Determining Adjusting entries and tracing their effects to Financial statements

p8. Steven Tax Service, Inc.’s trial balance at the end of its second year of operation is as follows.

 

steven tax service, Inc. trial Balance December 31, 2014

 

 

Cash	2,268	Â
Accounts Receivable	1,031
Prepaid Insurance	240
Office Supplies	782
Office Equipment	7,100
Accumulated Depreciation—Office Equipment	Â	Â	770
Accounts Payable	Â	Â	635
Unearned Tax Fees	Â	Â	219
Common Stock	Â	Â	3,000
Retained Earnings	Â	Â	2,439
Dividends	6,000	Â	Â
Tax Fees Revenue	Â	Â	21,926
Office Salaries Expense	8,300	Â	Â
Advertising Expense	650	Â	Â
Rent Expense	2,400	Â	Â
Telephone Expense	      218	Â	         Â
Â	28,989	Â	28,989

 

 

 

 

 

 

The following information is also available:

a.     Office supplies on hand, December 31, 2014, $227

b.     Insurance still unexpired, $120

c.     Estimated depreciation of office equipment, $770

d.    Telephone expense for December, $19; the bill was received but not recorded.

e.     The services for all unearned tax fees had been performed by the end of the year.

f.      Estimated federal income taxes for the year, $2,160

ReQUIReD

1.    Open T accounts for the accounts in the trial balance plus the following: Income Taxes Payable; Office Supplies Expense; Insurance Expense; Depreciation Expense— Office Equipment; and Income Taxes Expense. Record the balances shown in the trial balance.

2.    Determine the adjusting entries and post them directly to the T accounts.

3.    Prepare an adjusted trial balance, an income statement, a statement of Retained Earnings, and a balance sheet.

4.    aCCounting ConneCtion ▶ Why is it not necessary to show the effects of the above transactions on the statement of cash flows?