Question

Golden Eagle Company prepares monthly financial statements for its bank. The November 30 adjusted trial balance includes the following account information: November 30 Debit CreditSupplies $1,100 Prepaid Insurance 4,400 Salaries Payable $9,200 Deferred Revenue 1,200The following information is known for the month of December: 1. Purchases of supplies during December total $2,700. Supplies on hand at the end of December equal $2,600. 2. No insurance payments are made in December. Insurance cost is $1,100 per month. 3. November salaries payable of $9,200 were paid to employees in December. Additional salaries for December owed at the end of the year are $14,200. 4. On November 1, a tenant paid Golden Eagle $1,800 in advance rent for the period November through January, and Deferred Revenue was credited for the entire amount. Required: Show the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and deferred revenue on December 31. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

Golden Eagle Company

Adjusting Journal Entries:

December 31:

Debit Supplies Expenses $1,200

Credit Supplies $1,200

To record adjusting entry for supplies used.

Debit Insurance Expenses $1,100

Credit Prepaid Insurance $1,100

To record insurance expense for the month.

Debit Salaries Expense $14,200

Credit Salaries Payable $14,200

To record accrued salaries for the month.

Debit Deferred Revenue $600

Credit Rent Revenue $600

To record the rent revenue for the month.

Explanation:

a) Supplies:

Beginning Balance =  $1,100

Purchases                 $2,700

Total available          $3,800

Ending balance       $2,600

Supplies Expenses $1,200

b) Prepaid Insurance:

Beginning balance = $4,400

Insurance Expense    $1,100

Ending balance        $3,300

c) Salaries Payable:

Beginning balance = $9,200

Cash payment         ($9,200)

Ending balance =    $14,200

Salaries Expense = $14,200

d) Deferred Revenue:

Beginning balance = $1,200

Rent Revenue $600

Ending balance $600

e) Adjusting journal entries are made at the end of the accounting period.  They help to reconcile the accounts from a cash basis to the accrual basis.  With this basis, accrued revenue and expenses, advance payment of expenses, advance receipt of revenue, and depreciation charges are adjusted to reflect in the accounts the period affected by transactions.  The aim is to match expenses and revenue to each other and to the period that generated the revenue or incurred the expense.