Question

1.
Scotsman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September.
SCOTSMAN COMPANY
Trial Balance (Selected Accounts)
September 30, 2014
———————————————————————————————————————————
Debit Credit
Supplies ₤ 2,700
Prepaid Insurance 3,150
Office Equipment 16,200
Accumulated Depreciation—Equipment ₤1,000
Unearned Rent Revenue 1,200
(Note: Debit column does not equal credit column because this is a partial listing of selected account balances)

An analysis of the account balances by the company's accountant provided the following additional information:
1. A physical count of office supplies revealed ₤800 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for ₤3,600.
3. Office equipment depreciated ₤3,000 per year.
4. The amount of rent received in advance that remains unearned at September 30 is ₤400.

Instructions
Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30.

Answer 1

Journal

Date	Account title	Debit	Credit
Sept. 30	Supplies expense	1,900
	Supplies		1,900
Sep. 30	Insurance expense	150
	Prepaid insurance		150
Sep. 30	Depreciation expense	250
	Accumulated depreciation - Equipment		250
Sep. 30	Unearned Rent Revenue	800
	Rent Revenue		800

i)

Supplies expense = Supplies beginning - Supplies ending

= 2,700 - 800

= 1,900

ii)

Insurance expense for 2 years = $3,600

Insurance expense for 1 month = 3,600 x 1/24

= 150

iii)

Annual Depreciation expense = $3,000

Depreciation expense for 1 month = 3,000 x 1/12

= 250

iv)

Rent revenue earned = Unearned Rent Revenue, beginning - Unearned Rent Revenue, ending

= 1,200 - 400

= 800