Problem

Use of Account Balances as a Basis for Adjustments

Lori Matlock operates a graphic arts business. A list of accounts on June 30, 2014, before recording any adjustments, appears as follows:

Other Data
a. The monthly rent is $600.
b. Supplies on hand on June 30, 2014, amount to $1,290.
c. The office equipment was purchased on June 1, 2013. On that date, it had an estimated useful life of ten years and a salvage value of $6,120.
d. Interest owed on the note payable but not yet paid amounts to $50.
e. Salaries of $620 are owed but unpaid to employees at the end of the month.
Required
1. For each of the items of other data, (a) through (e), identify and analyze the necessary adjustment at June 30, 2014.
2. Note the balance in Accumulated Depreciation—Equipment of $4,000. Explain why the account contains a balance of $4,000 on June 30, 2014.

Step-by-step solution

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