Question

ournalize the following adjusting entries that were included on the work sheet for the month ended December 31. Assume the financial statements have been prepared. Dec. 31 Salaries for two days are unpaid at December 31, $1,420. Salaries are $3,550 for a five-day week. 31 Insurance was bought on August 1 for $4,080 for 12 months' coverage. Five months' coverage has expired, $1,700. 31 Depreciation for the month on equipment, $120, based on an asset costing $7,450 with a trade-in value of $250 and an estimated life of five years. 31 The balance in supplies before adjustment totaled $154. The amount of supplies on hand at the end of the year is $72. Journalize the adjustments in the order given in the question.

Answer 1

Answer:

See explanation section:

Explanation:

Date              Account Name & Explanation      Debit           Credit

December 31    Salaries expense                      $1,420            

                                             Salaries payable                        $1,420

Note: Since salaries are unpaid, it is a liability. Hence, salaries payable are credit, however, salaries expenses are debit as it is an expense.

December 31    Insurance expense                    $1,700            

                                       Prepaid Insurance                           $1,700

Note: Since prepaid insurance are expired for the five months, therefore, prepaid insurance becomes credit. On the other hand, the expense are recorded as an expense because of the expiration of advance payment.

December 31    Depreciation expense               $1,440            

                          Accumulated Depreciation - Equipment    $1,440

Note: Depreciation expense for a month = $120;

Depreciation expense for a year = $120 x 12 = $1,440

December 31    Supplies expense                       $72

                                          Supplies                                         $72

Note: Since supplies are used, supplies becomes an expense $(154-72) = $72.