Exercise 3-16

Colin Mochrie Company has the following balances in selected accounts on December 31, 2010.

Consulting Revenue              $40,000

Insurance Expense                   2,100

Supplies Expense                     2,450

All the accounts have normal balances. Colin Mochrie Company debits prepayments to expense accounts when paid, and credits unearned revenues to revenue accounts when received.The following information below has been gathered at December 31, 2010.

1. Colin Mochrie Company paid $2,100 for 12 months of insurance coverage on June 1, 2010.

2. On December 1, 2010, Colin Mochrie Company collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2011.

3. A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand.

Instructions

Prepare the adjusting entries needed at December 31, 2010

Prepare a correct income statement for July 2010.

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