Each of the following independent events requires a year-end adjusting entry. Sh

Question

Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.) a. Paid $6,100 cash in advance on April 1 for a one-year insurance policy. b. Purchased $1,650 of supplies on account. At year’s end, $110 of supplies remained on hand. c. Paid $6,150 cash in advance on March 1 for a one-year lease on office space. d. Received an $15,150 cash advance for a contract to provide services in the future. The contract required a one-year commitment starting September 1.

Explanation / Answer

A)

1 April

Initial entry would be

Prepaid insurance expense            6,100

                     To cash                                    6,100

(For 6100 paid In cash to buy insurance)

At 31 dec adjusting entry would be to transfer the expense to insurance expense from prepaid for 9 months 1pril till 31 dec

=6100/12 *9 = 4575

Insurance expense account debit          4575

                          To prepaid insurance                 4575

B)

Supplies account debit         1650

                To cash                             1650

( For supplies purchased)

31 dec adjusting entry

Supplies expense debit                  1540

                 To supplies account                  1540

C)

Prepaid lease     6150

    To cash                    6150

Adjusting entry would be

Transferring 10 months lease expenses to account

       Lease expense account debit    5125

                 Prepaid lease                                   5125

( for 10 months lease transferred to lease expense account)

D)

Cash account debit                   15150

     To unearned revenue                           15150

Adjsuting entry would be transferring 4 months revenue to service revenue account

Unearned revenue account debit   5,050

        To service revenue                                   5,050

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

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