Question

Depreciation on the company's equipment for the year is computed to be $15,000. The Prepaid Insurance account had a $7,000 debit balance at December 31 before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,830 of unexpired insurance coverage remains. The Office Supplies account had a $500 debit balance at the beginning of the year; and $2,680 of office supplies were purchased during the year. The December 31 physical count showed $590 of supplies available. One-fourth of the work related to $11,000 of cash received in advance was performed this period. The Prepaid Rent account had a $5,800 debit balance at December 31 before adjusting for the costs of expired prepaid rent. An analysis of the rental agreement showed that $3,970 of prepaid rent had expired. Wage expenses of $4,000 have been incurred but are not paid as of December

31. Prepare adjusting journal entries for the year ended (date of) December 31 for each of these separate situations.

Answer 1

Answer is as follows:

1. Depreciation Expense A/C Dr $15000

To Equipment A/C $15000

2. Insurance expense A/C Dr    $5170

To Prepaid Insurance A/C $5170 (paid = $7000, unexpired = $1830, expired : $7000-$1830= $5170 )

3. Supplies expense A/C Dr $2590

To Office supplies A/C $2590 ($500+$2680-$590 = $2590, supplies used during the year)

4. Advance from Customers A/C Dr $2750

To Sales/Service Revenue A/C $2750 ($11000/4 = $2750)

5. Rent Expense A/C Dr $3970

To Prepaid Expense A/C $3970 (expired portion is to be expensed)

6. Wage expense A/C Dr $4000

To Wage expense payable A/C $4000