College Accounting 2nd Edition by David Haddock, John Price,Michael Farina

Exercise 9

Preparing a worksheet and financial statements, journalizing adjusting entries, and posting to ledger accounts.
Raul Rojas owns Rojas Estate Planning and Investments. The trial balance of the firm for June 30, 2013, the first month of operations, is shown below.

INSTRUCTIONS
1. Complete the worksheet for the month.
2. Prepare an income statement, statement of owner's equity, and balance sheet. No additional investments were made by the owner during the month.
3. Journalize and post the adjusting entries. Use 3 for the journal page number. Use the account numbers provided in Problem 5.4A.
End-of-month adjustments must account for the following:
a. The supplies were purchased on June 1, 2013; inventory of supplies on June 30, 2013, showed a value of $3,000.
b. The prepaid advertising contract was signed on June 1, 2013, and covers a four-month period.
c. Rent of $3,000 expired during the month.
d. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of five years with no salvage value.
Analyze: Why are the costs that reduce the value of equipment not directly posted to the asset account Equipment?