Question

Computing adjustments for accrued and prepaid expense items. For each of the following independent situations, indicate the adjusting entry that must be made on the December 31, 2019, worksheet. Omit descriptions. a. On December 31, 2019, the Notes Payable account at Northwood Manufacturing Company had a balance of $16,000. This balance represented a three-month, 7.5 percent note issued on November 1.

b. On January 2, 2019, Hitech Computer Consultants purchased flash drives, paper, and other supplies for $5,230 in cash. On December 31, 2019, an inventory of supplies showed that items costing $1,590 were on hand. The Supplies account has a balance of $5,230. c. On September 1, 2019, North Dakota Manufacturing paid a premium of $14,640 in cash for a one-year insurance policy. On December 31, 2019, an examination of the insurance records showed that coverage for a period of four months had expired. d. On May 1, 2019, Headcase Beauty Salon signed a one-year advertising contract with a local radio station and issued a check for $10,800 to pay the total amount owed. On December 31, 2019, the Prepaid Advertising account has a balance of $10,800.

Answer 1

Date	Account Titles	Debit	Credit
December 31, 2019		$	$
a.	Interest Expense ( $ 16,000 x 7.5 % x 2/12 )	200
	Interest Payable		200
b.	Supplies Expense	3,640
	Supplies		3,640
c.	Insurance Expense [ 14,640 / 12 * 4 ]	4,880
	Prepaid Insurance		4,880
d.	Advertising Expense [ 10,800 / 12 * 8 ]	7,200
	Prepaid Advertising		7,200