Question

SCHILD. 9. The Warsaw Corporation began business operations on December 1, Year One. The company had the following transactions during the time when it was starting: a. An employee was hired on December 1, for $4,000 per month with the first payment to be made on January 1. b. The company made an $18,000 payment on December 1, to rent a building for the following six months. c. Supplies were bought on account for $10,000 on December 1. Supplies are counted at the end of the year and $3,600 is still on hand. d. The company receives $9,000 for a service that it had expected to provide immediately. However, a problem arises because of a series of delays and the parties agree that the service will be performed on January 9. e. A job was completed near the end of the year, and the customer will pay Warsaw all $8,000 early in the following year. Because of the late date, no entry was made at that time.

Answer 1

Journal Entries
No.	Accounts	Debit	Credit
a	Salaries Expense Dr	4000
	To Salaries Payable		4000
	(Being salary payable for December.)
b	Rent Expense Dr	3000		=18000/6*1
	Prepaid Rent Dr	15000		=18000/6*5
	To Cash		18000
	(Being Rent paid for December-May.)
c	Supplies Dr	10000
	To Accounts Payable		10000
	(Being supplies bought on account.)
	Supplies Expense Dr	6400		=10000-3600
	To Supplies		6400
	(Being supplies used debited as expense.)
d	Cash Dr	9000
	To Unearned Revenue		9000
	(Being cash received for service not performed.)
e	Accounts Receivable Dr	8000
	To Revenue		8000
	(Being job completed and payment receivable in following year.)