Adjusting entries and financial statements.
The following information pertains to Sally Corporation:
- The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned.
- Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31.
- Salaries owed to employees at year-end amounted to $1,000.
- The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.
- The company paid $18,000 on October 1 of the current year to Vantage Property Management.
The payment was for 6 months' rent of Sally Corporation's headquarters, beginning on
November 1.
Sally Corporation's accounting year ends on December 31.
Instructions
Analyze the five preceding cases individually and determine the following:
a. The type of adjusting entry needed at year-end (Use the following codes: A, adjustment of a prepaid expense; B, adjustment of an unearned revenue; C, adjustment to record an accrued expense; or D, adjustment to record an accrued revenue.)
b. The year-end journal entry to adjust the accounts
c. The income statement impact of each adjustment (e.g., increases total revenues by $500)