Q 1 Present, in journal form, the adjustments that would be made on July 31, 201
ID: 2424847 • Letter: Q
Question
Q 1 Present, in journal form, the adjustments that would be made on July 31, 2011, the end of the fiscal year, for each of the following.
1. The supplies inventory on August 1, 2010 was €7,350. Supplies costing €20,150 were acquired during the year and charged to the supplies inventory. A count on July 31, 2011 indicated supplies on hand of €8,810.
2. On April 30, a twelve-month, 9% note for €20,000 was received from a customer.
3. On March 1, €12,000 was collected as rent for one year and a nominal account was credited.
Q 2 Record the following transactions of Reed Co. in the desired manner and give the adjusting entry on December 31, 2010. (Two entries for each part.)
1. An insurance policy for two years was acquired on April 1, 2010 for $8,000.
2. Rent of $12,000 for six months for a portion of the building was received on November 1, 2010.
Explanation / Answer
Question 1:
1.Dr Supplies Expense ......................................................................18,690
Cr Supplies ..........................................................................18,690
(7,350 +20,150-8,810)
2. Dr Interest Receivable ....................................................................450
Cr Interest Revenue .............................................................450’
(20,000 x 8% x 3/12) three months
3. Dr Rent Revenue ............................................................................7,000
Cr Unearned Revenue .....................................................................7,000
Total revenue=12,000
Rent revenue from March to July 5 months=5,000 hence unearned is $7,000
Question 2:
1.
a).Dr Prepaid Insurance .......................................................................8,000
Cr Cash ................................................................................8,000
b).Dr Insurance Expense .....................................................................3,000
CrPrepaid Insurance ...........................................................3,000
2. a). Dr Cash ..........................................................................................12,000
Cr Unearned Rent ................................................................12,000
b).Dr Unearned Rent ............................................................................4,000
Cr Rent Revenue .................................................................4,000
2 months rent =12,000/6 x 2
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