Question

A review of the ledger of Blossom Company at December 31, 2022, produces these data pertaining to the preparation of annual adjusting entries.
1. Prepaid Insurance $23,149. 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 $15,510. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2022, for $10,224. This policy has a term of 18 months.
2. Unearned Rent Revenue $469,440. 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.
Date Term (in months) Monthly Rent Number of Leases
Nov. 1 9 $5,000 5
Dec. 1 6 $8,500 4
3. Notes Payable, $120,000. This balance consists of a note for 9 months at an annual interest rate of 9%, dated November 1.
4. Salaries and Wages Payable, $0. There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $700 each per week, and three employees earn $500 each per week. Assume December 31 is a Tuesday. Employees do not work weekends. All employees worked the last two days of December.
Prepare the adjusting entries at December 31, 2022.

Answer 1

Answer:

insurance expense 11,986 debit

   prepaid insurance     11,986 credit

unearned revenue    84,000 debit

       rent revenue           84,000 credit

interest expense 1,800 debit

    interest payable   1,800 credit

salaries expense 2,000 debit

    salaries payable    2,000 credit

Explanation:

expired insurance

Policy B4564 adjustment:

15,510 / 36 months x 12 months = 5,170

Plicy A2958 adjusment:

10,224 / 18 months x 12 months = 6,816

Total insurance expense: 11,986

earned revenue:

monthly rent x accrued month x number of lease

$5,000 x 2 months x 5 lease = 50,000

$8,500 x 1 months  x 4 lease = 34,000

total 84,000

interest calculations:

principal x rate x time

120,000 x 9% x 2/12 = 1,800

salaries accrued:

5 employees x 700 each x 2/5 days =  1,400

3 employees x 500 each x 2/5 days =    600

Total accrued wages: 2,000