Question

CP4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1, LO 4-2]

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Jordan Company’s annual accounting year ends on December 31. It is now December 31, 2015, and all of the 2015 entries have been made except for the following:

a.	The company owes interest of $680 on a bank loan. The interest will be paid when the loan is repaid on September 30, 2016. No interest has been recorded.
b.	On September 1, 2015, Jordan collected six months’ rent of $4,680 on storage space. At that date, Jordan debited Cash and credited Unearned Revenue for $4,680.
c.	The company earned service revenue of $3,100 on a special job that was completed December 29, 2015. Collection will be made during January 2016. No entry has been recorded.
d.	On November 1, 2015, Jordan paid a one-year premium for property insurance of $4,080, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.
e.	At December 31, 2015, wages earned by employees but not yet paid totaled $1,100. The employees will be paid on the next payroll date, January 15, 2016.
f.	Depreciation of $1,000 must be recognized on a service truck purchased this year.
g.	The income after all adjustments other than income taxes was $29,800. The company's income tax rate is 30%. Compute and record income tax expense.

Answer 1

Adjusting entry :

Transaction	Accounts titles & explanation	debit	credit
a	Interest expense	680
	Interest payable		680
	(To record accured interest)
b	Unearned revenue	3120
	Rent revenue (4680*4/6)		3120
	(To record unearned revenue adjusted)
c	Account receivable	3100
	Service revenue		3100
	(To record service revenue)
d	Insurance expense (4080/12)*2	680
	Prepaid insurance		680
	(To record insurance expense)
e	Wages expenses	1100
	Wages payable		1100
	(To record wages payable)
f	Depreciation expense	1000
	Accumlated depreciation-Truck		1000
	(To record depreciation expense)
g	Income tax expense (29800*30%)	8940
	Income tax payable		8940
	(To record income tax expense)