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P9-2 (Algo) Recording and Reporting Current Liabilities with Discussion of Cash Flow Effects LO9-1, 9-5

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Roger Company completed the following transactions during Year 1. Roger’s fiscal year ends on December 31.

Jan.	8		Purchased merchandise for resale on account. The invoice amount was $14,770; assume a perpetual inventory system.
	17		Paid January 8 invoice.
Apr.	1		Borrowed $60,000 from National Bank for general use; signed a 12-month, 13% annual interest-bearing note for the money.
June	3		Purchased merchandise for resale on account. The invoice amount was $17,320.
July	5		Paid June 3 invoice.
Aug.	1		Rented office space in one of Roger’s buildings to another company and collected six months’ rent in advance amounting to $21,000.
Dec.	20		Received a $200 deposit from a customer as a guarantee to return a trailer borrowed for 30 days.
	31		Determined wages of $9,400 were earned but not yet paid on December 31 (disregard payroll taxes).

P9-2 Part 2

2. Prepare the adjusting entries required on December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:

Date	Account title and explanation	Debit	Credit
Dec 31	Interest expense	$5,850
	Interest payable		$5,850
	(To record interest expense)
Dec 31	Deferred rent revenue	$17,500
	Rent revenue		$17,500
	(To record rent revenue)

Working:

Interest payable =$60,000*13%*9/12

=$5,850

Deferred rent revenue =$21,000*5/6

=$17,500

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