Riverside Shipping Ltd’s administrative assistant maintains a very simple
computerised general ledger system. This system includes routines for recording
receipts, payments, and sales on account. However, the system is not sufficiently
robust to automate end-of-period adjustments. Below is the trial balance for the
month ending January 31, 2016. This trial balance has not been adjusted for the
various items that are described below.
RIVERSIDE SHIPPING LTD
TRIAL BALANCE
JANUARY 31, 2016
Debits Credits
Cash $ 112 500 —
Accounts Receivable 37 230 —
Prepaid Insurance 7 200 —
Supplies 21 339 —
Equipment 105 000 —
Accumulated Depreciation — 30 000
Accounts Payable — 22 707
Unearned Revenue — 25 500
Loan Payable — 45 000
Share Capital — 72 000
Retained Earnings, Jan. 1 — 46 371
Revenues — 131 985
Salary Expense 36 294 —
Rent Expense 39 000 —
Office Expense 7 500 —
Dividends 7 500 —
_______
$373 563
_______
$373 563
The company’s equipment had an original life of 140 months, and the straight-line
depreciation method is used. As of January 1, the equipment was 40 months old. The
equipment will be worthless at the end of its useful life.
As of the end of the month, Riverside Shipping Ltd has provided services to
customers for which the earnings process is complete. Formal billings are normally
sent out on the first day of each month for the prior month’s work. January’s unbilled
work is $75 000.
Utilities used during January, for which bills will soon be forthcoming from
providers, are estimated at $4 500.
The $7 200 balance in prepaid insurance was for a 6-month policy running from
January 1 to June 30.
22
The unearned revenue was collected in December of 2015. 60% of that amount was
actually earned in January, with the remainder to be earned in February.
The loan accrues interest at 1% per month. No interest was paid in January.
REQUIRED:
a) Ignoring GST, write the journal entries to record all the necessary balance day
adjustments. Narrations are not required.
(12 marks)
b) Prepare appropriate reversing journal entries. Narrations are not required.
(3 marks)
