Question

Adelman Company received a $100,000, one year, 9 percent bank loan on October 31, 2016. Interest is payable at the end of the loan term.

Adelman’s adjusting entry at the end of their fiscal year on March 31, 2017 is:

	A.	A debit to Interest Receivable of $4,500 and a credit to Interest Payable of $4,500
	B.	A debit to Interest Expense of $1,500 and a credit to Interest Payable of $1,500
	C.	A debit to Interest Expense of $3,750 and a credit to Interest Payable of $3,750
	D.	A debit to Interest Expense of $9,000 and a credit to Interest Revenue of $9,000

At the beginning of the period, Cracker Corporation had $800 of supplies on hand. During the period, it purchased $1,800 of supplies and at the end of the period, the company determined that only $1,600 of supplies were still on hand.

What adjusting entry should Cracker Corporation make at the end of the period?

	A.	Supplies Expense 2,600 Supplies 2,600
	B.	Supplies 2,600 Supplies Expense 2,600
	C.	Supplies 1,000 Supplies Expense 1,000
	D.	Supplies Expense 1,000 Supplies 1,000

On June 1, 2016, Enne Brahtz Corporation received $3,600 as advance payment for 12 months' advertising. The receipt was recorded as a credit to Unearned Fees.

What adjusting entry is required on December 31, 2016?

	A.	Unearned Fees 2,100 Advertising Revenue 2,100
	B.	Unearned Fees 1,500 Advertising Revenue 1,500
	C.	Unearned Fees 1,800 Advertising Revenue 1,800
	D.	Advertising Revenue 2,100 Unearned Fees 2,100

Answer 1

1.

Interest expense from October 31, 2016 to March 31, 2017 = 100,000 x 9% x 5/12

= $3,750

Adelman’s adjusting entry at the end of their fiscal year on March 31, 2017 is:

A debit to Interest Expense of $3,750 and a credit to Interest Payable of $3,750

Correct option is (c)

2.

At the beginning of the period, Cracker Corporation had $800 of supplies on hand. During the period, it purchased $1,800 of supplies and at the end of the period, the company determined that only $1,600 of supplies were still on hand.

Supplies expense = Beginning supplies + Supplies purchased - Ending supplies

= 800 + 1,800 - 1,600

= $1,000

The following adjusting entry will be made at the end of the year:

	Supplies expense	1,000
	Supplies		1,000

Correct option is (d)

3.

On June 1, 2016, Enne Brahtz Corporation received $3,600 as advance payment for 12 months' advertising. The receipt was recorded as a credit to Unearned Fees.

Advertising revenue for 7 months from June to December 2016 = 3,600 x 7/12

= $2,100

The following adjusting entry is required on December 31, 2016:

Dec. 31, 2016	Unearned fees	2,100
	Advertising revenue		2,100

Correct option is (A)