Adjusting Entries and Financial Statements.

The following information pertains to Fixation Enterprises:

· The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one third of this amount had been earned.

· Fixation provided $2,500 of services to Artech Corporation; no billing had been made by December 31.

  • Salaries owed to employees at year-end amounted to $1,650.

· The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.

· The company paid $18,000 on October 1 of the current year to Vantage Property

Management. The payment was for 6 months’ rent of Fixation’s headquarters, beginning on November 1.

Fixation’s accounting year ends on December 31.


Analyze the five preceding cases individually and determine the following:

a. The type of adjusting entry needed at year-end (Use the following codes: A, adjustment of a prepaid expense; B, adjustment of an unearned revenue; C, adjustment to record an accrued expense; or D, adjustment to record an accrued revenue.)

b. The year-end journal entry to adjust the accounts

c. The income statement impact of each adjustment (e.g., increases total revenues by $500)