2 • Jaworski’s Ski Store is completing the accounting process for its first year

Question

2 •

Jaworski’s Ski Store is completing the accounting process for its first year ended December 31, 2015. The transactions during 2015 have been journalized and posted. The following data are available to determine adjusting journal entries: a. The unadjusted balance in Supplies was $890 at December 31, 2015. The unadjusted balance in Supplies Expense was $0 at December 31, 2015. A year-end count showed $120 of supplies on hand. b. Wages earned by employees during December 2015, unpaid and unrecorded at December 31, 2015, amounted to $4,100. The last paychecks were issued December 28; the next payments will be made on January 6, 2016. The unadjusted balance in Salaries and Wages Expense was $44,000 at December 31, 2015. c. A portion of the store’s basement is now being rented for $1,140 per month to K. Frey. On November 1, 2015, the store collected six months’ rent in advance from Frey in the amount of $6,840. It was credited in full to Unearned Revenue when collected. The unadjusted balance in Rent Revenue was $0 at December 31, 2015. d. The store purchased delivery equipment at the beginning of the year. The estimated depreciation for 2015 is $2,400, although none has been recorded yet. e. On December 31, 2015, the unadjusted balance in Prepaid Insurance was $3,240. This was the amount paid in the middle of the year for a two-year insurance policy with coverage beginning on July 1, 2015. The unadjusted balance in Insurance Expense was $720, which was the cost of insurance from January 1 to June 30, 2015. f. Jaworski’s store did some ski repair work for Frey. At the end of December 31, 2015, Frey had not paid for work completed amounting to $790. This amount has not yet been recorded as Service Revenue. Collection is expected during January 2016.

Required: For each situation, prepare the adjusting journal entry that Jaworski’s should record at December 31, 2015. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

a. Record the adjusting entry for supplies

b. Record the adjusting entry for salaries and wages.

c. Record the adjusting entry for rent.

d. ecord the adjusting entry for depreciation

e. Record the adjusting entry for insurance.

f. Record the adjusting entry for revenues earned, but not yet recorded.

Explanation / Answer

S. No. Accounts Title and explanations Debit $ Credit $ a. Supplies expense Account Dr. 770     Supplies Account 770 (for supplies expense recognized for supplies consumed) b. Salaries and Wages Expense Account Dr. 4,100     Wages payable Account 41,000 (for wages due and unpaid) c. Unearned Revenue Account Dr. 2,280    Rent revenue Account 2,280 (for Rent for two months recognized as revenue @$1140 per month) d. Depreciation-Equipment Expense Account Dr. 2,400      Accumulated depreciation- Equipment Account 2,400 (for Charging deprecication on delivery equipment) e. Insurance expense Account Dr. 810     Prepaid Insurance Account 810 (for insurance expired for six months) f. Accrued Revenue Account Dr. 790     Service revenue Account 790 (for recognizing the revenue for services rendered) Note: A. Supplies consumed is computed= Unadjusted Supplies balance- Supplies in hand Note: Rent revenue shall be recognized for two months i.e. Nov and Dec @ $1140 per month Note: Insurance is paid for $3240 for 24 months. Out of which six months insurance has been expired during the year.

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