On December 31, the following data were accumulated for preparing the adjusting entries for Bellingham Realty:
• The supplies account balance on December 31 is $1,375. The supplies on hand on December 31 are $280.
• The unearned rent account balance on December 31 is $9,000 representing the receipt of an advance payment on December 1 of four months’ rent from tenants.
• Wages accrued but not paid at December 31 are $3,220.
• Fees earned but unbilled at December 31 are $18,750.
• Depreciation of office equipment is $2,900.
Instructions
1. Journalize the adjusting entries required at December 31.
2. Briefly explain the difference between adjusting entries and entries that would be made to correct errors.
Answer:
1. Dec. 31 Supplies Expense1,095 Supplies1,095 Supplies used ($1,375 – $280). 31 Unearned Rent2,250 Rent Revenue2,250 Rent earned [($9,000 ÷ 4 months) × 1 month]. 31 Wages Expense3,220 Wages Payable3,220 Accrued wages. 31 Accounts Receivable18,750 Fees Earned18,750 Accrued fees earned.31 Depreciation Expense2,900 Accumulated Depreciation—Office Equipment 2,900 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.