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1) On October 1, C. R. Byrd invests ₺10,000 cash in an advertising company called Yazici Advertising. 2) On October 1, Yazici purchases office equipment costing ₺5,000 by signing a 3month, 12%, ₺5,000 note payable. 3) On October 2, Yazici receives a ₺1,200 cash for advertising services that are expected to be completed by December 31. 4) On October 3, Yazici pays office rent for October in cash of ₺900. 5) On October 4, Yazici pays ₺600 for a one-year insurance policy that will expire next year on September 30. 6) On October 5, Yazici purchases a 3-month supply of advertising materials on account from Aero Supply for ₺2,500. 7) On October 20, C. R. Byrd withdraws ₺500 cash for personal use. 8) On October 26, Yazici owes employee salaries of ₺4,000 and pays them in cash (see October 9 event). 9) On October 31, Yazici receives ₺10,000 in cash from Copa Company for advertising services performed in October.

Required: 1234-

journalize these transactions post these transactions prepare trail balance (before adjustments) consider the adjustments

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Date 1/10/2020

Explanation Cash

Debit 10,000

Owners’ Capital 1/10/2020

2/10/2020

10,000

Equipment Notes Payable

5,000

Cash

1,200

5,000

Unearned Revenue 3/10/2020 4/10/2020 5/10/2020 20/10/2020 26/10/2020 31/10/2020

Credit

Rent Expense Cash Prepaid insurance Cash Supplies Accounts Payable Owner’s Drawings Cash Salaries and Wages Experience Cash Cash Service Revenue

1,200 900 900 600 600 2,500 2,500 500 500 4,000 4,000 10,0000 10,000

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Yazici Advertising Trial Balance October 31, 2020 Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Service Revenue Owner’s Capital Owner’s Drawings Service Revenue Salaries and Wages Expense Rent Expense

Debit ₺15,200 2,500 600 5,000

Credit

₺ 5,000 2,500 1,200 10,000 500 10,000 4,000 900 ₺28,700

₺28,700

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Adjustments: Illustration: Yazici Advertising purchased supplies costing ₺2,500 on October 5. This account shows a balance of ₺2,500 in the October 31 trial balance. An inventory count at the close of business on October 31 reveals that ₺1,000 of supplies are still on hand.

Illustration: On October 4, Yazici Advertising paid ₺600 for a one-year fire insurance policy. Coverage began on October 1. Illustration: For Yazici Advertising, assume that depreciation on the equipment is ₺480 a year. Illustration: Yazici Advertising received ₺1,200 on October 2 from R. Knox for advertising services expected to be completed by December 31. Analysis reveals that the company performed ₺400 of services in October.

Illustration: In October Yazici Advertising performed services worth ₺200 that were not billed to clients on or before October 31.

Illustration: Yazici Advertising signed a three-month note payable in the amount of ₺5,000 on October 1. The note requires Yazici to pay interest at an annual rate of 12%. Illustration: Yazici Advertising paid salaries and wages on October 26; the next payment of salaries will not occur until November 9. The employees receive total salaries of ₺2,000 for a five-day work week, or ₺400 per day.

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Journals entries for adjustments Date Notes

Explanation

Debit

Credit

6

Type of Adjustment

Accounts Before Adjustment

Adjusting Entry

Prepaid expenses

Assets overstated. Expenses understated.

Dr. Expense Cr. Assets or Contra Assets

Unearned revenues

Liabilities overstated. Revenues understated.

Dr. Liabilities Cr. Revenues

Accrued revenues

Assets understated. Revenues understated.

Dr. Assets Cr. Revenues

Accrued expenses

Expenses understated. Liabilities understated.

Dr. Expenses Cr. Liabilities

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Yazici Advertising Adjusted Trial Balance October 31, 2020 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation Notes Payable Accounts Payable Unearned Service Revenue Salaries and Wages Payable Interest Payable Owner’s Capital Owner’s Drawings Service Revenue Salaries and Wages Expense Supplies Expense Rent Expense Insurance Expense Interest Expense Depreciation Expense

Debit ₺15,200 200 1,000 550 5,000

Credit

₺ 40 5,000 2,500 800 1,200 50 10,000 500 10,600 5,200 1,500 900 50 50 40 ₺30,190

₺30,190

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Chapter 4: Completing the Accounting Cycle

The adjustments are the same as in Illustration 3.23. a. Yazici debits an additional account, Supplies Expense, ₺1,500 for the cost of supplies used, and credits Supplies ₺1,500. b. Yazici debits an additional account, Insurance Expense, ₺50 for the insurance that has expired, and credits Prepaid Insurance ₺50. c. The company needs two additional depreciation accounts. It debits Depreciation Expense ₺40 for the month’s depreciation, and credits Accumulated Depreciation—Equipment ₺40. d. Yazici debits Unearned Service Revenue ₺400 for services performed, and credits Service Revenue ₺400. e. Yazici debits an additional account, Accounts Receivable, ₺200 for services performed but not billed, and credits Service Revenue ₺200. f. The company needs two additional accounts relating to interest. It debits Interest Expense ₺50 for accrued interest, and credits Interest Payable ₺50. g. Yazici debits Salaries and Wages Expense ₺1,200 for accrued salaries, and credits an additional account, Salaries and Wages Payable, ₺1,200.

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Yazici Advertising Worksheet For the Month Ended October 31, 2020

Account Titles Cash Supplies Prepaid Insurance Equipment Notes Payable Accounts Payable Unearned Service Revenue Owner's Capital Owner's Drawings Service Revenue

Trial Balance Dr. Cr. 15,200 2,500 600 5,000 5,000 2,500 1,200 10,000 500 10,000

Salaries and Wages Expense 4,000 Rent Expense 900 Totals 28,700 Supplies Expense Insurance Expense Accumulated Depreciation Depreciation Expense Accounts Receivable Interest Expense Interest Payable Salaries and Wages Payable Totals Net Income Totals

Adjusted Trial Balance Dr. Cr. 15,200 (a) 1,500 1,000 (b) 50 550 5,000 5,000 2,500 800 10,000 500 (d) 400 10,600 (e) 200 5,200 900

Adjustments Dr. Cr.

(d) 400

(g) 1,200

Income Statement Dr.

Cr.

Statement of Financial Position Dr. Cr. 15,200 1,000 550 5,000 5,000 2,500 800 10,000 500

10,600 5,200 900

28,700 (a) 1,500 (b) 50

1,500 50 (c)

(c)

40 (e) 200 (f) 50

3,440

1,500

40

50 40

40 200 50 (f) 50 (g) 1,200 3,440 30,190

40 40 200 50

50 1,200 30,190

7,740 2,860 10,600

10,600

22,450

10,600

22,450

50 1,200 19,590 2,860 22,450

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Yazici Advertising Income Statement For the Month Ended October 31, 2020

Revenues Service revenue Expenses Salaries and wages expense Supplies expense Rent expense Insurance expense Interest expense Depreciation expense Total expenses Net income

₺10,600 ₺5,200 1,500 900 50 50 40 (7,740) ₺2,860

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Yazici Advertising Statement of Financial Position October 31, 2020 Assets Cash Accounts receivable Supplies Prepaid insurance Equipment Less: Accumulated depreciation Total assets Liabilities and Owner’s Equity Liabilities Notes payable Accounts payable Interest payable Unearned service revenue Salaries and wages payable Total liabilities Owner’s equity Owner’s capital Total owner’s equity and liabilities

₺15,200 200 1,000 550 ₺5,000 40

4,960 ₺21,910

₺5,000 2,500 50 800 1,200 ₺9,550 12,360 ₺21,910

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