Arnez Company\'s annual accounting period ends on December 31, 2017. The followi

Question

Arnez Company's annual accounting period ends on December 31, 2017. The following information concerns the adjusting entries to be recorded as of that date. a. The Office Supplies account started the year with a $3,425 balance. During 2017, the company purchased supplies for $14,145, which was added to the Office Supplies account. The inventory of supplies avallable at December 31, 2017, totaled $3,014 b. An analysis of the company's insurance policies provided the following facts. Months of PolicyDate of Purchase Coverage Cost April 1, 2015 April 1, 2016 August 1, 2017 24 36 12 $11,832 10,584 9,432 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 $1,550 in salaries each working day. They are paid each Monday in the five-day workweek ending on the previous Friday Assume that December 31, 2017, is a Tuesday, and all 15 employees s each working day. They are paid each Monday for their work worked the first two days of that week. Because New Year's Day is a paid holiday, th ey will be paid salaries for five full days on Monday. January 6, 2018. The company purchased a building on January 1, 2017. It cost $7 end of its predicted 40-year life. Annual depreciation is $18.000. 65,000 and is expected to have a $45,000 salvage value at the e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $2.300 per month starting on November 1, 2017. The rent was paid on time on N account. However, the tenant has not paid the December rent The co ovember 1. and the amount received was credited to the Rent Earned mpany has worked out an agreement with the tenant, wiho promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again t. On November 1, the company rented space to another tenant for $2.084 per month. The tenant paid five monthst rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account Required: 1 Use the information to prepare adjusting entries as of December 31, 2017 2. Prepare journal entries to record the first subsequent cash transaction in 2018 for parts cand e

Explanation / Answer

1. Adjusting entries as of December 31, 2017

Working:

2. First subsequent cash transaction in 2018

Transaction General Journal Debit Credit a. Office Supplies expense 14556 Office Supplies ($3425 + $14145 - $3014) 14556 (To record office supplies expense) b. Insurance expense 8937 Prepaid insurance 8937 (To record insurance expense) c. Salaries expense ($1550 x 2 days) 3100 Salaries payable 3100 (To record accrued salaries) d. Depreciation expense 18000 Accumulated depreciation-Building 18000 (To record depreciation expense) e. Rent receivable 2300 Rent earned 2300 (To record rent revenue accrued for December) f. Unearned rent 4168 Rent earned ($2084 x 2) 4168 (To record rent earned for 2 months)

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