The following selected accounts with normal balances appeared in the unadjusted

Question

The following selected accounts with normal balances appeared in the unadjusted trial balance of Bellwether Garden Industries: Accounts receivable $200,000 Prepaid rent 72,000 Prepaid insurance 42,000 Equipment 270,000 Accumulated depreciation-equipment 22,500 Unearned service revenue 30,000 Salary expense 180,000 REQUIRED: Prepare the necessary year-end adjusting entries as of December 31, 2011 for each part. Be sure to note which account is debited and credited. - Part A: One-quarter of the revenue received in advance has been earned by December 31, 2011. - Part B: The prepaid insurance represents two years' premium on a policy providing coverage starting August 1, 2011. - Part C: Since the last payday, employees have worked four additional days. There are six employees each earning $200 per day. These wages have not yet been paid or recorded. - Part D: The equipment has an estimated life of eight years and no expected value at the end of its life. - Part E: Services performed but unbilled and uncollected at year end amount to $30,000. - Part F: The prepaid rent relates to 1 1/2 years beginning on September 1, 2011.

Explanation / Answer

Ans-

Part A Dr. Cr. Revenue     7,500.00 Unearned Service Revenue     7,500.00 (1/4 of 30,000) B Insurance     4,375.00 Prepaid Insurance     4,375.00 (42000/2 Yeats/12 months*5 months) C Wages     4,800.00 Wages Payable     4,800.00 (6employees*200 per day labor*4 days) D Depreciation 33,750.00 Accumulated Depreciation 33,750.00 (270,000 equipment value/8 life years) E Revenue     3,000.00 Account Receivable     3,000.00 F Rent 16,000.00 Prepaid Rent 16,000.00 (72,000 rent/18 months*4 months

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