Question

Wages of $8,000 are earned by workers but not paid as of December 31. Depreciation on the company’s equipment for the year is $10,480. The Office Supplies account had a $310 debit balance at the beginning of the year. During the year, $4,597 of office supplies are purchased. A physical count of supplies at December 31 shows $510 of supplies available. The Prepaid Insurance account had a $5,000 balance at the beginning of the year. An analysis of insurance policies shows that $2,700 of unexpired insurance benefits remain at December 31. The company has earned (but not recorded) $650 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10. The company has a bank loan and has incurred (but not recorded) interest expense of $3,000 for the year ended December 31. The company will pay the interest five days after the year-end on January 5.
Required:
For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31.

Answer 1

Answer:

a Wages expense 8, 000

Wages payable 8,000

b Dr Depreciation expense 10,840

Cr Accumulated depreciation-equipment 10,840

c Dr Supplies expense 4,397

Cr Supplies 4,367

d Dr Insurance expense 2,700

Cr Prepaid insurance 2,700

e. Dr Interest receivable 650

Cr Interest revenue 650

f. Dr Interest expense 3,000

Cr nterest payable 3,000

Explanation:

Preparation of Adjusting entry

a. Based on the information given we were told that Wages of the amount of $8,000 are earned by workers but was not paid which means that the Journal entry will be :

Dr Wages expense 8000

Cr Wages payable 8000

(To record wages payable)

b. Based on the information given we were told that Depreciation of the company’s equipment for the year was the amount of $10,480 which means that the Journal entry will be:.

Dr Depreciation expense 10,840

Cr Accumulated depreciation-equipment 10, 840

(To record Depreciation )

c. Based on the information given we were told that Office Supplies had the amount of $310 as debit balance in which During the year the amount of $4,597 of office supplies was purchased and a physical count of supplies shows the amount of $510 of supplies available which means that the Journal entry will be :

Dr Supplies expense 4,397

(310+4,597-510)

Cr Supplies 4,367

(To record supplies expense)

d. Based on the information given we were told that the insurance policies shows that the amount of $2,700 of unexpired insurance remain at December which means that the Journal entry will be :

Dr Insurance expense 2,700

Cr Prepaid insurance 2,700

(To record insurance expense)

e. Based on the information given we were told that the company has earned but did not record the amount of $650 of interest revenue which means that the Journal entry will be :

Dr Interest receivable 650

Cr Interest revenue 650

(To record interest)

f. Based on the information given we were told that the company has interest expense of the amount of $3,000 which means that the Journal entry will be :

Dr Interest expense 3,000

Cr Interest payable 3,000

(To record interest expense)