Problem 3-7A Adjusting entries (monthly) LO4

Wedona Energy Consultants prepares adjusting entries monthly. Based on an analysis of the unadjusted
trial balance at January 31, 2017, the following information was available for the preparation of the
January 31, 2017, month-end adjusting entries:
a. Equipment purchased on November 1 of this accounting period for $21,600 is estimated to have a
useful life of three years. After three years of use, it is expected that the equipment will be scrapped due
to technological obsolescence.
b. Of the $11,400 balance in Unearned Consulting Revenue, $8,700 had been earned.
c. The Prepaid Rent account showed a balance of $13,500. This was paid on January 1 of this accounting
period and represents six months of rent commencing on the same date.
d. Accrued wages at January 31 totalled $18,500.
e. One month of interest had accrued at the rate of 4% per year on a $42,000 note payable
f. Unrecorded and uncollected consulting revenue at month-end were $6,150.
g. A $3,510 insurance policy was purchased on April 1 of the current accounting period and debited to the
Prepaid Insurance account. Coverage began April 1 for 18 months.
h. The monthly depreciation on the office furniture was $625.
i. Repair revenues accrued at month-end totalled $3,400.
j. The Store Supplies account had a balance of $800 at the beginning of January.
During January, $1,780 of supplies were purchased and debited to the Store Supplies account. At
month-end, a count of the supplies revealed a balance of $650.
Required:
Prepare adjusting journal entries for the month ended January 31, 2017, based on the above.

Solution:
Date Account Debit Credits
2017
a) January 31 Depreciation 550
Expense,
Equipment…….
Accumulated 550
Depreciation,
Equipment…..
To record
Depreciation;
19,800/3 yrs =
6,600/yr x 1/12
=550.
b) 31 Unearned 8,200
Consulting
Fees……
Consulting fees 8,200
Earned…
To record Fees
Earned.
c) 31 Rent 2,000
Expense……
Prepaid Rent… 2,000
To record
expired rent;
12,000/6 = 2,000
d) 31 Wages Expense 18,000
Wages Payable 18,000
To record
accured wages
e) 31 Interest Expense. 160
Interest Payable 160
To record
accured interest;
32,000 x 6% =
1,920 x 1/12
=160
f) 31 Accounts 5,900
Receivable
 Consulting Fees 5,900
Earned
To record
accured fees.
g) 31 Insurance 170
Expense
Prepaid 170
Insurance
To record
expired
insurance
3,060/ 18
months = 170/
month
h) 31 Depreciation 600
Expense, Office
Furniture.
Accumulated 600
Depreciation,
Office Furniture
To record
depreciation of
office furniture.
i) 31 Accounts 2,900
Receivable
Repair Revenues 2,900
Earned
j) 31 Store Supplies
Expense
Store Supplies 1,880
1,880
To record store
supplies used
750 + 1,730 –
600 = 1,880