Sarah Company’s trial balance on December 31, 2016 (the end of its annual accoun

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Sarah Company’s trial balance on December 31, 2016 (the end of its annual accounting period), included the following account balances before adjustments: Debit Credit Notes Receivable $10,000 Insurance Expense 3,000 Delivery Equipment 14,000 Building 60,000 Unearned Rent $4,320 Notes Payable 7,200 Office Supplies Expense 1,000 Reviewing the company’s recorded transactions and accounting records for 2016, you find the following data pertaining to the December 31, 2016, adjustments: 1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid $3,000 for a 2-year insurance policy. 3. The building was acquired in 1998 and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of $8,000. 4. The delivery equipment was purchased on April 2, 2016. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000. 5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company. 6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid. 7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required: Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31, 2016.
Sarah Company’s trial balance on December 31, 2016 (the end of its annual accounting period), included the following account balances before adjustments: Debit Credit Notes Receivable $10,000 Insurance Expense 3,000 Delivery Equipment 14,000 Building 60,000 Unearned Rent $4,320 Notes Payable 7,200 Office Supplies Expense 1,000 Reviewing the company’s recorded transactions and accounting records for 2016, you find the following data pertaining to the December 31, 2016, adjustments: 1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid $3,000 for a 2-year insurance policy. 3. The building was acquired in 1998 and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of $8,000. 4. The delivery equipment was purchased on April 2, 2016. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000. 5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company. 6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid. 7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required: Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31, 2016.
Sarah Company’s trial balance on December 31, 2016 (the end of its annual accounting period), included the following account balances before adjustments: Debit Credit Notes Receivable $10,000 Insurance Expense 3,000 Delivery Equipment 14,000 Building 60,000 Unearned Rent $4,320 Notes Payable 7,200 Office Supplies Expense 1,000 Reviewing the company’s recorded transactions and accounting records for 2016, you find the following data pertaining to the December 31, 2016, adjustments: 1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid $3,000 for a 2-year insurance policy. 3. The building was acquired in 1998 and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of $8,000. 4. The delivery equipment was purchased on April 2, 2016. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000. 5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company. 6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid. 7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required: Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31, 2016.

Explanation / Answer

Solution:

Adjusting entries

Date Account titles Debit Credit Dec 31 Interest receivable dr (6/12 * 10% * 10,000) 500 To interest revenue 500 Dec 31 Insurance expense dr (5 / 24 * 3000) 625 To prepaid insurance 625 Dec 31 Depreciation expense dr (60000 - 8000) / 25 2080 To accumulated depreciation on buildings 2080 Dec 31 Depreciation expense dr (14000 - 2000) / 10 * (9 / 12) 900 To accumulated depreciation on driver equipment 900 Dec 31 Un earned rent dr (4 / 24) * 4320 720 To rent revenue 720 Dec 31 Interest expense dr 7200 * (1 / 12) * 12% 72 To interest payable 72 Dec 31 Supplies expense dr 600 To supplies 600

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