Adjusting Entries—Annual Adjustments Palmer Industries prepares annual financial

Question

Adjusting Entries—Annual Adjustments

Palmer Industries prepares annual financial statements and adjusts its accounts only at the end of the year. The following information is available for the year ended December 31, 2012:

a. Palmer purchased computer equipment two years ago for $15,000. The equipment has an estimated useful life of five years and an estimated salvage value of $250.

b. The Office Supplies account had a balance of $3,600 on January 1, 2012. During 2012, Palmer added $17,600 to the account for purchases of office supplies during the year. A count of the supplies on hand at the end of December 2012 indicates a balance of $1,850.

c. On August 1, 2012, Palmer credited a liability account, Customer Deposits, for $24,000. This sum represents an amount that a customer paid in advance and that will be earned evenly by Palmer over a six-month period.

d. Palmer rented some office space on November 1, 2012, at a rate of $2,700 per month. On that date, Palmer debited Prepaid Rent for three months' rent paid in advance.

e. Palmer took out a 120-day, 9%, $200,000 note on November 1, 2012, with interest and principal to be paid at maturity. Assume a 360-day year.

f. Palmer operates five days per week with an average daily payroll of $500. Palmer pays its employees every Thursday. December 31, 2012, is a Monday.

Explanation / Answer

a. Debit Depreciation Expenses (WN-1)     2,950 Credit Accumulated Depreciation 2,950 c. Debit Customer Deposit 24000 Credit Revenue (24,000/6*5) 20000 Credit Unearned revenue 4000 e. f. Debit Wages Expenses (2*500) 1000 Credit Wages Payable 1000 (Thursday excluded while calcualting salary) WN - 1 - Depreciation Cost of Assets 15,000 Less: Salvage Value        250 cost of assets available for depreciation 14,750 Useful life 5 Depreciation under stright line basis     2,950

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.