Question

Create journal entries for the adjusting entries made on June 30 2015

Present, in journal format below, the necessary adjustments that would be made on June 30, 2015, the end of the fiscal year, for each of the following situations.

1.    The supplies inventory on July 1, 2014 was $9,350. Supplies costing $22,150 were acquired during the fiscal year and charged to the supplies inventory account. A count on June 30, 2015 indicated supplies on hand of $8,810.

2.    On April 1, 2015, an eight-month, 6% note receivable for $30,000 was received from a customer for services.

3.   On April 1, 2015, $12,000 was collected as rent for one year and rent revenue was credited at that date.

4. On January 1, 2015 a building was purchased for $5,000,000. Its salvage value is estimated to be $500,000 and its useful life 50 years (the company uses straight-line depreciation).

Answer 1

Explanation:

1) Consumption of supplies = opening stock + purchase - closing stock

= $9,350 + $22,150 - $8,810

= $22,690

2) Note Receivable issued on April 1, 2015.

Our accounting year ends on June 30, 2015

So only 3 months interest will form part of revenue of the year ending on june 30, 2015

= $30,000 * 6% * 3/12

= $450

3) Rent Received on April 1 for one year, and was fully credited to rent revenue, so at year end we need to remove unearned revenue.

Rent Revenue for year ending june 30, 2015 is for 3 months

So unearned portion is for 9 months (12-3)

= $12,000 * 9/12

= $9,000

4) Calculation of depreciation: (straight line method)

Depreciation per annum = (Cost - Salvage Value)/Useful Life of asset

= ($5,000,000 - $500,000) / 50

= $90,000 per annum

Building is purchased on January 1, 2015

So upto June 30, 2015, it is used for 6 months in current year.

So depreciation for year ending June 30, 2015 is;

= $90,000 * 6/12

= $45,000

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