Question

At December 31 of the current year, Sunland Corporation had a number of items that were not reflected in its accounting records. Maintenance and repair costs of $900 were incurred but not paid. Utilities costing $370 were used but not paid, and use of a warehouse space worth $2,070 was provided to a tenant who had not been billed as of the end of the month. Record the required adjusting entries related to these events.

Answer 1

Answer:

Dr Maintenance and repair expense  $900

Cr Accrued expense   $900

Being entries to record maintenance and repair costs incurred

Utilities costing $370 were used but not paid

Dr Utilities expense  $900

Cr Accrued expense   $900

Being entries to record utilities used but unpaid for

use of a warehouse space worth $2,070 was provided to a tenant who had not been billed as of the end of the month

Dr Unbilled receivables    $2,070

Cr Rental Income       $2,070

Being entries to recognize income from warehouse space unbilled

Explanation:

When an expense is incurred but unpaid for, an accrual is recognized to capture the cost. For income earned but unbilled, unbilled receivable is recognized. This is based on the accrual concept.

Considering the transactions given

Maintenance and repair costs of $900 were incurred but not paid

Dr Maintenance and repair expense  $900

Cr Accrued expense   $900

Being entries to record maintenance and repair costs incurred

Utilities costing $370 were used but not paid

Dr Utilities expense  $900

Cr Accrued expense   $900

Being entries to record utilities used but unpaid for

use of a warehouse space worth $2,070 was provided to a tenant who had not been billed as of the end of the month

Dr Unbilled receivables    $2,070

Cr Rental Income       $2,070

Being entries to recognize income from warehouse space unbilled