Arnez Co. follows the practice of recording prepaid expenses andunearned revenues in balance sheet accounts. The companyâs annualaccounting period ends on December 31, 2013. The followinginformation concerns the adjusting entries to be recorded as ofthat date.
a. The Office Supplies account started the year with a $2,800balance. During 2013, the company purchased supplies for $11,564,which was added to the Office Supplies account. The inventory ofsupplies available at December 31, 2013, totaled $2,464.
b. An analysis of the company's insurance policies provided thefollowing facts.
Policy Date ofPurchase Months ofCoverage Cost A April 1, 2012 24 $ 10,464 B April 1, 2013 36 9,216 C August 1, 2013 12 8,064
The total premium for each policy was paid in full (for allmonths) at the purchase date, and the Prepaid Insurance account wasdebited for the full cost. (Year-end adjusting entries for PrepaidInsurance were properly recorded in all prior years.)
c. The company has 15 employees, who earn a total of $2,500 insalaries each working day. They are paid each Monday for their workin the five-day workweek ending on the previous Friday. Assume thatDecember 31, 2013, is a Tuesday, and all 15 employees worked thefirst two days of that week. Because New Yearâs Day is a paidholiday, they will be paid salaries for five full days on Monday,January 6, 2014.
d. The company purchased a building on January 1, 2013. It cost$870,000 and is expected to have a $45,000 salvage value at the endof its predicted 25-year life. Annual depreciation is $33,000.
e. Since the company is not large enough to occupy the entirebuilding it owns, it rented space to a tenant at $2,100 per month,starting on November 1, 2013. The rent was paid on time on November1, and the amount received was credited to the Rent Earned account.However, the tenant has not paid the December rent. The company hasworked out an agreement with the tenant, who has promised to payboth December and January rent in full on January 15. The tenanthas agreed not to fall behind again.
f. On November 1, the company rented space to another tenant for$1,903 per month. The tenant paid five months' rent in advance onthat date. The payment was recorded with a credit to the UnearnedRent account.
Required: 1. Use the information to prepare adjusting entries as of December31, 2013.
Adjustingentries (all dated December 31, 2013).
Arnez Co. follows the practice of recording prepaid expenses andunearned revenues in balance sheet accounts. The companyâs annualaccounting period ends on December 31, 2013. The followinginformation concerns the adjusting entries to be recorded as ofthat date.
| a. | The Office Supplies account started the year with a $2,800balance. During 2013, the company purchased supplies for $11,564,which was added to the Office Supplies account. The inventory ofsupplies available at December 31, 2013, totaled $2,464. |
| b. | An analysis of the company's insurance policies provided thefollowing facts. |
| Policy | Date ofPurchase | Months ofCoverage | Cost | |
| A | April 1, 2012 | 24 | $ | 10,464 |
| B | April 1, 2013 | 36 | 9,216 | |
| C | August 1, 2013 | 12 | 8,064 | |
The total premium for each policy was paid in full (for allmonths) at the purchase date, and the Prepaid Insurance account wasdebited for the full cost. (Year-end adjusting entries for PrepaidInsurance were properly recorded in all prior years.) |
| c. | The company has 15 employees, who earn a total of $2,500 insalaries each working day. They are paid each Monday for their workin the five-day workweek ending on the previous Friday. Assume thatDecember 31, 2013, is a Tuesday, and all 15 employees worked thefirst two days of that week. Because New Yearâs Day is a paidholiday, they will be paid salaries for five full days on Monday,January 6, 2014. |
| d. | The company purchased a building on January 1, 2013. It cost$870,000 and is expected to have a $45,000 salvage value at the endof its predicted 25-year life. Annual depreciation is $33,000. |
| e. | Since the company is not large enough to occupy the entirebuilding it owns, it rented space to a tenant at $2,100 per month,starting on November 1, 2013. The rent was paid on time on November1, and the amount received was credited to the Rent Earned account.However, the tenant has not paid the December rent. The company hasworked out an agreement with the tenant, who has promised to payboth December and January rent in full on January 15. The tenanthas agreed not to fall behind again. |
