Exercise 3-1 Preparing adjusting entries L.O. P1 The Office Supplies account had
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Question
Exercise 3-1 Preparing adjusting entries L.O. P1
The Office Supplies account had a $340 debit balance on December 31, 2010. During 2011, $6,241 of office supplies are purchased. A physical count of supplies at December 31, 2011, shows $674 of supplies available.
The Prepaid Insurance account had a $5,000 balance on December 31, 2010. An analysis of insurance policies shows that $2,900 of unexpired insurance benefits remain at December 31, 2011.
The company has a bank loan and has incurred (but not recorded) interest expense of $5,000 for the year ended December 31, 2011. The company must pay the interest on January 2, 2012.
For each of the above separate events, prepare the required adjusting entries for the year ended December 31, 2011 (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.)
a. One-fourth of the work related to $11,000 cash received in advance is performed this period. b. Wages of $13,000 are earned by workers but not paid as of December 31, 2011. c. Depreciation on the company%u2019s equipment for 2011 is $10,720. d.The Office Supplies account had a $340 debit balance on December 31, 2010. During 2011, $6,241 of office supplies are purchased. A physical count of supplies at December 31, 2011, shows $674 of supplies available.
e.The Prepaid Insurance account had a $5,000 balance on December 31, 2010. An analysis of insurance policies shows that $2,900 of unexpired insurance benefits remain at December 31, 2011.
f. The company has earned (but not recorded) $900 of interest from investments in CDs for the year ended December 31, 2011. The interest revenue will be received on January 10, 2012. g.The company has a bank loan and has incurred (but not recorded) interest expense of $5,000 for the year ended December 31, 2011. The company must pay the interest on January 2, 2012.
Explanation / Answer
ANSWER
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a.) one-third of the work related to $15,000 cash received in advance is performed this period.
Dr Unearned revenue $5,000
Cr Revenue $5,000
b.) wages of $7,500 are earned by workers but not paid as of december 31, 2009.
Dr Wages expense $7,500
Cr Wages payable $7,500
c.) depreciation of the company's equipment for 2009 is $17,251.
Dr depreciation-office equipment $17,251
Cr accumulated depreciation-office equipment $17,251
d.) the office supplies account had a $240 debit balance on december 31, 2008. During 2009, $6,102 of office supplies are purchased. A physical count of supplies at December 31, 2009, shows $660 of supplies available
Dr supplies expense $5,682
Cr office supplies $5,682
e.) the prepaid insurance account had a $4,000 balance on December 31, 2008. An analysis of insurance policies shows that $1,300 of unexpired insurance benefits remain at december 31, 2009.
Dr insurance expense $2,700
Cr prepaid insurance $2,700
f.) the company has earned (but not recorded) $1,400 of interest from investments in CD's for the year ended December 31, 2009. The interest revenue will be received on january 10, 2010.
Dr Interest receivable $1,400
Cr Interest revenue $1,400
g.) the company has a bank loan and has incurred (but not recorded) interest expense of $2,000 for the year ended december 31, 2009. The company must pay the interest on january 2, 2010.
Dr Interest expense $2,000
Cr Interest payable $2,000
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