Exercise 2 23 Reversing entries (Appendix 28) Prepare the necessary adjusting en
ID: 2330605 • Letter: E
Question
Exercise 2 23 Reversing entries (Appendix 28) Prepare the necessary adjusting entries at December 31, 2018, for the Microchip Company for each of the following situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. I. On October 1, 2018, Microchip lent $91,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2019 2. On November 1, 2018, the company paid its landlord $9.600 representing rent for the months of November through January Prepaid rent was debited 3. On August 1, 2018, collected $15,600 in advance rent from another company that is renting a portion of Microchip's factory. The $15,600 represents one year's rent and the entire amount was credited to rent revenue. 4. Depreciation on office equipment is $5,700 for the year 5. Vacation pay for the year that had been earned by employees but not paid to them or fecorded is $9,200. The company records vacation pay as salaries expense. 6. Microchip began the year with $3,200 in its asset account, supplies. During the year, $7,700 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,850 remain on hand Required: 2-a. If Microchip's accountant employed reversing entries for prepaid expenses, prepare the original transactions creating the prepayments for only those entries that would be reversed. 2-b. If Microchip's accountant employed reversing entries for prepaid expenses, prepare the adjusting entries at the end of 2018 for only those entries that would be reversed. 3. Prepare the appropriate reversing entries at the beginning of 2019.Explanation / Answer
Requirement 2 2 Original transaction on November 1: Rent expense 9,600 Cash 9,600 Adjusting entry on December 31: Prepaid rent ($9,600 x 1/3) 3,200 Rent expense 3,200 6 Original transaction during the year: Supplies expense 7,700 Cash 7,700 Adjusting entry on December 31: Supplies 3,850 Supplies expense 3,850 Requirement 3 2 Rent expense 3,200 Prepaid rent 3,200 6 Supplies expense 3,850 Supplies 3,850
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