Question

4-1 through L04-6, 124.9 XERCISE 4.7 eparing Various Adjusting tries Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31, 2015: 1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,500. No interest expense has yet been recorded. 2. Depreciation of the firm's office building is based on an estimated life of 30 years. The building was purchased in 2011 for $450,000. 3. Accrued, but unbilled, revenue during December amounts to $75,000. 4. On March 1, the firm paid $2,400 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance. 5. The firm received $15.000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, 89,000 had actually been earned by the firm. 6. The company's policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to S1,900. Record the necessary adjusting journal entries on December 31, 2015,

Answer 1

Solution Required (a): Adjustment journal entry on December 31, 2015 L Credit No. 1 Debit $1,500 Date General Journal Dec. 31, 2015 Interest Expense Interest Payable (To record the accrued interest expense on bank loan) $1,500 | Credit No. 2 Debit $15,000 Date General Journal Dec. 31, 2015 Depreciation Expense (WN-1) | Accumulated Depreciation - Building (To record the depreciation expense on office building) $15,000 WN-1: Depreciation expense on office building Cost of the building Estimated life Depreciation expense (yearly) = $450,000/30 = $450,000 30 Years $15,000 Credit No. 3 Debit $75,000 Date General Journal Dec. 31, 2015 Accrued Revenue Service Revenue (To record the accrued revenue for December month) $75,000 No. Debit Credit 4 Date General Journal Dec. 31, 2015 Insurance Expense (WN-2) Prepaid Insurance (To record the expired insurance expense) $2,000 $2,000 WN-2: Expired insurance expense till December 2015 end Insurance premium paid Policy period covered Expired policy period till December 2015 end Expired insurance expense ($2,400 x 10/12) $2,400 12 months 10 months $2,000 Credit No. 5 Date General Journal Dec 31, 2015 Unearned Revenue Service Revenue (To record the earned revenue) Debit $9,000 I $9,000 Credit No. 6 Date General Journal Dec. 31, 2015 Salaries Expense Salaries Payable (To record the accrued salaries expense) Debit $1,900 $1,900