Answer:
Wolverine Company
Adjusting Journal Entries:
1. Debit Deferred Revenue $2,000
Credit Rent Revenue $2,000
To record rent revenue for December.
2. Debit Insurance Expense $6,600
Credit Prepaid Insurance $6,600
To record the insurance expense for the year.
3. Debit Salaries Expense $3,000
Credit Salaries Payable $3,000
To record the unpaid salaries expense.
4. Debit Interest Expense $250
Credit Interest Payable $250
To accrue interest expense for 2 months.
5. Debit Supplies Expense $3,900
Credit Supplies $3,900
To record the supplies used during the year.
Explanation:
a) Data and Calculations:
1. Rent Revenue = $2,000 ($4,000/2)
2. Insurance Expense = $6,600 ($13,200*6/12)
3. Salaries Expense $3,000 and Salaries Payable $3,000
4. Interest Expense = $250 ($15,000 * 10% * 2/12)
5. Office Supplies:
Beginning balance $1,000
Purchases 3,400
Ending balance 500
Supplies Expense $3,900
b) Adjusting journal entries are made in order to allocate revenue and expenses to the period in which they are earned or incurred. This agrees with the accrual concept and the matching principle of generally accepted accounting principles, which require that revenue and expenses are recognized in the period they occur instead of when cash is exchanged.
