Question

Problem 3-02A a-c, d1-d3 (Video) (Part Level Submission)

The Tamarisk, Inc. opened for business on May 1, 2020. Its trial balance before adjustment on May 31 is as follows.

Tamarisk, Inc. Trial Balance May 31, 2020
Account Number				Debit		Credit
101		Cash		$ 3,500
126		Supplies		2,150
130		Prepaid Insurance		2,400
140		Land		14,000
141		Buildings		59,000
149		Equipment		14,800
201		Accounts Payable				$ 11,400
208		Unearned Rent Revenue				3,200
275		Mortgage Payable				40,000
311		Common Stock				35,500
429		Rent Revenue				10,350
610		Advertising Expense		550
726		Salaries and Wages Expense		3,200
732		Utilities Expense		850
				$100,450		$100,450

In addition to those accounts listed on the trial balance, the chart of accounts for Tamarisk, Inc. also contains the following accounts and account numbers: No. 142 Accumulated Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:

1.		Prepaid insurance is a 1-year policy starting May 1, 2020.
2.		A count of supplies shows $800 of unused supplies on May 31.
3.		Annual depreciation is $2,952 on the buildings and $1,476 on equipment.
4.		The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5.		Two-thirds of the unearned rent revenue has been earned.
6.		Salaries of $800 are accrued and unpaid at May 31.

Journalize the adjusting entries on May 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Answer 1

Adjusting Entries:- These Entries are Journal Entries which are prepared at the end of accounting period to adjust Income and Expenses. These entries adjust all income and expenses to the period in which they actually occurred.

Preparing Adjusting Entries on May 31:-

Tamarisk Inc.

General Journal (Adjusting Entries)

On May 31,2020

Date	Accounts Title and Explanation	Debit	Credit
May 31	Insurance Expense	$200
	Prepaid Insurance		$200
	(To adjust Insurance Expense)
May 31	Supplies Expense	$1,350
	Supplies		$1,350
	(To adjust Supplies Expense)
May 31	Depreciation Expense, Buildings	$2,952
	Accumulated Depreciation, Buildings		$2,952
	Depreciation Expense, Equipment	$1,476
	Accumulated Depreciation, Equipment		$1,476
	(To adjust Depreciation Expense on Buildings and Equipment)
May 31	Interest Expense	$400
	Interest Payable		$400
	(To adjust Interest on Mortgage)
May 31	Unearned Rent Revenue	$2,133
	Rent Revenue		$2,133
	(To adjust Unearned Rent Revenue)
May 31	Salaries Expense	$800
	Salaries Payable		$800
	(To adjust Salaries Expense)

Working Notes:-

1. Calculations for Insurance Expense for the Month of May 2020:-

Insurance Expense=($2,400/12)

=$200

2. Calculations for Supplies Expense:-

Supplies Expense=(Supplies- Unused Supplies)

=($2,150-$800)

=$1,350

4. Calculations for Interest Expense on Mortgage for the Month of May:-

Interest Expense=($40,000×12%×1/12)

=($40,000×12/100×1/12)

=$400

5. Two-thirds of Unearned Rent Regards has been earned, so Debited the Unearned Rent Revenue and Credited Rent Revenue by $2,133 ($3,200×2/3).