Question

The following information relates to Paul Anderson, Property Manager, at the close of the fiscal year ending December 31:

1.		Paul paid a storage locker facility $325 for next January’s rent on a locker and charged it to Rent Expense.
2.		On November 1, Paul signed a three-month, 12% note to borrow $17,760 from Yorkville Bank.
3.		The following salaries and wages are due and unpaid at December 31: sales, $1,390; office clerks, $1,080.
4.		Interest of $505 has accrued to date on a note that Paul holds from Grant Muldaur.
5.		The estimated loss on bad debts for the period is $1,530.
6.		Stamps and stationery are charged to the Office Expense account when purchased; $105 of these supplies remain on hand.
7.		Paul has not yet paid the December rent of $1,230 on the building his business uses.
8.		Insurance was paid on November 1 for one year and charged to Prepaid Insurance, $1,080.
9.		Property tax accrued, $1,930.
10.		On December 1, Paul accepted Alana Zipursky’s two-month, 15% note in settlement of her $7,200 account receivable.
11.		On October 31, Paul received $2,520 from Tareq Giza in payment of six months’ rent for Giza’s office space in the building and credited Unearned Rent Revenue.
12.		On September 1, Paul paid six months’ rent in advance on a warehouse, $7,995, and debited the asset account Prepaid Rent.
13.		The bill from Light & Power Limited for December has been received but not yet entered or paid, $430. (Use Utilities Payable.)
14.		The estimated depreciation on equipment is $1,090.

Prepare annual adjusting entries as at December 31

Answer 1

	Adjusting entries:
	Ref.	Particulars					Debit	Credit
	1	Prepaid rent					325
		Rent expense						325
		(Rent paid related to next year)
	2	Interest expense		(17760*12%*2/12)			355
		Interest payable						355
		(Interest due for Nov and Dec-2 months)
	3	Salaries and wages expense			(1390+1080)		2470
		Salaries and wages payable						2470
		(Salaries and wages due)
	4	Interest receivable					505
		Interest revenue						505
		(Interest due on notes from Grant muldaur)
	5	Bad debt expense					1530
		Allowance for doubtful accounts						1530
		(Estimated loss on bad debts)
	6	Office supplies					105
		Office expense						105
		(supplies remain on hand recorded)
	7	Rent expense					1230
		Rent payable						1230
		(Dec rent not yet paid)
	8	Insurance expense		1080*(2/12)			180
		Prepaid insurance						180
		(Insurance expired for Nov and Dec-2 months)
	9	Property taxes					1930
		Property taxes payable						1930
		(Property tax accrued)
	10	Interest receivable		(7200*15%*1/12)			90
		Interest revenue						90
		(Interest accrued for Dec month)
	11	Unearned Rent Revenue			2520*(2/6)		840
		Rent revenue						840
		(Rent revenue earned for Nov and Dec-2 months)
	12	Rent expense		7995*(4/6)			5330
		Prepaid rent						5330
		(Rent expired for Sept 1 to Dec 31-4 months)
	13	Utilities expense					430
		Utilities Payable						430
		(Utilities bill for December)
	14	Depreciation expense					1090
		Accumulated depreciation						1090
		(Depreciation recorded)