Question

Preparing adjusting entries LO P1, P3, P4

Answer 1

Answer:

Adjusting Journal Entries:

a. Debit Wages Expense $10,000

Credit Wages Payable $10,000

To record unpaid wages as of December 31.

b. Debit Depreciation Expense - Equipment $10,600

Credit Accumulated Depreciation - Equipment $10,600

To record depreciation expense for the year.

c. Debit Supplies Expense $5,066

Credit Supplies $5,066

To record the supplies expense for the year.

d. Debit Insurance Expense $3,400

Credit Prepaid Insurance $3,400

To record the insurance expense for the year.

e. Debit Interest Revenue Receivable $900

Credit Interest Revenue $900

To record earned interest receivable.

f. Debit Interest Expense $5,000

Credit Interest Expense Payable $5,000

To record interest on bank loan incurred.

Explanation:

The above adjusting entries are made in order to ensure that transactions are recorded in accordance with the accrual concept and matching principle of generally accepted accounting principles.  These require that expenses and revenues are accrued to the period that they are incurred or earned and not when they are paid or received in cash.