Question

a. Depreciation on the company's equipment for 2016 is computed to be $16,000.
b. The Prepaid Insurance account had a $7,000 debit balance at December 31, 2016, before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,240 of unexpired insurance coverage remains.
c. The Office Supplies account had a $530 debit balance on December 31, 2015; and $2,680 of office supplies were purchased during the year. The December 31, 2016, physical count showed $625 of supplies available.
d. One-fifth of the work related to $10,000 of cash received in advance was performed this period.
e. The Prepaid Insurance account had a $5,900 debit balance at December 31, 2016, before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $4,660 of coverage had expired.
f. Wage expenses of $1,000 have been incurred but are not paid as of December 31, 2016.

Required: Prepare adjusting journal entries for the year ended (date of) December 31, 2016, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities.

Answer 1

Adjusting entry :

No.	accounts & explanation	debit	credit
a	Depreciation expenses	16000
	Accumlated depreciation		16000
	(To record depreciation expenses)
b	Insurance expenses	5760
	Prepaid insurance (7000-1240)		5760
	(To record prepaid insurance adjusted)
c	Supplies expenses	2585
	supplies		2585
	(To record supplies expenses)
d	Unearned revenue (10000/5)	2000
	Service revenue		2000
	(To record revenue)
e	Insurance expenses	4660
	Prepaid insurance		4660
	(To record insurance expired)
f	Wages expenses	1000
	Wages payable		1000
	(To record wages expenses)