Question

The following information relates to year-end adjusting entries as of December 31, 2021. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $6,660. Six months’ of the one-year insurance policy purchased on July 1 has expired. Four months of the one-year rental agreement purchased on September 1 has expired. Of the $1,000 of office supplies purchased on July 4, $300 remains. Interest expense on the $44,000 loan obtained from the city council on August 1 should be recorded. Of the $2,100 of racing supplies purchased on December 12, $110 remains. Suzie calculates that the company owes $13,900 in income taxes.

Answer 1

Question Completion:

Record the adjusting entries.

Answer:

Adjusting Journal Entries:

Debit Depreciation Expense - Mountain Bikes $6,660

Credit Accumulated Depreciation - Mountain Bikes $6,660

To record depreciation expense for the period.

Debit Insurance Expense $

Credit Prepaid Insurance $

To record the insurance expense for the period.

Debit Rental Expense $

Credit Prepaid Rental $

To record the rental expense for the period.

Debit Office Supplies Expense $700

Credit Office Supplies $700

To record office supplies expense for the period.

Debit Interest Expense $

Credit Interest Expense Payable $

To record interest expense on the $44,000 loan.

Debit Racing Supplies Expense $1,990

Credit Racing Supplies $1,990

To record racing supplies expense for the period.

Debit Income Tax Expense $13,900

Credit Income Tax Payable $13,900

To record income tax expense payable.

Explanation:

Adjusting journal entries are recorded in order to present elements of financial statements based on the accrual basis and not whether cash was paid or received.

In this question, some data were not provided.  This is why some figures were not disclosed for Insurance Expense, Rental Expense, and Interest Expense.  But, the accounting treatments remain valid.  Only the figures are missing.