Question

Use the adjusting journal entry information to prepare the formal adjusting journal entries as of December 31, 2020. Remember to skip a line between each adjusting journal entry and use AJ1, AJ2, AJ3, etc, instead of the actual date.

Information for Year End Adjusting Journal Entries December 31, 2020

1) The building(cost of $180,000)was purchased on January 1, 2019 and it is expected to have a useful life of 30 years with no salvage value. Depreciation expense has been recorded through November 30, 2020.

2) Office equipment(cost of $130,000)as of November 30, 2020 was purchased on January 1, 2015. The office equipment is expected to have a useful life of 10 years with $10,000 salvage value. Depreciation expense has been recorded through November 30, 2020.

3) Insurance in the amount of $4,800 was paid on April 1, 2020 covering the period of April 1, 2020 through March 31, 2021. The insurance expense and prepaid insurance accounts have been properly adjusted through November 30, 2020.

4) A December 31, 2020 count of supplies showed $3,300 of supplies remaining on hand.

5) Salaries earned but unpaid as of December 31, 2020 amount to $31,500.

6) The company has earned one of the three months rent previously received on December 1 from Bullwinkle Inc.

7) Interest at an annual rate of 3¼% is owed for the month of December 2020 on the Mortgage Note Payable due in 5 years (round interest to nearest whole dollar).

8) The savings account was opened on December 31, 2019. It earns interest at an annual rate of 1.5%, compounded monthly. Interest has been received and recorded through November 30, 2019. The bank notified the company that interest for the month of December was deposited in the savings account on December 31, 2020(round interest to the nearest dollar).

9) Uncollectible accounts are expected to be $11,500 based on net sales.

10) Income taxes owed for the year amounted to $15,000.

Answer 1

	Particular	DR/CR	Amount
AJ1	Depreciation Expense Account	Dr	500
	Accumulated Depreciation - Plant & Machine	Cr	500
	for Dec 2020
AJ2	Depreciation Expense Account	Dr	1,000
	Accumulated Depreciation - Plant & Machine	Cr	1,000
	for Dec 2020
AJ3	Insurance Expense A/c	Dr	400
	Prepaid Insurance A/c	Cr	400
	As insurance expenses were accounted for November 20 that means Prepaid expenses Balance was 4800/12*4 =1600
AJ4	Stock In Transit A/c	Dr	3,300
	Vendor A/c	Cr	3,300
AJ5	Salary Expenses A/c	Dr	31,500
	Accrued Liablities A/c	Cr	31,500
	As Libalitied occurred but not booked Yet
AJ6	Rent Income	Dr	**
	Unearened Revenue A/c	Cr	**
	As Amount is not provided it has been put Blank and amount will be total rent received * 2/3
AJ7	Interest Expenses A/c	Dr	**
	Accrued Liabbllitied A/c	Cr	**
	As Loan Amount is not provided it has been put Blank - Basic Amount of Loan * 3.25% * 1/12
AJ8	No Entry will be done Because Interest earned has been received during the year only and it is asssumed that same entry has been done in Books of Account while finalising Trial Balance , but still presenting you entry for your reference
	Bank A/c	Dr
	Interest Income	Cr
AJ9	Bad Debts A/c	Dr	11,500
	Provision for Doubtful Debts/ Debtors A/c	Cr	11,500
	If company is maintaing Provision for doubtful debts then such account will be used otherwise Debtors A/c )
AJ10	Income Tax Expenses	Dr	15,000
	Provision for Tax	Cr	15,000

Working ;

AJ1	Building Purchase on 01.01.2019	1,80,000
	Life	30 Year
	Depreciation Each Year	6,000
	Depreciation for each Month	500

AJ2	Office Equipment on 01.01.2015	1,30,000
	Salvage Value	10,000
	Net Value for Depreciation	1,20,000
	Life	10 Year
	Depreciation Each Year	12,000
	Depreciation for each Month	1,000

AJ3	Insurance Paid	4,800
	Insurance prepaid for 3 Months	1,200