ADJUSTING ENTRIES ABL company prepares yearly financial statements. Below are li

Question

ADJUSTING ENTRIES

ABL company prepares yearly financial statements. Below are listed some selected accounts and their balances on the September 30 trial balance before any adjustments have been made for the September year end.

ABL company
Unadjusted Trial Balance (Partial)
September 30, 2013

DEBIT $ CREDIT $

Office supplies 2,700 (debit)

Prepaid Insurance 5,400 (debit)

Office equipment 20,000 (debit)

Accumulated amortization– office equipment 7,200 (credit)

Unearned rent revenue 1,200 (credit)

(Note: Debit column does not equal credit column because this is a PARTIAL listing of selected account balances.)

Required: Prepare the year end adjusting entries (show your calculations), with the following additional information:

a. On October 1, 2012 the business had $2000 of supplies on hand. During the year, $700 of supplies were purchased. A physical count of office supplies revealed $200 of supplied on hand at September 30.

Date

b)  A two-year life insurance policy was purchased on June 1 for $7,200

Date

Account

Debit

Credit

c) Office equipment was purchased on October 1, 2010 for $20,000. It has an estimated useful life of 5 years and is expected to be sold for $2,000 (residual value) at the end of the 5 year life.

Date

Account

Debit

Credit

d) The amount of rent revenue received in advance that remains unearned at September 30th is $500

Date

Account

Debit

Credit

Date

Explanation / Answer

Date Account Title Dr Cr A 30-Sep Supplies Expense $2,500 Office Supplies 2500 (Being $200 supplies on hand on 30 Sep (2700-2500) 1-Jun Prepaid Insurance 7200 Cash 7200 30-Sep Insurance Expense(7200/24*4) 1200 Prepaid Insurance 1200 or for prepaid insurance the following entry can be made as the balance in account is $5400, the above is shown for the correct way to enter Which shows that the insureance expense is debited by $1800 instead of $1200 B 30-Sep Prepaid Insurance 600 Insurance Expense 600 C 30-Sep Depreciation- Equipment(20000-2000)/5 3600 Accumulated Depreciation-Equipment 3600 D 30-Sep Unearned Rent Revenue 700 Rent revenue 700

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