2. Wages of $8,000 are earned by workers but not paid as of December 31, 2017. D

Question

2. Wages of $8,000 are earned by workers but not paid as of December 31, 2017.

Depreciation on the company’s equipment for 2017 is $11,560.

The Office Supplies account had a $330 debit balance on December 31, 2016. During 2017, $6,445 of office supplies are purchased. A physical count of supplies at December 31, 2017, shows $695 of supplies available.

The Prepaid Insurance account had a $5,000 balance on December 31, 2016. An analysis of insurance policies shows that $3,300 of unexpired insurance benefits remain at December 31, 2017.

The company has earned (but not recorded) $700 of interest from investments in CDs for the year ended December 31, 2017. The interest revenue will be received on January 10, 2018.

The company has a bank loan and has incurred (but not recorded) interest expense of $3,000 for the year ended December 31, 2017. The company must pay the interest on January 2, 2018.

For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2017.

Explanation / Answer

Adjusting entry

Date account and explanation debit credit Dec 31 Wages expense 8000 Wages payable 8000 (To record wages) Dec 31 Depreciation expense 11560 Accumlated depreciation 11560 (To record depreciation expense) Dec 31 Supplies expense 6080 Supplies 6080 (To record supplies expense) Dec 31 Insurance expense 1700 Prepaid insurance 1700 (To record insurance expense) Dec 31 Interest receivable 700 Interest revenue 700 (To record interest revenue) Dec 31 Interest expense 3000 Interest payable 3000 (To record interest expense)

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