Jordan Company\'s annual accounting year ends on December 31. It is now December
ID: 2437816 • Letter: J
Question
Jordan Company's annual accounting year ends on December 31. It is now December 31, 2018, and all of the 2018 entries have been made except for the following: a. The company owes interest of $710 on a bank loan. The interest will be paid when the loan is repaid on September 30, 2019. No interest has been recorded. b. On September 1, 2018, Jordan collected six months' rent of $4,860 on storage space. At that date, Jordan debited Cash and credited Deferred Revenue for $4,860. c. The company earned service revenue of $3,400 on a special job that was completed December 29, 2018. Collection will be made during January 2019. No entry has been recorded. d. On November 1, 2018, Jordan paid a one-year premium for property insurance of $4,260, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount. e. At December 31, 2018, wages earned by employees but not yet paid totaled $1,200. The employees will be paid on the next payroll date, January 15, 2019. f Depreciation of $1,100 must be recognized on a service truck purchased this year. g. The income after all adjustments other than income taxes was $30,100. The company's income tax rate is 20%. Compute and record income tax expense. Required 1. Give the adjusting journal entry required for each transaction at December 31, 2018. 2. If adjustments were not made each period, the financial results could be materially misstated. Determine the amount by which Jordan Company's net income would have been understated, or overstated, had the adjustments in requirement 1 not been made.Explanation / Answer
Adjusting Entries
No
Date
General Journal
Debit
Credit
a
31-Dec
Interest Expense
$ 710.00
Interest Payable
$ 710.00
(for Interest Expense)
b
31-Dec
Deferred revenue
$ 3,240.00
Rental revenue
$ 3,240.00
(For Recording rental revenue earned of 4 months)
c
31-Dec
Accounts Receivable
$ 3,400.00
Service Revenue
$ 3,400.00
(for service revenue earned)
d
31-Dec
Insurance Expense
$ 710.00
Prepaid Insurance
$ 710.00
(For Insurance expense of 2 months )
e
31-Dec
Salaries and Wages
$ 1,200.00
Salaries and Wages Payable
$ 1,200.00
(For salaries and wages expense)
f
31-Dec
Depreciation expense-Service Truck
$ 1,100.00
Accumulated Depreciation-Service Truck
$ 1,100.00
(For depreciation expense)
g
31-Dec
Income tax expense
$ 6,020.00
Income tax payable
$ 6,020.00
(For recording income tax expense)
$ 16,380.00
$ 16,380.00
(A) Income after Adjustment
$ 30,100.00
Adjustments
a
$ 710.00
b
$ (3,240.00)
c
$ (3,400.00)
d
$ 710.00
e
$ 1,200.00
f
$ 1,100.00
(B) Unadjusted Income
$ 27,180.00
(A-B) Understated Income
$ 2,920.00
Adjusting Entries
No
Date
General Journal
Debit
Credit
a
31-Dec
Interest Expense
$ 710.00
Interest Payable
$ 710.00
(for Interest Expense)
b
31-Dec
Deferred revenue
$ 3,240.00
Rental revenue
$ 3,240.00
(For Recording rental revenue earned of 4 months)
c
31-Dec
Accounts Receivable
$ 3,400.00
Service Revenue
$ 3,400.00
(for service revenue earned)
d
31-Dec
Insurance Expense
$ 710.00
Prepaid Insurance
$ 710.00
(For Insurance expense of 2 months )
e
31-Dec
Salaries and Wages
$ 1,200.00
Salaries and Wages Payable
$ 1,200.00
(For salaries and wages expense)
f
31-Dec
Depreciation expense-Service Truck
$ 1,100.00
Accumulated Depreciation-Service Truck
$ 1,100.00
(For depreciation expense)
g
31-Dec
Income tax expense
$ 6,020.00
Income tax payable
$ 6,020.00
(For recording income tax expense)
$ 16,380.00
$ 16,380.00
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