Supplies $2,215dr Salaries and wages payable $1,626cr Interest Receivable 5,480d

Question

Supplies $2,215dr

Salaries and wages payable $1,626cr

Interest Receivable 5,480dr

Prepaid Insurance 88,730dr

Unearned Rent 0

Interest Payable 17,330cr

1. A physical count of supplies on hand on December 31, 2015, totaled $1,214.

2. Through oversight, the Salaries and Wages Payable account was not changed during 2015. Accrued salaries and wages on December 31, 2015, amounted to $4,525.

3. The Interest Receivable account was also left unchanged during 2015. Accrued interest on investments amounts to $4,459 on December 31, 2015.

4. The unexpired portions of the insurance policies totaled $62,010 as of December 31, 2015.

5. $22,650 was received on January 1, 2015, for the rent of a building for both 2015 and 2016. The entire amount was credited to rent revenue.

6. Depreciation on equipment for the year was erroneously recorded as $5,010 rather than the correct figure of $50,100.

7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,302 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

(a) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2015? (Ignore income tax considerations.) (b) Pass the necessary adjusting entries for the following taking into account income tax effects (40% tax rate) and assuming that the books have been closed. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1. Depreciation on equipment for the year was erroneously recorded as $5,010 rather than the correct figure of $50,100.

2. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,302 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

Explanation / Answer

Adjusting Journal Entries: S.No. Date Account titles and Explanations Debit Credit 1 12/31/15 Supplies expense (2215-1214) 1001 Supplies 1001 (Being supplies expense recorded) 2 12/31/15 Salaries and wages expense 4525 Salaries and wages expense payable 4525 (Being salary and wages accrued) 3 12/31/15 Interest Receivables 4459 Interest revenue 4459 (being interest revenue accrued) 4 12/31/15 Insurance expense (88730-62010) 26720 Prepaid Insurance 26720 (being insurance expense recorded) 5 12/31/15 Rent revenue 11325 Unearned Rent (22650/2) 11325 (being rent revenue adjusted for unearned revenue) 6 12/31/15 Depreciation expense – Equipment (50100-5010) 45090 Accumulated depreciation -Equipment 45090 (Being depreciation adjusted ) 7 12/31/15 Retained earnings 7302 Accumulated depreciation -Equipment 7302 (being prior period adjustment made for depreciation)

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