Question

Problem 3-3 A review of the ledger of Teal Company at December 31, 2017, produces the folewing data pertaining to the preprabon of antiual adjysting entries I. Salaries and Wages Payable SO. There are eight employees. Salanes and wages are paid every Friday for the oant wek. Five employees receive $890 each per week, arid three employees earn $470 each per week. December 31 is a Tuesday, Employees do not work ekends Al emploveeswkd the ast 2 days of Decembe 2. Un arned Rent Revenue S399,660 The comp y began sub easing office space n t, new baking on November 1 tenant is required to r ake。ss, sso security depost that s not refu t able unti occupancy is terminated. At December 31, the cempany had the following rentid contradS that are pad "tull for the ente term 여 the lease. Date Term (in months) Monthly Rent Number of Leases Nov. 1 Dec. 1 $6,300 6,760 Prepaid Advertising $22,800. This balance consists of payments on o advertsing contracts The cotrcts provide for oontying in two trade magaznes. The terms of the contracts are as below 3. contract Date Amount №.mber of Magazine Issues A650 0974 et1 12,000 The frst advertisement runs in the month in wich 4. Notes Payable $58,200. This belance conssts of o note for one year May 1 $10,800 24 the cotract is sed afne i

Answer 1

Answer:

Adjusting entries:
Sr. no	Date	Account Titles	Debit($)	Credit($)
	2017
1	Dec-31	Salaries and wages expense [2 Day /5 Day x $ ( 890*5) + (470*3)]	$2,344
		Salaries and wages payable		$2,344
		(To record unpaid salaries for 2 days)
2		Unearned rent revenue(Note:1)	$90,040
		Rent revenue		$90,040
		(To recognize rent revenue earned during the period)
3		Advertising expense (Note:2)	$8,700
		Prepaid advertising		$8,700
		(To record Prepaid advertisement expense)
4		Interest expense ( $ 58,200 x 12% x 7/12)	$4,074
		Interest payable		$4,074
		(To record Payable interest expense on note payable)

1. Unearned rent revenue:

Nov1-

Two months lease for 5 leases at $6,300 per month = 6,300 x 5 x2 = $63,000

Dec 1 –

One month lease for 4 leases at $6,760 per month = 6,760 x 4 x 1 = $27,040

Total lease rent revenue earned as on December 31 = $90,040

Note: The security deposit is not recorded under unearned rent revenue.

2. Advertisement expense - $8,700

A650 May1 $10,800 – expense is for 8 issues out of 12 issues = 10,800 x 8/12 = $7,200

B974 Oct 1  $12,000 – expense is for 3 issues out of 24 issues (Oct1 – Dec 31) = 12,000 x 3/24 = $1,500