Relax Spa Company is engaged in providing facial and body treatment in a spa centre. Customersare required to purchase spa coupons in advance. Coupons are redeemed when customers completethe treatment and the Company records income. The Company also sells day pass for using the spafacilities and records income. The Company records all income in “Service revenue”. Adjustingentries are performed on a monthly basis. Closing entries are performed annually on December 31.Below is the Company’s unadjusted trial balance at the year ended 31 December, 2021.
1.Spa coupons amounting $16,000 were redeemed in December 2021 for treatment.
Account name: Cash Accounts receivable Prepaid rent Supplies Equipment Accumulated depreciation: Equipment Accounts payable Income taxes payable Unearned revenue Notes payable Interest payable Share capital ($2 per share) Retained earnings Service revenue Salaries expense Rent expense Insurance expense Depreciation expense: Equipment Supplies expense Interest expense Income taxes expense
Prepare the necessary adjusting journal entries on 31 December 2021 to bring the financialrecords of Relax Spa Company up-to-date. If no adjusting entries are required, state “No entry” and name theaccounting principle applied.
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