On July 1, 20X1, Cherie Wang established Cherie Wang Financial Services. Selected transactions for the first few days of July follow. INSTRUCTIONS:
1. Record the transactions on page 1 of the general journal. Omit descriptions. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability. Omit explanations.
2. Record the adjusting journal entries that must be made on July 31, 20X1, on page 2 of the general journal. Omit descriptions.
DATE TRANSACTIONS
20X1
July 1 Signed a lease for an office and issued Check 101 for $14,700 to pay the rent in advance for six months.
1 Borrowed money from Bancorp West by issuing a four-month,
9 percent note for $40,000; received $38,800 because the bank deducted the interest in advance.
1 Signed an agreement with Kroll Corp. to provide financial services for one year at $7,000 per month; received the entire fee of $84,000 in advance. The $84,000 was credited to Unearned Financial Service Fees.
1 Purchased office equipment for $15,900 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 $1,500 salvage value. The equipment will be depreciated using the straight-line method.
1 Purchased a one-year insurance policy and issued Check 102 for $1,740 to pay the entire premium.
3 Purchased office furniture for $16,080 from Furniture Warehouse; issued Check 103 for $8,480 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,200 salvage value. The office furniture will be depreciated using the straight-line method.
5 Purchased office supplies for $2,010 with Check 104. Assume $900 of supplies are on hand July 31, 20X1.
Analyze: What balance should be reflected in Unearned Financial Service Fees at July 31, 20X1?