| f. | On November 1, the company rented space to another tenant for$1,903 per month. The tenant paid five months' rent in advance onthat date. The payment was recorded with a credit to the UnearnedRent account. |
| Required: | |
| 1. | Use the information to prepare adjusting entries as of December31, 2013. |
| Adjustingentries (all dated December 31, 2013). |
Related questions
| a. | Depreciation onthe company's equipment for 2011 is computed to be $12,000. |
| b. | The Prepaid Insurance account had a $5,000 debit balance atDecember 31, 2011, before adjusting for the costs of any expiredcoverage. An analysis of the companyâs insurance policies showedthat $1,970 of unexpired insurance coverage remains. |
| c. | The Office Supplies account had a $520 debit balance on December31, 2010; and $2,680 of office supplies were purchased during theyear. The December 31, 2011, physical count showed $614 of suppliesavailable. |
| d. | One-third of thework related to $15,000 of cash received in advance was performedthis period. |
| e. | The Prepaid Insurance account had a $5,700 debit balance atDecember 31, 2011, before adjusting for the costs of any expiredcoverage. An analysis of insurance policies showed that $3,730 ofcoverage had expired. |
| f. | Wage expenses of$2,000 have been incurred but are not paid as of December 31,2011. |
Prepare adjusting journal entries for the year ended (date of)December 31, 2011, for each of the above separate situations.Assume that prepaid expenses are initially recorded in assetaccounts. Also assume that fees collected in advance of work areinitially recorded as liabilities.
| URGENT PLEASE Arnez Co. follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts. The companyâs annual accounting period ends on December 31, 2015. The following information concerns the adjusting entries to be recorded as of that date. |
| a. | The Office Supplies account started the year with a $4,275 balance. During 2015, the company purchased supplies for $17,656, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2015, totaled $3,762. |
| b. | An analysis of the company's insurance policies provided the following facts. |
| Policy | Date of Purchase | Months of Coverage | Cost | |
| A | April 1, 2014 | 24 | $ | 11,256 |
| B | April 1, 2015 | 36 | 10,080 | |
| C | August 1, 2015 | 12 | 8,856 | |
| The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) | |
| c. | The company has 15 employees, who earn a total of $2,400 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2015, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Yearâs Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2016. |
| d. | The company purchased a building on January 1, 2015. It cost $640,000 and is expected to have a $45,000 salvage value at the end of its predicted 20-year life. Annual depreciation is $29,750. |
| e. | Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3,100 per month, starting on November 1, 2015. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again. |
| f. | On November 1, the company rented space to another tenant for $2,809 per month. The tenant paid five months' rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account. |
1}
Record the adjusting entry related to the company's insurance
2) The company has 15 employees, who earn a total of $2,400 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2015, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Yearâs Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2016.
3)The company purchased a building on January 1, 2015. It cost $640,000 and is expected to have a $45,000 salvage value at the end of its predicted 20-year life. Annual depreciation is $29,750.
4)Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3,100 per month, starting on November 1, 2015. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again.
5)On November 1, the company rented space to another tenant for $2,809 per month. The tenant paid five months' rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account
6)Record payment of accrued and current salaries.
7)Record the receipt of two months rent.
Question 16
Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of$5,000 and advertising expense of $2,000. Which of the followingjournal entries correctly records these expenses?
Debit: Cash $7,000 | ||
Debit: Salaries/Wages Expense$5,000 | ||
Debit: Salaries/Wages Expense$5,000 | ||
Debit: Salaries/Wages Expense$5,000 |
3 points
Question 17
Corresponds to CLO 4(a) Which of the following statements iscorrect regarding accrued revenues and unearned revenues, beforeadjusting entries have been made?
