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Consider the following independent situations at December 31:
a. On October 1, a business collected $3,000 rent in advance, debiting Cash and crediting Unearned Revenue. The tenant was paying one year's rent in advance. On December 31, the business must account for the amount of rent it has earned.
b. Salaries expense is $1,800 per day-Monday through Friday-and the business pays employees each Friday. This year, December 31 falls on a Thursday.
c. The unadjusted balance of the Office Supplies account is $3,000. Office supplies on hand total $1,900.
d. Equipment depreciation was $500.
e. On April 1, when the business prepaid $4,320 for a two-year insurance policy, the business debited Prepaid Insurance and credited Cash.
Journalize the adjusting entry needed on December 31 for each situation. Use the letters to label the journal entries.

Answer :

Shahzaibfaraz

Answer:

All the entries are made on December 31.

a.

Unearned Rent Revenue           750 Dr

          Rent Revenue                      750 Cr

b.

Salaries expense             7200 Dr

    Salaries Payable              7200 Cr

c.

Supplies expense                1100 Dr

    Supplies                               1100 Cr

d.

Depreciation expense-Equipment                    500 Dr

        Accumulated depreciation-Equipment          500 Cr

e.

Insurance expense              1620 Dr

     Prepaid Insurance                1620 Cr

Explanation:

a.

The rent received in advance is for one year. On December 31 the 3 months of rent becomes earned. So, we debit the unearned rent revenue account and credit the rent revenue.

b.

The salaries expense per day is $1800 and as the 31 December is a thursday, the salary for 4 days becomes an expense which is still not paid as salaries are paid on friday. So we debit the salaries expense by 1800 * 4 = 7200 and credit the salaries payable by the same amount.

c.

The supplies of 1100 (3000 - 1900) have been consumed and the supplies expense will be recorded for 1100 and the supplies account will be reduced by 1100.

d.

The depreciation on equipment is recorded.

e.

The insurance paid in advance in April of the current year is for 2 years or 24 months. The per month insurance expense is 4320 / 24 = 180

Till 31 December, the 9 months of insurance policy has been consumed and should be recorded as an expense and a reduction in the prepaid asset.

The amount is = 180 * 9 = 1620

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