Underwater Adventures Has the Following Account Balances on August 31

question 179

Essay

Underwater Adventures has the following account balances on August 31, 2019: $$\begin{array} { l r } \text { Accounts payable } & \$ 8,800 \\\text { Accounts receivable } & 9,600 \\\text { Accumulated amortization - equipment } & 30,300 \\\text { Cash } & 2,200 \\\text { Cost of goods sold } & 341,500 \\\text { Jacobson, capital } & 190,700 \\\text { Jacobson, withdrawals } & 44,000 \\\text { Equipment } & 88,000 \\\text { Interest earned } & 2,000 \\\text { Inventory } & 71,500 \\\text { Operating expenses } & 175,500 \\\text { Sales discounts } & 3,100 \\\text { Sales returns and allowances } & 14,400 \\\text { Sales revenue } & 520,600 \\\text { Supplies } & 7,100 \\\text { Unearned sales revenue } & 4,500\end{array}$$ The following information as at August 31, 2019 was also available:
a. A physical count of items showed $1,200 of supplies on hand.
b. An inventory count showed inventory on hand of $66,400.
c. The equipment has an estimated useful life of eight years and is expected to have no salvage value.
d. Unearned sales revenue of $1,000 was earned.
Required:
1. Prepare the necessary adjusting journal entries at August 31, 2019. For simplicity all operating expenses are combined into a single operating expense account for financial statement purposes. Use the normal account name for the adjusting journal entries.
2. Prepare a classified balance sheet based on adjusted account balances.

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Definitions:

At-Risk Amount

The portion of an investment under which the investor could actually lose money, often considered in tax implications and incentives.

Full Recourse Debt

A loan in which the lender is allowed to claim against the borrower’s other assets in addition to the collateral if the borrower defaults.

Rental Activity

This refers to engaging in the leasing or renting of property as a means of earning income, often subjected to specific tax rules and reporting requirements.

Rental Losses

Financial losses incurred from renting out property when related expenses exceed rental income, with potential tax implications.