Question

A review of the ledger of Cullumber Company at December 31, 2022, produces these data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $17,062. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2021, for $11,100. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2022, for $7,812. This policy has a term of 18 months. 2. Unearned Rent Revenue $524,440. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. Term (in months) Number of Leases Date Monthly Rent Nov. 1 10 $5,380 4 Dec. 1 6 $8,590 6 3. Notes Payable $45,600. This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1. 4. Salaries and Wages Payable $0. There are 10 salaried employees. Salaries are paid every Friday for the current week. 5 employees receive a salary of $615 each per week, and 5 employees earn $710 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.

Answer 1

Answer:

1)      Dr.          Insurance Expense 8,908

       Cr.               Prepaid Insurance 8,908

2)      Dr.   Prepaid Rental revenue        94,580

        Cr.              Rental revenue            94,580

3)       Dr.   Interest Expense     798

         Cr.          Notes Payable   798

4)        Dr.   Salaries and Wages Expense        3,975

          Cr.         Salaries and Wages Payable     3,975

Explanation:

1) Insurance

Building:     (11,100/3)×1 =  3700

Vehicle :     (7812/18)×12= 5208

   total =  3700 +5208= 8908

2) Revenue

  5380×2 = 10760 ×4 = 43040

  8590 ×1 = 8590 ×6 = 51540

                         total = 94580

3) Notes Payable

monthly interest rate =       7%/12 = 0.0058333  

       interest expense = 45600× 0.005833 × 3 = 798

4) Salary Expense

615 ×5 = 3075

710 ×5 = 3550

salary per week = 3075 + 3550 = 6625

Salary per day = 6625 ÷ 5 = 1325

since they worked last three days of December so:

Salary payable = 1325 × 3 = 3975