based data on the share market and other investments. The subscription was taken out on 1 August 2015.
4. The wages are paid every Friday for a 5-day working week ending on the preceding Wednesday. In 2016, 30 June falls on a Thursday and the wages for the week ended 6 July 2016 amount to $9000. No overtime was worked and all employees worked the normal office hours during the 5-day week.
5. The Electricity Expense ledger balance does not include the amount for June 2016. The account was received during July and amounted to $1250.
Required - Journalise the necessary adjusting entries.