On July 31, 2014, the following data were accumulated to assist the accountant in preparing the adjusting entries for Atrium Realty

On July 31, 2014, the following data were accumulated to assist the accountant in preparing the adjusting entries for Atrium Realty:

a. The supplies account balance on July 31 is $6,880. The supplies on hand on July 31 are $2,200.

b. The unearned rent account balance on July 31 is $9,200, representing the receipt of an advance payment on July 1 of four months’ rent from tenants.

c. Wages accrued but not paid at July 31 are $1,850.

d. Fees accrued but unbilled at July 31 are $11,700.

e. Depreciation of office equipment is $3,500.

Instructions

1. Journalize the adjusting entries required at July 31, 2014.

2. Briefly explain the difference between adjusting entries and entries that would be made to correct errors.


Answer:

1. a.Supplies Expense 4,680
Supplies 4,680
Supplies used ($6,880 – $2,200).
b. Unearned Rent 2,300
Rent Revenue 2,300
Rent earned ($9,200 ÷ 4 months).
c. Wages Expense 1,850
Wages Payable 1,850
Accrued wages.
d. Accounts Receivable 11,700
Fees Earned 11,700
Accrued fees earned.
e. Depreciation Expense 3,500
Accumulated Depreciation—Office Equipment 3,500
Depreciation expense.

2. Adjusting entries are a planned part of the accounting process to update the
accounts. Correcting entries are not planned, but arise only when necessary
to correct errors.