Question

Badger Bagels had the following separate situations occur during 2016.The company’s accountant is preparing the annual financial statements at December 31, 2016 and has asked you to prepare the adjusting entries for each situation using the financial statement effects template.

a. The Unearned Revenue account has an unadjusted balance of $8,000 consisting of gift cards sold to customers. Redeemed gift cards that have not yet been recorded total $4,800.

b. At the beginning of the year, the company purchased supplies worth $5000 and paid cash. At December 31, 2016, the supplies available are $2000.

c. At December 31, 2016, employee wages of $9,200 have been incurred but not paid or recorded.

d. Nine months ago, the company paid one year's advance rent of $1200 in cash.

e.	The company purchased equipment on January 1 by paying $ 100,000 cash. Unrecorded depreciation on equipment is $11,200.

Answer 1

Adjustment Entries at the year end (December 31, 2016):

a. Unearned Revenue Dr $4,800

Service Revenue $4,800

(To record redeemed gifts)

b. Inventory - Supplies Dr $2,000

Supplies $2,000

(To record Supplies available at the end of the year)

c. Wages Expense Dr $9,200

Wages Payable $9,200

(To record wages incurred but not paid)

d. Rent Expense ($1,200 * 9 / 12) Dr $900

Prepaid Rent $900

(To record rent for nine months)

e. Depreciation Expense Dr $11,200

Accumulated Depreciation - Equipment $11,200

(To record Unrecorded Depreciation on Equipment)