All five families at once, plus the adjustment the facts only imply

The case

Tamarack Marina & Storage Inc. rents slips on Lake Simcoe, stores boats for the winter, runs a repair shop, and sells fuel and chandlery goods from a dock store with perpetual inventory. Its unadjusted trial balance at 31 December foots at 1,671,150. The page of year-end facts follows, and the final asks for everything from here: the adjustments, the adjusted trial balance, the four statements, the closing entries and the post-closing trial balance. This lesson does the first two.

Ten facts, ten entries

Read each fact against the trial balance, name the family (Module 5), and write the entry.

1. Supplies on hand 2,100. Supplies shows 6,800; used 6,800 − 2,100 = 4,700. Prepaid used.
2. The 9,600 policy runs twelve months from 1 September. Four months expired: 9,600 × 4/12 = 3,200. Prepaid used. 6,400 stays prepaid.
3. Amortization. Building (480,000 − 80,000) ÷ 40 = 10,000; equipment (180,000 − 20,000) ÷ 8 = 20,000; the trademark has an indefinite life and is not amortised (s.3064). One entry, 30,000, two contra credits.
4. The 84,000 of storage contracts received 1 November cover November to April. Two of six months earned: 84,000 × 2/6 = 28,000. Unearned earned. 56,000 remains a liability.
5. Salaries earned but unpaid 5,400. Accrued expense.
6. The bank loan bears 5 %, interest paid each 30 April and 31 October; 25,000 of principal is due 30 April. The fact says when interest is paid; nobody says “accrue it”. Since 31 October two months have run: 150,000 × 5 % × 2/12 = 1,250. Accrued expense. The 25,000 is a balance-sheet reclassification (L14.3), not an adjusting entry.
7. An aging requires an allowance of 2,700. The account already holds 900 credit; expense = 2,700 − 900 = 1,800.
8. Inventory’s net realisable value is 51,900. Cost 52,600; write down 700 to cost of goods sold (s.3031).
9. Repair work of 3,600 completed in December, not yet billed. Accrued revenue — Dr Accounts Receivable 3,600.
10. Income tax is 20 % of income before tax. This one must wait: income before tax is known only after the other nine are posted. Revenue 829,600 − expenses before tax 635,500 = 194,100; tax 20 % = 38,820; instalments of 12,000 already sit in Income Tax Expense, so the accrual is 38,820 − 12,000 = 26,820 to Income Tax Payable.

The one nobody mentions

Fact 6 is the trap the final sets every year. The trial balance shows a loan; the facts talk about payment dates. A learner who writes “no adjustment — interest is paid in April” loses the accrual, overstates net income by 1,250, and understates liabilities. The habit that catches it: read the trial balance for liabilities that accrue (loans → interest), assets that wear (buildings, equipment → amortization even if no fact says so), and income that is taxed (tax after everything else). If a fact list is silent on one of those, the silence is the question.

The proof

Post the ten entries and re-foot. The adjusted trial balance totals 1,740,020 on each side. Service Revenue is now 486,000 + 28,000 + 3,600 = 517,600; Interest Expense 6,250 + 1,250 = 7,500; Income Tax Expense 38,820. The proof says debits equal credits after posting — it does not say the adjustments are right. A missed accrual leaves the columns equal and the net income wrong.