Question

MAVERICK COMPANY Trial Balance Before Adjustment December 31, 20X1 Debit Credit Cash $ 51,000 Accounts Receivable 7,500 Supplies 2,000 Note Payable $ 10,000 Unearned Revenues 21,000 Common Stock 18,000 Retained Earnings 15,000 Dividends 2,000 Revenues 14,000 Salary & Wage Expense 6,500 Rent Expense 9,000 TOTALS $ 78,000 $ 78,000 Additional Information: Supplies on hand at the end of December were $800 Of the unearned revenues, 60% of the work had been completed during the year. On Nov. 1, 20X1, Maverick paid 6-months of rent in advance for a total of $9,000. The bookkeeper debited rent expense when recording this payment. As of December 31st, accrued salaries were $400. Payday is January 2, 20X2. The Note Payable is a one-year, 8% note, issued on October 1, 20x1 Required: To record the necessary Adjusting Journal Entry for #3 above, you would:

Answer 1

Answer:

rent expense 3,000  debit

   prepaid rent    3,000 credit

Explanation:

To record the necessary Adjusting Journal Entry for #3

Being #3:

On Nov. 1, 20X1, Maverick paid 6-months of rent in advance for a total of $9,000.

We will calculate the value of a single month by dividing the 9,000 prepaid payment over the six month paid

9,000/6 = 1,500

Now we multiply by the months past:

1,500 x 2 (November and December) = 3,000

the entry will recognize an expense for 3,000 and decrease the prepaid for the same ammount.