E22-19 (Error Analysis; Correcting Entries) A partial trial balance of Julie Har

Question

E22-19 (Error Analysis; Correcting Entries) A partial trial balance of Julie Hartsack Corporation is as
follows on December 31, 2008.
Dr. Cr.
Supplies on hand $ 2,700
Accrued salaries and wages $ 1,500
Interest receivable on investments 5,100
Prepaid insurance 90,000
Unearned rent –0–
Accrued interest payable 15,000
Additional adjusting data:
1. A physical count of supplies on hand on December 31, 2008, totaled $1,100.
2. Through oversight, the Accrued Salaries and Wages account was not changed during 2008. Accrued
salaries and wages on December 31, 2008, amounted to $4,400.
3. The Interest Receivable on Investments account was also left unchanged during 2008. Accrued
interest on investments amounts to $4,350 on December 31, 2008.
4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2008.
5. $28,000 was received on January 1, 2008 for the rent of a building for both 2008 and 2009. The entire
amount was credited to rental income.
6. Depreciation for the year was erroneously recorded as $5,000 rather than the correct figure of
$50,000.
7. A further review of depreciation calculations of prior years revealed that depreciation of $7,200
was not recorded. It was decided that this oversight should be corrected by a prior period
adjustment.

Instructions
(a) Assuming that the books have not been closed, what are the adjusting entries necessary at
December 31, 2008? (Ignore income tax considerations.)

Explanation / Answer

1. Dr. Supplies Expense 1,600 Cr. Supplies on hand 1,600 2. Dr. Salaries and Wages Expense 2,900 Cr. Accrued salaries and wages 2,900 3. Dr. Interest receivable on investments 750 Cr. Interest Revenue 750 4. Dr. Insurance Expense 25,000 Cr. Prepaid Insurance 25,000 5. Dr. Rental income 14,000 Cr. Unearned rent 14,000 6. Dr. Depreciation Expense 45,000 Cr. Accumulated Depreciation 45,000 7. Dr. Retained Earnings 7,200 Cr. Accumulated Depreciation 7,200

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