You have been given an unadjusted trial balance for ABC, Inc. Company as of 12/3

Question

You have been given an unadjusted trial balance for ABC, Inc. Company as of 12/31/12. ABC prepares financial statements annually. No adjustment entries have been made yet for this year. The following pertains to the adjustments needed at year end. a.) On February 1, 2012, ABC paid Gordan Advertising $50,000 for two years of advertising experience. b.) $15,350 of store supplies were purchased during the year and the asset store supplies was increased. $1,300 of these supplies were on hand at year end. c.) $8,600 of office supplies were purchased during the year and were immediately expended. $1,100 of these supplies remained at the end of 2012. d.) On November 1, 2012, ABC received a $25,000 9-month note receivable from Shanny Co. The note bears interest 6%. Principle and interest will be paid to us on July 31, 2013 at the end of the 9 months.

Explanation / Answer

a.) On February 1, 2012, ABC paid Gordan Advertising $50,000 for two years of advertising experience. 50,000*11 months/24 months = 22,916.67 Debit: Advertising expense 22,916.67 Credit: Prepaid advertising 22,916.67 b.) $15,350 of store supplies were purchased during the year and the asset store supplies was increased. $1,300 of these supplies were on hand at year end. 15,350 – 1,300 = 14,050 Debit: Store Supplies expense 14,050 Credit: Store Supplies 14,050 c.) $8,600 of office supplies were purchased during the year and were immediately expended. $1,100 of these supplies remained at the end of 2012. Debit: Office Supplies 1,100 Credit: Office Supplies expense 1,100 d.) On November 1, 2012, ABC received a $25,000 9-month note receivable from Shanny Co. The note bears interest 6%. Principle and interest will be paid to us on July 31, 2013 at the end of the 9 months 25,000*.06*2 months/12 months = 250 Debit: Interest expense 250 Credit: Interest payable 250

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