Question

The following items are independent. Assume that the original transactions have been recorded correctly or as described. Assume a December 31 year-end unless otherwise noted. DE a. Prepaid insurance had a debit balance of $23,800 at the beginning of January. This represents the remaining 14 months in an insurance policy that was purchased in a prior year. On 1 April of the current year, a 30-month policy was bought for $66,000, which was debited to prepaid insurance. There were no other entries to the prepaid insurance account during the year. On 1 November, an 18-month policy was bought for $10,080. This policy was debited to insurance expense. b. Certain invoices had not been recorded at 31 December: a $7,800 bill for power, a $900 phone bill, and a repair bill for $1,750. All these bills are due in January. c. Salaries payable has a balance of $7,700, unadjusted from the last year-end. There are 14 employees. They were paid up to Friday, 27 December. There were two additional working days prior to the year-end. Three employees earn $1,000 per (five-day) week each, three earn $900 per week, and eight earn $800 per week. d. There are two notes payable outstanding. The first is an $930,000,4% note, issued on 1 September, no interest has been paid to date. The second is a $731,600, 3.5% note issued on 1 April; six months' interest was paid on 1 October. The notes payable themselves were properly recorded on issuance, but interest must be accrued to 31 December, the year-end. e. There is an unearned revenue account with a balance of $165,200. This includes a $10,400 security deposit from a tenant. This deposit will be returned when the tenant eventually vacates. The remaining $154,800 is six months' rent received, on a lease beginning 1 December, on commercial property f. Supplies inventory had a balance of $24,400 at the end of last year. During the year, $72,200 of supplies were purchased, and were debited directly to supplies expense. At year-end, an inventory count was conducted, and the balance was ascertained to be $25,600 g. Advertising expense of $98,200 includes a $6,700 payment for an advertisement that will run in January of next year. Required: 1. Prepare adjusting journal entries to reflect the facts above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations and round your final answers to the nearest whole dollar amount.)

Answer 1

1.

Account Titles	Debit	Credit
Insurance Expense	$        31,240		=23800/14*12+66000/30*9-10080/18*16
Prepaid Insurance		$        31,240
Utilities and Repair Expense	$        10,450		=7800+900+1750
Accounts Payable		$        10,450
Salaries Payable	$          2,860		=7700-(1000/5*2*3+900/5*2*3+800/5*2*8)
Salaries Expense		$          2,860
Interest Expense	$        18,802		=930000*4%*4/12+731600*3.5%*3/12
Interest Payable		$        18,802
Unearned Revenue	$        25,800		=154800/6
Rent Revenue		$        25,800
Supplies	$          1,200		=72200-(24400+72200-25600)
Supplies Expense		$          1,200
Prepaid Advertising expense	$          6,700
Advertising Expense		$          6,700

2.

Account Titles	Debit	Credit
Accounts Payable	$        10,450
Utilities and Repair Expense		$        10,450
Salaries Payable	$          4,840
Salaries Expense		$          4,840
Interest Payable	$        18,802
Interest Expense		$        18,802

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