Question

Problem 3-08A A review of the ledger of Greenberg Company at December 31, 2021, produces the following important data for the preparation of annual adjusting entries: 1. Prepaid Advertising, December 31, 2021, unadjusted balance, $15,600. This balance consists of payments on two advertising contracts for monthly advertising in two trade magazines. The terms of the contracts are as follows: 12 Contract First Month Amount Number of Magazine Issues A650 May 2021 $5,000 B974 October 2021 10,600 $15,600 2. Vehicles, December 31, 2021, balance, $70,000. The company owns two vehicles used for delivery purposes. The first, purchased for $30,000 on January 2, 2019, has an estimated seven-year useful life. The second, purchased for $40,000 on June 1, 2020, has an estimated eight-year useful life. 3. Notes Payable, December 31, 2021, balance, $85,000. This consists of an eight-month, 6.5% note, dated August 1. Interest is payable at maturity. 4. Salaries Payable, December 31, 2021, unadjusted balance, $0. There are nine salaried employees. Salaries are paid every following Monday for a six-day workweek (Monday-Saturday). Six employees receive a salary of $750 per week, and three employees earn $600 per week. December 31, 2021, is a Friday. 5. Unearned Revenue, December 31, 2021, unadjusted balance, $270,000. Greenberg began renting office space to tenants in its new building on November 1. At December 31, Greenberg had the following rental contracts that were paid in full for the entire term of the lease: Rental Term Nov. 1, 2021, to Apr. 30, 2022 Dec. 1, 2021, to May 31, 2022 Monthly Rent Number of Tenants Total Rent Paid $4,000 $144,000 7,000 126,000 $270,000

Answer 1

Greenberg Company
Adjusting journal entries on December 31,2021
No	Date	Account Titles and Explanations	Debit	Credit
1	Dec. 31	Advertising Expense	$4,658
		Prepaid Advertising		$4,658
		(to record advertising expenses against the two contracts incurred in the year)
2	Dec. 31	Depreciation expense	$4,286
		Accumulated Depreciation - Vehicles		$4,286
		(to record depreciation on the first vehicle)
2	Dec. 31	Depreciation expense	$2,500
		Accumulated Depreciation - Vehicles		$2,500
		(to record depreciation on the second vehicle)
3	Dec. 31	Interest Expense	$2,302
		Accrued Expenses		$2,302
		(to record the interest on 6.50% Notes payable for the year)
4	Dec.31	Salaries and Wages Expense	$5,250
		Accrued Expenses		$5,250
		(to record salary and wages expense for the last week of December)
5	Dec.31	Unearned Revenue	$69,000
		Rent Revenue		$69,000
		(to record the rent income earned during the year)

Working Notes
Advertising expenses
Contract	Total Prepaid Amount	Period (in months)	Monthly Expense	Months expensed in 2021	Advertising Expense
A650	$5,000	12	417	8	$3,333
B974	$10,600	24	442	3	$1,325
	$15,600				$4,658
Depreciation
Vehicle	Cost	Useful Life	Annual Depreciation	Date of Purchase	Period Used (in months)	Depreciation
Vehicle -1	$30,000	7	$4,286	2-Jan-19	12	$4,286
Vehicle -2	$40,000	8	$5,000	1-Jun-19	6	$2,500
	$70,000		$9,286			$6,786
Interest on Notes payable
Notes Payable	Rate of Interest	Annual Interest	Date of issue	Period in 2021 (months)	Interest
$85,000	6.50%	$5,525	1-Aug-19	5	$2,302
Salaries and Wages
No. of employees	Work days	Weekly Salary	Days worked	Salary for one emp.	Total Salary
6	6	$750	5	$625	$3,750
3	6	$600	5	$500	$1,500
		$1,350		$1,125	$5,250
Rent Revenue
Monthly Rent	No. of Tenants	No. of months in 2021	Total Rent in 2021
$4,000	6	2	$48,000
$7,000	3	1	$21,000
$11,000			$69,000