Karla Tanner opens a web consulting business called Linkworks and recorded the f
ID: 2485555 • Letter: K
Question
Karla Tanner opens a web consulting business called Linkworks and recorded the following transactions in its first month of operations.
Apr. 1 Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock.
Apr. 2 The company prepaid $9,000 cash for twelve months’ rent for office space. The company's policy is record prepaid expenses in balance sheet accounts.
Apr. 3 The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days.
Apr. 6 The company completed services for a client and immediately received $4,000 cash.
Apr. 9 The company completed a $6,000 project for a client, who must pay within 30 days.
Apr. 13 The company paid $11,600 cash to settle the account payable created on April 3.
Apr. 19 The company paid $2,400 cash for the premium on a 12-month insurance policy. The company's policy is record prepaid expenses in balance sheet accounts.
Apr. 22 The company received $4,400 cash as partial payment for the work completed on April 9.
Apr. 25 The company completed work for another client for $2,890 on credit.
Apr. 28 The company paid $5,500 cash in dividends.
Apr. 29 The company purchased $600 of additional office supplies on credit.
Apr. 30 The company paid $435 cash for this month’s utility bill.
Descriptions of items that require adjusting entries on April 30, 2015, follow.
a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space.
b) The balance in Prepaid insurance represents the premium paid for a 12-month insurance policy; the policy's coverage began on April 1.
c) Office supplies on hand as of April 30 total $1,200.
d) Straight-line depreciation of office equipment, based on a 5-year life and a $4,000 salvage value, is $500 per month.
e) The company has completed work for a client, but has not yet billed the $1,800 fee.
f) Wages due to employees, but not yet paid, as of April 30 total $2,600.
****Use the 3-step adjusting entry process to prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred: Step 1: Determine what the current account balance equals (See General Ledger tab) Step 2: Determine what the current account balance should equal. Step 3: Prepare an adjusting entry to get from Step 1 to Step 2.
April 30
a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space.
***I need help putting this into a Journal Entry Worksheet. I've entered, for the question above, PREPAID RENT DEBIT $9,000 AND CASH CREDIT $9,000 and it's incorrect.
Explanation / Answer
Adjusting Entries-At the end of the month a) Current account 1) Prepaid Rent 9000 2) Prepaid rent 8250 should be 9000/12*11 Dr Cr Adjusting entry Rent expense 750 Prepaid Rent 750 (Rent of one month is expensed) You have entered the initial entry when cash was paid Prepaid Rent 9000 Cash 9000 b Current account 1) Prepaid Insurance 2400 2) Prepaid Insurance should be 2400/12*11 2200 Adjusting entry Dr Cr Insurance expense 200 Prepaid Insurance 200 c) Office supplies 3600 Office supplies should be 1200 Adjusting entry Dr Cr Office supplies Expenses 2400 Office supplies(3600-1200) 2400 d Adjusting entry Dr Cr Depreciation - equipment 500 Accumulated depreciation-Equip 500 e Accounts Receivable (6000-4400+2890) 4490 Account Receivable (4490+1800) 6290 Adjusting entry Dr Cr Accounts Receivable 1800 Sales 1800 f Salralies & wages Expenses 2600 Salralies & wages Payable 2600
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