Question

(a) A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the fiscal period, assuming that the fiscal period ends (1) on Tuesday, (2) on Wednesday. (b) The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry required under each of the following alternatives: (1) the amount of insurance expired during the year is $5,300, (2) the amount of unexpired insurance applicable to a future period is $2,700. (c) On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business is also required to pay an annual property tax at the end of the year. The estimated amount of the current year's property tax allocated to July is $4,800. (1) Journalize the two adjusting entries required to bring the accounts affected by the taxes up to date as of July 31. (2) What is the amount of tax expense for July

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

a. 1. Salaries expenses Dr, $8,800 ($22,000 × 5 ÷ 2)

        To Accrued salaries $8,800

(Being salaries expense is recorded)

2. Salaries expenses Dr, $13,200 ($22,000 × 5 ÷ 3)

       To Accrued salaries $13,200

(Being salaries expense is recorded)

b. 1. Insurance expense Dr, $5,300

         To Prepaid insurance $5,300

(Being insurance expense is recorded)

2. Insurance expense Dr, $15,300 ($18,000 - $2,700)

         To Prepaid insurance $15,300

(Being insurance expense is recorded)

c. 1. Prepaid license taxes Dr, $54,000

        To license taxes $54,000

(being license tax is recorded)

2. Property tax Dr, $4,800

           To Property tax payable $4,800

(Being property tax is recorded)

(2) the amount of tax expense for July is $4,800