Question

In: Accounting

When the accounts of Bonita Inc. are examined, the adjusting data listed below are uncovered on...

When the accounts of Bonita Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

1. The prepaid insurance account shows a debit of $4,752, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.

2. On November 1, Rent Revenue was credited for $1,680, representing revenue from a subrental for a 3-month period beginning on that date.

3. Purchase of advertising materials for $726 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $262 are on hand.

4. Interest of $815 has accrued on notes payable. The interest will be paid in January of the next year. Prepare the following in general journal form. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) (a) The adjusting entry for each item.

(a) The adjusting entry for each item.

No.

Account Titles and Explanation

Debit

Credit

1.

enter an account title for the adjusting entry enter a debit amount enter a credit amount
enter an account title for the adjusting entry enter a debit amount enter a credit amount

2.

enter an account title for the adjusting entry enter a debit amount enter a credit amount
enter an account title for the adjusting entry enter a debit amount enter a credit amount

3.

enter an account title for the adjusting entry enter a debit amount enter a credit amount
enter an account title for the adjusting entry enter a debit amount enter a credit amount

4.

enter an account title for the adjusting entry enter a debit amount enter a credit amount
enter an account title for the adjusting entry enter a debit amount enter a credit amount


(b) The reversing entry for each item where appropriate.

No.

Account Titles and Explanation

Debit

Credit

1.

enter an account title for the reversing entry enter a debit amount enter a credit amount
enter an account title for the reversing entry enter a debit amount enter a credit amount

2.

enter an account title for the reversing entry enter a debit amount enter a credit amount
enter an account title for the reversing entry enter a debit amount enter a credit amount

3.

enter an account title for the reversing entry enter a debit amount enter a credit amount
enter an account title for the reversing entry enter a debit amount enter a credit amount

4.

enter an account title for the reversing entry enter a debit amount enter a credit amount
enter an account title for the reversing entry enter a debit amount enter a credit amount

Solutions

Expert Solution

a) Adjusting Entries
No. Account Titles and Explanation Debit Credit
1) Insurance Expense $990
   Prepaid Insurance ($4,752/2years*5/12 months) $990
(To record the expiry of 5 months insurance)
2) Unearned Rent Revenue ($1,680/3 months * 2 months) $1,120
   Rent Revenue $1,120
(To record rent revenue earned for 2 months)
3) Advertising Expense ($726 - $262) $464
Advertising Supplies or Advertising Inventory $464
(To record the usage of advertising materials)
4) Interest Expense $815
   Interest Payable $815
(To record the interest accrued on notes payable)
b) Reversing Entries
No. Account Titles and Explanation Debit Credit
1) No reversing entry is required
2) No reversing entry is required
3) Advertising Supplies or Advertising Inventory $726
   Advertising Expense $726
(To record the reversing entry for advertising materials that was wrongly recorded earlier)
4) No reversing entry is required

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