Problem - On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow.
DATE TRANSACTIONS
July 1 Signed a lease for an office and issued Check 101 for $12,000 to pay the rent in advance for six months.
July 1 Borrowed money from Second National Bank by issuing a four-month, 12 percent note for $42,400; received $40,704 because the bank deducted the interest in advance.
July 1 Signed an agreement with Carter Corp. to provide accounting and tax services for one year at $5,200 per month; received the entire fee of $62,400 in advance.
July 1 Purchased office equipment for $23,000 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,400 salvage value. The equipment will be depreciated using the straight-line method.
July 1 Purchased a one-year insurance policy and issued Check 102 for $1,704 to pay the entire premium.
July 3 Purchased office furniture for $11,560 from Furniture Warehouse; issued Check 103 for $8,460 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,000 salvage value. The office furniture will be depreciated using the straight-line method.
July 5 Purchased office supplies for $1,950 with Check 104. Assume $870 of supplies are on hand July 31, 2019.
What to do:
1. Record the transactions in the general journal. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability for the year 2019.
2. Record the adjusting journal entries that must be made on July 31, 2019.
Also answer: What balance should be reflected in Unearned Accounting Fees at July 31, 2019?