Question

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 $600 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 $4,200 on storage space. At that date, Jordan debited Cash and credited Unearned Revenue for $4,200.

c. The company earned service revenue of $2,300 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 $3,600, 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 $1,000. The employees will be paid on the next payroll date, January 15, 2016. f. Depreciation of $1,200 must be recognized on a service truck purchased this year. g. The income after all adjustments other than income taxes was $29,000. The company's income tax rate is 25%. Compute and record income tax expense.

Determine the accounting equation effects of each required adjustment.

	Transaction Assets = Liabilities + Stockholders’ Equity a. b. c. d. e. f. g.

Answer 1

Trans	Assets		liabilities		Stockholders Equity
a.			interest payable	600	interest expense	-600
b.			unearned revenue	-2800	rent revenue	2,800	(4200/6*4)
c.	Accounts receivable	2,300			service revenue	2,300
d.	prepaid insurance	-650			insurance expense	-650	(3600/12*2)
e.			wages payable	1,000	wage expense	-1,000
f.	Accumulated deprec	-1,200			Depreciation expense	-1,200
g.			income tax payable	7250	income tax expens	-7,250	(29000*25%)