Question

Part II The below information relates to Company A. Company A has a fiscal year end of March 31, 2019. Assume no other adjusting entries have been recorded throughout the year.

a) April 30, 2018: Purchased insurance for the year: $6,000.

b) June 1, 2018: Purchased equipment on account: $4,000. The equipment had an expected useful life of 8 years and no expected residual value.

c) July 21, 2018: Purchased supplies for cash: $2,000. A count at year-end revealed the company still had $1,700 of supplies remaining.

d) December 1, 2018: Loaned $3,000 cash signing a note receivable. The note has an annual interest rate of 6%. The company expects to be repaid on June 30, 2019.

e) January 1, 2019: The company received a $12,000 prepayment for software development services it would be delivering over the next four months. As of fiscal year end, the first three months of the service had been delivered on time and on schedule with one more month remaining

. f) March 31, 2019: The company had three employees who were owed for two days of salaries at year end. Each employee earns $250 per day. Instructions

For the transactions above, record a journal entry for the original transaction and record the required year-end adjustment. (NOTE: Transaction F only requires a year-end adjusting entry.)

Answer 1

Original journal entries:

	Date	Account title	Debit	Credit
a	Apr. 30, 2018	Prepaid insurance	6,000
		Cash		6,000
b	Jun. 1, 2018	Equipment	4,000
		Accounts payable		4,000
c	Jul. 21, 2018	Supplies	2,000
		Cash		2,000
d	Dec. 1, 2018	Note receivable	3,000
		Cash		3,000
e	Jan. 1, 2019	Cash	12,000
		Unearned service revenue		12,000

Year end adjusting entries:

	Date	Account title	Debit	Credit
a	Mar. 31, 2019	Insurance expense	6,000
		Prepaid insurance		6,000
b	Mar. 31, 2019	Depreciation expense	416.67
		Accumulated depreciation		416.67
c	Mar. 31, 2019	Interest receivable	300
		Supplies		300
d	Mar. 31, 2019	Interest receivable	60
		Interest revenue (3,000x6%x4/12)		60
e	Mar. 31, 2019	Unearned service revenue	9,000
		Service revenue (12,000x3/4)		9,000
f	Mar. 31, 2019	Salaries expense (250x3x2)	1,500
		Salaries payable		1,500

Working note for depreciation expense:

Dep. Per year = 4,000/8 = 500

Dep on Mar 31, 2019 = 500 x 10 month/12 months = 416.67