Reference no: EM132665938
Sutton Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as at the end of the company's fiscal year, December 31, 2020:
Account Titles Debit Credit
Cash $ 23, 300
Accounts receivable 9, 125
Service supplies inventory 1, 800
Prepaid insurance 1, 375
Service trucks 36, 900
Accumulated depreciation, service trucks $ 16,000
Other assets 6, 100
Accounts payable 4,090
Note payable ( three years; 9% each December 31) 9,000
Contributed capital (5,000 shares outstanding) 16,800
Retained earnings 10, 800
Service revenue 53, 000
Other expenses, excluding income tax 31, 900
Totals $109, 600 $109, 600
Data not yet recorded at December 31, 2020, include the following:
a. Supplies inventory on December 31, 2020, reflecting $700 remaining on hand.
b. Insurance expired during 2020, $550.
c. Depreciation expense for 2020, $4,000.
d. Wages earned by employees not yet paid on December 31, 2020, $1,600.
e. Income tax expense, $3,450.
Required:
Problem 1: Prepare the adjusting entries at December 31, 2020.
Problem 2: Show the effects of the adjusting entries on net earnings and cash.
Problem 3: Compute the net earnings for the year, assuming that you did not make an adjustment to the balance of the supplies inventory account.
Problem 4: Prepare the closing entries at December 31, 2020.