Accrued revenues have not been earned and unearned revenues havebeen earned. | ||
Accrued revenues have been paid and unearned revenues havenot. | ||
Accrued revenues have not been recorded and unearned revenueshave been recorded. | ||
Accrued revenues have been recorded and unearned revenues havebeen recorded. |
3 points
Question 18
Corresponds to CLO 4(b) Hudson Law Corporation received $5,500cash for legal services to be rendered in the future. The fullamount was credited to the liability account Unearned ServiceRevenue. At the end of the period, Hudson determines that $3,000 ofthe legal services have been rendered. The appropriate adjustingjournal entry to be made at the end of the period is:
debit Unearned Service Revenue, $3,000; credit Cash, $3,000. | ||
debit Unearned Service Revenue, $3,000; credit Service Revenue,$3,000. | ||
debit Unearned Service Revenue, $2,500; credit Service Revenue,$2,500. | ||
debit Service Revenue, $2,500; credit Unearned Service Revenue,$2,500. |
3 points
Question 19
Corresponds to CLO 4(c) Ace Corporation purchased officesupplies costing $13,000 and debited Office Supplies for the fullamount. At the end of the accounting period, a physical count ofoffice supplies revealed $2,700 still on hand. The appropriateadjusting journal entry to be made at the end of the period is:
debit Office Supplies Expense, $10,300; credit Office Supplies,$10,300. | ||
debit Office Supplies, $10,300; credit Office Supplies Expense,$10,300. | ||
debit Office Supplies Expense, $2,700; credit Office Supplies,$2,700. | ||
debit Office Supplies, $2,700; credit Office Supplies Expense,$2,700. |
3 points
Question 20
Corresponds to CLO 4(d) On September 1, Northgate paid $18,000to Evans Management Company for 12 months of rent beginning onSeptember 1. The appropriate journal entry was made to record thistransaction. If financial statements are prepared for the 9 monthsended September 30, the adjusting entry to be made by Northgateis:
debit Rent Expense, $13,500; credit Prepaid Rent, $13,500. | ||
debit Prepaid Rent, $1,500; credit Rent Revenue, $1,500. | ||
debit Prepaid Rent, $1,500; credit Rent Expense, $1,500. | ||
debit Rent Expense, $1,500; credit Prepaid Rent, $1,500. |
3 points
Question 21
Corresponds to CLO 5(a) Lennox Corporation purchased a newdelivery truck for 35,000. The sales taxes are $2,700. The logo ispainted on the side of the truck for $800. The truck's annuallicense is $200. Annual insurance on the truck is $1,300. Whatshould Lennox record as the cost of the new truck?
$40,000 | ||
$38,500 | ||
$37,700 | ||
$35,000 |
3 points
Question 22
Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporationpurchased equipment for $65,000. It is estimated that the equipmentwill have a $5,000 salvage value at the end of its 5 year usefullife. If Ballard uses the straight-line method of depreciation,what is the accumulated depreciation at December 31, 2013?
$13,000 | ||
$12,000 | ||
$9,750 | ||
$9,000 |
3 points
Question 23
Corresponds to CLO 5(c) Tyree Company purchased equipment with acost of $90,000 and an estimated salvage value of $18,000. Theequipment is expected to produce 150,000 units over its estimateduseful life of 10 years. If Tyree uses the units-of-activitymethod, what is the depreciation cost per unit to be used incalculating depreciation?
$1.67 | ||
$0.48 | ||
$2.08 | ||
$0.60 |
3 points
Question 24
Corresponds to CLO 5(d) Kerns Company purchased equipment with acost of $200,000 and an estimated salvage value of $10,000. Theequipment has an estimated useful life of 10 years. If Kerns usesthe double-declining balance method, what is the annualdepreciation rate to be used in calculating depreciation?
5% | ||
10% | ||
20% | ||
40% |
3 points
Question 25
Corresponds to CLO 6(a) Marshall Machinery made a sale for$150,000 on March 31. The customer is sent a statement on April 6and payment is received on April 15. Marshall prepares March'smonthly internal financial statements on April 20. Marshall followsGAAP and applies the revenue recognition principle. When is the$150,000 considered to be earned?
March 31 | ||
April 6 | ||
April 15 | ||
April 20 |
