E3-5 Drew Carey Company has the following balances in selected accounts on Decem
ID: 2370961 • Letter: E
Question
E3-5Drew Carey Company has the following balances in selected accounts on December 31, 2010.
Accounts Receivable $ -0-
Accumulated Depreciation-Equipment -0-
Equipment 7,000
Interest Payable -0-
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries Payable -0-
Supplies 2,450
Unearned Consulting Revenue 40,000
All the accounts have normal balances. The information below has been gathered at December 31, 2010.
Instructions
Prepare adjusting entries for the seven items described below.
Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2010.
A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand.
Depreciation on the equipment for 2010 is $1,000.
Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2010.
On December 1, 2010, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2011.
Drew Carey performed consulting services for a client in December 2010. The client will be billed $4,200.
Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2010.
Explanation / Answer
Accounts Receivable $ -0- Accumulated Depreciation-Equipment -0- Equipment 7,000 Interest Payable -0- Notes Payable 10,000 Prepaid Insurance 2,100 Salaries Payable -0- Supplies 2,450 Unearned Consulting Revenue 40,000 Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2010. Interest for 4 months: 10,000*.12*4/12 = 400 Debit: Interest Expense 400 Credit: Interest Payable 400 A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand. 2,450 – 800 = 1,650 Debit: Supplies Expense 1,650 Credit: Supplies 1,650 Depreciation on the equipment for 2010 is $1,000. Debit: Depreciation expense 1,000 Credit: Accumulated Depreciation-Equipment 1,000 Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2010. 7 months insurance expired: 2,100*7/12 = 1225 Debit: Insurance expense 1,225 Credit Prepaid insurance 1,225 On December 1, 2010, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2011. Earned one month out of four: 40,000*1/4 = 10,000 Debit: Unearned Consulting Revenue 10,000 Credit: Earned Consulting Revenue 10,000 Drew Carey performed consulting services for a client in December 2010. The client will be billed $4,200. Debit: Accounts Receivable 4,200 Credit: Earned Consulting Revenue 4,200 Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2010. 9,000 equals the total salaries for one week or five days, which is 9,000/5 = 1,800 per day. For three days, December 29,30, and 31: 3*1,800 = 5,400. Debit: Salaries Expense 5,400 Credit: Salaries Payable 5,400
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.