Answer:
a. Debit Salaries and wages expense $750
Credit Accrued Salaries and wages $750
Being entries to record accrued salaries and wages
b. Debit Interest receivable $600
Credit Interest income $600
Being entries to record interest earned
c. Debit Insurance expense $350
Credit Prepaid Insurance $350
Being entries to record insurance expense
d. Debit Service revenue $900
Credit Unearned Service revenue $900
Being entries to record unearned revenue
e. Debit Supplies expense $1,500
Credit Supplies account $1,500
Being entries to record supplies expense
Explanation:
When salaries are incurred but yet to be paid, the expense has to be recorded with a corresponding liability known as accrued expense. When interest is earned but yet to be paid, it has to be recognized as a credit to the income statement and a debit to the balance sheet.
When insurance is paid in advance, the entries required are
Debit Prepaid Insurance
Credit Cash account
As time elapses and the insurance expires,
Debit Insurance expense
Since payment was for 2 years, period elapsed as at December 31, 2017 is 7 months hence amount of expense
= 7/24 * $1,200
= $350
When a fee is received in advance for a service yet to be rendered, the revenue for such fee is said to be unearned. The entries required are
Debit Cash account and Credit Unearned fees or deferred revenue.
As the service is performed and the revenue is earned, debit Unearned fees and credit revenue.
When Supplies is purchased, Debit supplies and credit Cash/Accounts payable. As Supplies are used up, debit supplies expense (with the amount used) and Credit Supplies account.
Amount of supplies used
= $2500 - $1000
= $1,500
