Question

For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2017.For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2017.

The Office Supplies account had a $240 debit balance on December 31, 2016. During 2017, $5,200 of office supplies are purchased. A physical count of supplies at December 31, 2017, shows $440 of supplies available.

The Prepaid Insurance account had a $4,000 balance on December 31, 2016. An analysis of insurance policies shows that $1,200 of unexpired insurance benefits remain at December 31, 2017.

The company has earned (but not recorded) $1,050 of interest from investments in CDs for the year ended December 31, 2017. The interest revenue will be received on January 10, 2018.

The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31, 2017. The company must pay the interest on January 2, 2018.

The office supplies account had a $240 debit balance on December 31, 2016. During 2017, $5,200 of office supplies are purchased. A physical count of supplies at December 31, 2017, shows $440 of supplies available.

The prepaid insurance account had a $4,000 balance on December 31, 2016. An analysis of insurance policies shows that $1,200 of unexpired insurance benefits remain at December 31, 2017.

The company has earned (but not recorded) $1,050 of interest from investments in CDs for the year ended December 31, 2017. The interest revenue will be received on January 10, 2018.

The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31, 2017. The company must pay the interest on January 2, 2018

Answer 1

Adjusting Entries are as follows:

1. Office Supplies Expense = Beginning Balance + Purchases - Ending Balance

= $240 + $5,200 - $440 = $5,000

2. Insurance Expense = Beginning Balance of Prepaid Insurance - Ending Balance of Prepaid Insurance

= $4,000 - $1,200

= $2,800

3. Office Supplies Expense gets debited and the Office Supplies Inventory gets reduced hence credited.

4. Insurance Expense gets debited and the Prepaid Insurance gets reduced hence credited.

5. Interest Income is earned, hence credited. Interest is receivable, an asset is debited.

6. Interest Expense is debited as accrued. Interest is payable, a liability is credited.