Question

Adjusting Entries Reynolds Computer Service offers data processing services to retail clothing stores. The following data have been collected to aid in the preparation of adjusting entries for Reynolds Computer Service for 2019: a. Computer equipment was purchased from IBM in 2016 at a cost of $540,000. Annual depreciation is $127,600 b. A fire insurance policy for a 2 year period beginning September 1, 2019, was purchased from Good Hands Insurance Company for $8,520 cash. The entire amount of the prepayment was debited to prepaid insurance. (Assume that the beginning balance of prepaid insurance was 50 and that there were no other debits or credits to that account during 2019.) c. Reynolds has a contract to perform the payroll accounting for Dayton's Department Stores. At the end of 2019, $5,060 of services have been performed under this contract but are unbilled. d. Reynoldsrents 12 computer terminals for $61 per month per terminal from Extreme Terminals Inc. At December 31, 2019, Reynolds owes Extreme Terminals for half a month's rent on each terminal. The amount owed is unrecorded e. Perry's Tax Service prepays rent for time on Reynolds' computer. When payments are received from Perry's Tax Service, Reynolds credits unearned rent revenue. At December 31, 2019, Reynolds has earned $1,740 for computer time used by Perry's Tax Service during December 2019. Required: 1. Prepare adyasting entries for each of the transactions Dec 31 Depreciation Expense Accumulated Depreciation (Record depreciation) Dec 31 Insurance Expense Prepaid Insurance Record insurance expense) Dec. 31 Accounts Receivable Service Revenue

Answer 1

JOURNAL Date Particulars Depreciation expense Accumulated dep a Debit Credit 127600 127600 Stockholder's equity and assets would have been overstated . 5 b 2130 Stockholder's equity and assets would have been overstated Insurance expense Prepaid insurance 2130 . с 5060 Stockholder's equity and assets would have been understated Unbilled Revenue Service revenue 0 5060 1 2 d 146 Rent expense Rent payable (12*61*0.5) Stocholder's equity would have been overstated Liabilities would have been understated 3 146 4 5 6 e 7 1740 Unearned rent revenue Rent revenue Liabilities would have been overstated Stockholder's equity would have been understated 1740 8