Question

Question 2

Scranton Motors Ltd faced the following situations.

•     The business has interest expense of $9,000 early in January 2017.
•     Interest revenue of $2,000 has been earned but not yet received.
•     When the business collected $12,000 in advance three months ago, the accountant debited

Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in

December, the other to be delivered in February 2017.

•     Salary expense is $500 per day – Monday through Friday – and the business pays employees

each Friday. For example, purposes, assume that this year, December 31 falls on a Tuesday.

•     The unadjusted balance of the Supplies account is $2,100. The total cost of supplies on hand is

$800.

•     Equipment was purchased at the beginning of this year at a cost of $40,000. The equipment’s

useful life is four years. Record the depreciation for this year and then determine the equipment’s carrying amount.

1.    Journalize the adjusting entry needed at year end for each situation. Each scenario should be

considered independently.

Answer 1

Adjusting entries

No	General Journal	Debit	Credit
1	Interest expense	9000
	Interest payable		9000
2	Interest receivable	2000
	Interest revenue		2000
3	Unearned revenue	6000
	Revenue earned		6000
4	Salaries expense	1000
	Salaries payable		1000
5	Supplies expense (2100-800)	1300
	Supplies		1300
6	Depreciation expense	10000
	Accumulated depreciation-equipment		10000

Equipment carrying amount = 40000-10000 = $30000