Question

G -Because of a new product line, Accounting Creations needed some temporary additional storage space so on _____3,1, 2018 they rented a unit for an annual rate of $17,000 and they paid the entire amount up front.

H -The storage building was self-constructed this year by Accounting Creations. The Company had their initial expenditure of $500,000 on January 1. They paid an additional $375,000 on May 1^st, $250,000 on August 1^st, and then the final payment of $150,000 on December 1^st when the building was completed, and occupancy occurred. The company has decided to use S/L method for depreciation. The storage building is estimated to have a life of 40 years and a salvage value of $75615. (Enter the last four digits of your student number.)   The company depreciates using partial years.

I - Accounting Creations Double Entry has two loans outstanding as of 12/31/2018. Interest is paid annually on January 1st.   The facts on each loan are as follows:OnStar Bank Loan – outstanding since January 1, 2018 with a 4.0% interest    rate. This loan was taken out to finance the construction of the Storage Building. Interest for the year and 10% of the principle will be paid to the bank on January 1, 2019. Except for recording the initial cash received and loan, no additional          entries have been made. Cold star Bank Loan – also outstanding all of 2018 with 3.05 % interest rate   Interest is due on January 1, 2019. Principle is due on January 1, 2024. Since interest will not be paid to the Bank until 2019, Accounting Creations’ office staff did not accrue any interest.

Accounting Creations was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 650,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1.         On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting    and correcting journal entries based on the following information. All information was        provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label            journal entries a through t.

Accounting Creations Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
	Unadjusted				Adjusted
Account Title	Trial Balance		Adjustments		Trial Balance
	DR	CR	DR	CR	DR	CR
Cash	330,000	-
Accounts Receivable	694,980	-
Allowance for Doubtful Accounts	-	17,000
Interest Receivable	-	-
Merchandise Inventory	425,000	-
Prepaid Insurance	-	-
LIFO Reserve	-	32,000
Prepaid Advertising	-	-
Prepaid Rent	17,000	-
Office Supplies	6,000	-
Note Receivable	25,000
Available for Sale Securities	375,000	-
Office Building	3,750,000	-
Accumulated Depreciation - Office Building	-	87,500
Storage Building	1,275,000	-
Accumulated Depreciation - Storage Building	-	-
Land	750,000	-
Leasehold Improvements	225,000	-
Accumulated Depreciation - Leasehold Improvements	-	-
Office Equipment	325,000	-
Accumulated Depreciation - Office Equipment	-	65,000
Patent	150,000	-
Accounts Payable	-	345,000
Sales Tax Payable	-	-
Salaries Payable	-	142,000
Payroll Taxes Payable	-	25,000
Interest Payable	-	-
Income Tax Payable	-	-
Unearned Rent Revenue	-	-
Loan Payable - Onstar Bank	-	650,000
Loan Payable - Coldstar Bank	-	2,000,000
Common Stock	-	650,000
Additional Paid in Capital	-	1,998,750
Retained Earnings	-	920,000
Accumulated Other Comprehensive Income	-	25,000
Dividends	84,750	-
Sales	-	4,528,200
Sales Returns and Allowances	42,250	-
Sales Discounts	19,250	-
Cost of Goods Sold	1,979,500	-
Sales Salaries Expense	436,400	-
Office Salaries Expense	274,000	-
Advertising Expense	16,000	-
Depreciation Expense - Office Building	-
Depreciation Expense - Leasehold Improvements	-	-
Depreciation Expense - Office Equipment	-	-
Leasing Expense - Stores	132,000	-
Miscellaneous Selling Expense	23,000	-
Research & Development Expense	15,000
Rent Expense - Storage Facility	-	-
Insurance Expense	15,000	-
Office Supplies Expense	35,000	-
Miscellaneous Administrative Expense	9,170	-
Rent Revenue	-	75,000
Interest Revenue on Note Receivable	-	-
Dividend Revenue on AFS Securities	-	25,000
Interest Expense	-	-
Bad Debt Expense	35,000	-
Amortization Expense	-	-
Income Tax Expense	-	-
Payroll Taxes Expense	121,150	-
	11,585,450	11,585,450

Answer 1

G. Entry to record the rent expense
Date	Account Title	Debit	Credit
Dec.31.2018	Rent Expense	14167
	Prepaid Rent		14167

Working:

Prepaid Rent		17000
Paid for		1 year
Monthly rent		1416.67
Date of payment		3/1/2018
Period (months) in 2018		10 months
Rent for 2018		14167

H. Entry to record capitalasation of the inteest to Storage Building
Date	Account Title	Debit	Credit
Dec.31.2018	Storage Building	23833
	Interest Expense		23833
	(Interest on OnStar Bank loan capitalized)

Working:

Storage building capitalized on		12/1/2018
Period of financing		11 months
Interest to be capitalised		23833

I. Bank Loans Payable
1 Entry to record the interest expense Onstar Bank Loan
Date	Account Title	Debit	Credit
Dec.31.2018	Interest Expense	26000
	Interest Payable		26000
	(Interest on OnStar Bank loan for the year recorded)

Working:

On Star Bank Loan
Rate of interest		4%
Lon Amount		650000
Interest for the year		26000

2. Entry to record the interest expense Coldstar Bank Loan
Date	Account Title	Debit	Credit
Dec.31.2018	Interest Expense	61000
	Interest Payable		61000
	(Interest on Coldstar Bank loan for the year recorded)

Working:

Coldstar Bank Loan
Rate of interest		3.05%
Lon Amount		2000000
Interest for the year		61000