4. (5 points) Complete the adjusting journal entries given the information below

Question

4. (5 points) Complete the adjusting journal entries given the information below
A. On 12/1/XX, Timeline purchased $500 of supplies. When they purchased the supplies, they did the following entry:
Debit Credit
Supplies $500
Cash $500
At the end of the year, there were $280 of supplies remaining on hand. Prepare the adjusting journal entry as of 12/31/XX. Debit Credit
12/31/2012 Supplies expense 220
supplies 220


B. On 10/1/XX, Timeline made a payment of $6000 to pay rent for the next 6 months. When making the payment, they did the following entry:
Debit Credit
Prepaid Rent 6,000
Cash 6,000
Prepare the adjusting journal entry as of 12/31/XX.
12/31/12 Rent expense 2000
Prepaid rent 2000


C. On 8/1/XX, Timeline received a payment of $12,000 for services to be performed over the next 6 months. When receiving the payment, they did the following entry:
Debit Credit
Cash 12,000
Unearned Service Revenue 12,000
Prepare the adjusting journal entry as of 12/31/XX
12/31/12 Unearned sales revenue 10000
Sales revenue 10000


D. On 8/1/XX, Timeline accepted a $5000 6% note from a customer as payment. The note plus interest will be paid on 3/31 of the following year. No interest has been recorded.
Prepare the adjusting journal entry as of 12/31/XX
12/31/12 Interest receivables 125
Interest revenue 125


E. On 6/1/XX Timeline purchased a vehicle for $15,000. Managers estimate the useful life of the vehicle to be 3 years. The depreciation for the year has not been recorded.
Prepare the adjusting journal entry as of 12/31/XX
12/31/12 Depreciation expense 2916
Accumulated depreciation 2916
To record deprection for the year

Explanation / Answer

Solution: Since $280 supplies or asset accounts are left at the end of the year you want to account for the consumption of $220 supplies. Therefore DR supplies expense $220 and CR supplies $220. The fees for service are earned at the rate of $2,000 / month. Record 5 months worth by DR Unearned Service Revenue CR Service Revenue/Income This depends on how your prof wants you to calculate interest. You could do it like this though: $5000 x 5/12 x 6% = $125. Dr Interest Expense, CR Interest payable

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