2. It is the end of Kencos\' fiscal year (12-31-15). You have been given the fol

Question

2. It is the end of Kencos' fiscal year (12-31-15). You have been given the following information to help you make the year end adjustments: a. On 8-1-15 Kenco purchase a one year insurance policy for a total cost of $36,000. The bookkeeper made an entry on 8-1 to debit pre-paid insr. exp. and credit cash. No other entries have been made to the insurance accounts. b. On 9-1-15 Kenco entered into a contract to provide maintenance service to Jimco Inc. for $500,000. Jimco Inc. pre-paid $50,000 on 9-1and the bookkeeper for Kenco debited Cash and credited Un-earned maint. rev. On 12-31-15 30% of the maintenance work had been completed. No other entries had been made in the accounting system since 9-1-15. c. Kenco rented excess office space to a client on 12-15-15. The renter paid $3,500 for one months rent in advance as a pre-payment. Kencos' bookkeeper debited cash and credited pre-paid rent on 12-15-15. d. The depreciation on equipment amounted to $25,000 for the year; no entry had been recorded to recognize this fact. e. Interest on Notes Payable of $200,000 in the amount of $5,000 was owed by Kenco to the bank on 12-31-15. No entry had been made to record this fact. The interest will not be paid until FY 04. Required: From the information given above, make all the adjusting entries required. As a description to the journal entry, indicate what accounting principle would have been violated if the entry had not been made.

Explanation / Answer

Journal entries

Insurance is paid on 1 august for 36000

months falling in 2015 = 5

proportionate expense = (36000 /12 ) x 5, =15000

prepaid = 36000 -15000, =21000

Maintenance revnue= 500000 x 30 %, =150000

Rent received = 3500

half falls in december = 3500 / 2 , = 1750

remaining half pre received = 1750

Date Particulars Debit Credit a) 08-01-15 Insurance expense 15000 Prepaid insurance expense 21000 Cash 36000 b) 9-1-15 Cash 50000 Unearned maintenance revenue 50000 12-31-15 Unearned maintenance revenue 50000 Kimca inc. 100000 maintenance revenue 150000 c) 12-15-15 Cash 3500 Rent 1750 Pre paid rent ( income) 1750 d) 12-31-15 Depreciation expense 25000 To Accumulated depreciation 25000 e) 12-31-15 Interst expense 5000 outstanding interest 5000

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.