Below are four transactions that were completed during 2009 by Timber Lodge. The

Question

Below are four transactions that were completed during 2009 by Timber Lodge. The annual accounting period ends on December 31. Each transaction will require an adjusting entry at December 31, 2009. You are to provide the 2009 adjusting entries required for Timber Lodge.
A. On July 1, 2009, Timber Lodge paid a two-year insurance premium for a policy on its facilities. This transaction was recorded as follows:

July 1 2009:
prepaid insurance debit 8000
cash credit 8000
B. On December 31, 2009 a tenant renting some storage space from Timber Lodge had not paid the rent of $750 for December 2009.

C. On September 1, 2009, Timber Lodge borrowed $25,000 cash and gave a one-year, 10 percent, note payable. The total interest of $2,500 is payable on the due date, August 31, 2010. The note was recorded as follows:

September 1 2009
cash debit 2500
notes payable credit 25000



D. On October 1, 2009, Timber Lodge collected $3,600 for rental of space two years in advance. The $3,600 collection was recorded as follows:
october 1 2009
cash debit 3600
unearned rent credit 3600

Explanation / Answer

(a) The adjusting entry for Insurance period completed (six months) will be Insurance Expense $2,000 Prepaid Insurance $2,000 (To record the insurance expense for the period of six months completed) (b) Accrued Rent $750 Rent Revenue $750 (To record the Rent earned for the month December 09, not received) (c) Interest Expense $833 Interest payable $833 (To record the Interest due for for forur months) (d) Unearned Rent credit $450 Rent revenue $450 (To record Interest income for 3 months)

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