Question

Problem 2: Adjustments

Select accounts of Burger Express are shown below as of December 31, 2017, before any accounts have been adjusted for the current fiscal year.

	Debit	Credit
Prepaid rent	103,680
Accumulated depreciation - Van		16,500
Accumulated depreciation - Stoves		29,250
Gift certificates – unearned revenue		4,680

Your analysis reveals additional information as follows:

• On June 1, 2017, the company prepaid rent of $8,640 per month for a 12-month lease on its building.  
• The company bought the van on January 1, 2015 for the cost of $132,000. The van is expected to last eight years. The company’s policy is to record depreciation evenly over the asset’s useful life. No depreciation has been recorded during fiscal year 2017.
• When purchased on January 1, 2014, the stoves had expected lives of 10 years. The company’s policy is to record depreciation evenly over the asset’s useful life. No depreciation has been recorded on the stoves during fiscal 2017.
• The company sells numbered gift certificates in $60 denominations. At year-end there were 30 unredeemed gift certificates.

Prepare journal entries for any required accounting adjustments.

Answer 1

D А 1 Date 2 Dec 31, 2017 B Particulars Rent expense Prepaid rent (To recoed rent expense) C Debit($) Credit($) 604801 L 60480|| 3 T 6 Dec 31, 2017 165001 Depreciation Expense-Van Accumulated expense-Van (To record depreciation expense-van) 16500 600 va 97501 10 Dec 31, 2017 11 12 13 14 Dec 31, 2017 Depreciation Expense-Stoves Accumulated expense-Stoves (To record depreciation expense-stoves) 9750 28801 15 Unearned revenue Service revenue (To record service revenue) 2880

в А 1 Date 2 Dec 31, 2017 с Debit($) =8640*7 D Credit($) Particul Particulars Rent expense Prepaid rent (To recoed rent expense) =C2 oo vane w 6 Dec 31, 2017 =132000/8 Depreciation Expense-Van Accumulated expense-Van |(To record depreciation expense-van) =C6 =29250/3 Depreciation Expense-Stoves Accumulated expense-Stoves (To record depreciation expense-stoves) =C10 10 Dec 31, 2017 11 12 13 14 Dec 31, 2017 15 16 =4680-160*30) Unearned revenue Service revenue (To record service revenue) I=C14