Question

The following information about Company A on December 31, 2019. The company, which uses the calendar...

The following information about Company A on December 31, 2019. The company, which uses the calendar year as its annual reporting period, initially records prepaid and unearned items in bal­ance sheet accounts (assets and liabilities, respectively).

a.The company's weekly payroll is $7,500, paid each Friday for a five-day workweek. December 31, 2019, falls on a Tuesday, but the employees will not be paid their wages until Friday, January 3, 2020.

b.Eighteen months earlier, on July 1,2018, the company purchased equipment that cost $30,000. Its use­ful life is predicted to be five years, at which time the equipment is expected to be worthless (zero salvage value).

c.On October 1, 2019, the company agreed to work on a new housing development. The company is paid $ 180,000 on October 1 in advance of future installation of similar alarm systems in 25 new homes. That amount was credited to the Unearned Services Revenue account. Between October 1 and December 31, work on 15 homes was completed.

d.On September 1,2019, the company purchased a 12-month insurance policy for $2,400. The transac­tion was recorded with an $ 2,400 debit to Prepaid Insurance.

e.On December 29, 2019, the company completed a $11,000 service that has not been billed and not re­corded as of December 31,2019.

Required: Prepare any necessary adjusting entries on December 31, 2019, in relation to transactions and events a through e.

Business   Accounting   
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Answer #1
No. Date Account title Debit credit
a December 31, 2019 Salaries and wage expense 3000
Salaries and wage payable 3000
[ Being salaries accrued for 2 days (Monday and Tuesday :7500*2/5=3000]
b December 31, 2019 Depreciation expense 6000
Accumulated depreciation -equipment 6000

[Being depreciation expense for the year :[Cost-salvage value]/useful life

[ 30000-0]/5 = 6000]
c December 31, 2019 Unearned service revenue 108000
Service revenue 108000
[Being revenue for 15 Homes completed out of 25 homes earned :180000*15/25= 108000]
d December 31, 2019 Insurance expense 800
Prepaid insurance 800
[Being insurance expired for the period (1 Sept -31 Dec ) 4 months : 2400*4/12 = 800]
e December 31, 2019 Accounts receivable 11000
Service revenue 11000
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