Question

Adjustments needed

ABC Corporation      
Unadjusted Trial Balance      
December 31, 2014      
      
   Debit   Credit
Cash   $975,232   
Short term investments   167,000   
Fair value adjustment (Trading)   -   
Accounts receivable   190,300   
Allowance for doubtful accounts       $-
Inventory   -   
Purchases   350,000   
Prepaid insurance   24,600   
LT (Debt) investments (HTM)   177,824   
Land   75,000   
Building   150,000   
Accumulated depreciation: building       4,000
Equipment   60,000   
Accumulated depreciation: equipment       20,000
Patent   37,500   
Accounts payable       75,240
Notes payable       235,000
Income taxes payable       63,800
Unearned rent revenue       36,000
Bonds Payable       800,000
Premium on Bonds Payable       61,771
Common stock       86,000
PIC In Excess of Par-Common Stock       13,000
Retained earnings       -
Treasury stock   49,000   
Dividends   41,000   
Sales Revenue       1,192,945
Advertising expense   8,400   
Wages expense   67,600   
Office expense   21,700   
Amortization expense   -   
Depreciation expense   24,000   
Utilities expense   31,000   
Insurance expense   73,800   
Income taxes expense   63,800   
   $2,587,756    $2,587,756
1   On March 1, ABC purchased a one-year liability insurance policy for $98,400.                                      
   Upon purchase, the following journal entry was made:                                      
       Dr Prepaid insurance           98,400                      
           Cr Cash           98,400                  
   The expired portion of insurance must be recorded as of 12/31/14.                                      
   Notice that the expired portion from March through November has been recorded already.                                      
   Make sure that the Prepaid Insurance balance after the adjusting entry is correct.                                      
                                          
                                          
2   Depreciation expense must be recorded for the month of December.                                      
   The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000.                                        
       The method of depreciation for the building is straight-line.                                    
   The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000.                                       
       The method of depreciation for the equipment is double-declining balance.                                  
   Depreciation has been recorded for the building and equipment for months February through November.                                      
                                          
                                          
3   On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month,                                      
   and XYZ paid ABC on December 1 in advance for the first three months' rent.                                      
   The entry made on December 1 was as follows:                                      
       Dr Cash           36,000                      
           Cr Unearned rent revenue           36,000                  
   The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14.                                      

Answer 1

	Adjusting Journal entries in books of ABC Corp.
Date	General Journal		Debit	Credit
Dec 31,2014	Insuarnce expense($98,400*1/12)		$               8,200
	Prepaid Insuarnce			$           8,200
	(to record entry for inusrance expense for month of december)
Dec 31,2014	Depreciation expense-Building[($150,000-$6,000)/6 Years*1/12]		$                  400
	Accumulated Depreciation-Building			$              400
	(to record entry for depreciation expense on Building month of december)
Dec 31,2014	Depreciation expense-Equipment[$600,000*40%*1/12]		$             20,000
	Accumulated Depreciation-Equipment			$         20,000
	(to record entry for depreciation expense on Building month of december)
Dec 31,2014	Unearned Rent revenue		$             12,000
	Rent revenue			$         12,000
	(to record entry for rent revenue earned for december)