Question

The following information is given for Ribbons and Bows prior to adjustments on December 31, 2019. Ribbons and Bows prepares adjusting entries annually on December 31.

a)Salaries of $5,000 are paid every Friday for a five-day workweek ending on Friday. December 31, 2019, is a Thursday.

b)On October 1, 2019, Ribbons and Bows collected $10,000 to be earned evenly over the next five months and credited unearned revenue.

c)Accrued service revenue on December 31 amounts to $1,400.

d)On June 1, 2019, Ribbons and Bows purchased a $4,800, two-year insurance policy and debited an asset account.

e)The supplies account had a January 1, 2019, balance of $2,400. Purchases of supplies during 2019 amounted to $3,500 and were debited to supplies asset account. Supplies on hand December 31, 2019, amount to $800.

Prepare adjusting entries needed on December 31, 2019.

Answer 1

No.	Date	General Journal	Debit	Credit
a)	December 31	Salaries expense	$4,000
		Salaries payable		$4,000
		( To record salaries expense)
b)	December 31	Unearned revenue	$6,000
		Service revenue		$6,000
		( To record service revenue)
c)	December 31	Revenue receivable	$1,400
		Service revenue		$1,400
		( To record service revenue)
d)	December 31	Insurance expense	$1,400
		Prepaid insurance		$1,400
		( To record insurance expense)
e)	December 31	Supplies expense	$5,100
		Supplies		$5,100
		( To record supplies expense)

a) Salaries expense for 5 days = $5,000

salaries expense for 4 days = 5,000 x 4/5

= $4,000

b) Revenue received in advance for 5 months = $10,000

Unearned revenue earned on December 31 = 10,000 x 3/5

= $6,000

d) Insurance expense for 24 months = $4,800

Insurance expense for 7 months (From June 1 to December 31, 2019) = 4,800 x 7/24

= $1,400

e) Supplies expense = Beginning supplies + Supplies purchased- Ending supplies

= 2,400+3,500-800

= $5,100