Question

Complete adjusting journal entries

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.

4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14.

Answer 1

1) Adjusting entry :

Date	account and explanantion	debit	credit
Dec 31	Insurance expense (98400/12)	8200
	Prepaid insurance		8200
	(To record insurance expense)

Prepaid insurance balance after adjusting entry = 98400-(8200*10) = $16400

2) Adjusting entry :

Date	account and explanation	debit	credit
Dec 31	Depreciation expense	2400
	Accumlated depreciation-Building (150000-6000/30)/12		400
	Accumlated depreciation-Equipment (60000*40%)*1/12		2000
	(To record depreciation expense)

3) Adjusting entry :

Date	account and explanation	debit	credit
Dec 31	unearned rent revenue (36000/3)	12000
	Rent revenue		12000
	(To record rent earned)

4) Journal entry ;

Date	account and explanation	debit	credit
Dec 31	Wages expense (250*51)	12750
	Wages payable		12750
	(To record wages expense)

Wages payable = $12750