Jaguar Auto Company provides general car maintenance to customers. The company’s
ID: 2356184 • Letter: J
Question
Jaguar Auto Company provides general car maintenance to customers. The company’s fiscal year-end is December 31. The December 31, 2012, trial balance (before any adjusting entries) appears below.Accounts Debits Credits
Cash $ 24,000
Accounts receivable 20,000
Supplies 30,000
Prepaid insurance 21,000
Equipment 90,000
Accumulated depreciation $ 23,000
Accounts payable 11,200
Salaries payable 0
Utilities payable 0
Interest payable 0
Notes payable 20,000
Common stock 21,000
Retained earnings 35,200
Dividends 2,400
Service revenue 231,000
Salaries expense 142,000
Depreciation expense 0
Insurance expense 0
Supplies expense 0
Utilities expense 12,000
Interest expense 0
Totals $ 341,400 $ 341,400
Information necessary to prepare the year-end adjusting entries appears below.
a. Depreciation on the machines for the year is $9,000.
b. Employee salaries are paid every two weeks. The last pay period ended on December 23. Salaries earned from December 24 through December 31, 2012, are $2,500.
c. On September 1, 2012, Jaguar borrows $20,000 from a local bank and signs a note. The note requires interest to be paid annually on August 31 at 9%. The principal is due in five years.
d. On March 1, 2012, the company purchases insurance for $21,000 for a one-year policy to cover possible injury to mechanics. The entire $21,000 is debited to Prepaid Insurance at the time of the purchase.
e. $4,500 of supplies remains on hand at December 31, 2012.
f. On December 30, Jaguar receives a utility bill of $1,900 for the month. The bill will not be paid until early January 2013, and no entry is recorded when the bill is received.
Required:
Prepare the necessary adjusting entries on December 31, 2012. (Do not round your intermediate calculations. Round your final answers to the nearest dollar amount.
Explanation / Answer
Information necessary to prepare the year-end adjusting entries appears below. a. Depreciation on the machines for the year is $9,000. Debit Depreciation expense 9,000 Credit Accumulated Depreciation 9,000 b. Employee salaries are paid every two weeks. The last pay period ended on December 23. Salaries earned from December 24 through December 31, 2012, are $2,500. Debit Salaries expense 2,500 Credit Salaries Payable 2,500 c. On September 1, 2012, Jaguar borrows $20,000 from a local bank and signs a note. The note requires interest to be paid annually on August 31 at 9%. The principal is due in five years. Debit Interest Expense 600 Credit Interest Payable 600 (this is 4 months of interest, 20,000*0.09*4/12) d. On March 1, 2012, the company purchases insurance for $21,000 for a one-year policy to cover possible injury to mechanics. The entire $21,000 is debited to Prepaid Insurance at the time of the purchase. Debit Insurance Expense 17,500 Credit Prepaid insurance 17,500 (this is 10 months of insurance used up, 21,000*10/12) e. $4,500 of supplies remains on hand at December 31, 2012. Debit supplies expense 25,500 Credit supplies 25,500 (had 30,000 in supplies account, now have 4,500, so need to decrease the supplies account by 25,500) f. On December 30, Jaguar receives a utility bill of $1,900 for the month. The bill will not be paid until early January 2013, and no entry is recorded when the bill is received. Debit Utilities expense 1,900 Credit Utilities Payable 1,900
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