Question

1. Wages of $9,000 are earned by workers but not paid as of December 31.
2. Depreciation on the company’s equipment for the year is $10,840.
3. The Supplies account had a $490 debit balance at the beginning of the year. During the year, $6,096 of supplies are purchased. A physical count of supplies at December 31 shows $660 of supplies available.
4. The Prepaid Insurance account had a $5,000 balance at the beginning of the year. An analysis of insurance policies shows that $2,800 of unexpired insurance benefits remain at December 31.
5. The company has earned (but not recorded) $750 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10.
6. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31. The company will pay the interest five days after the year-end on January 5.

For each of the above separate cases, analyze each adjusting entry by showing its effects on the accounting equation—specifically, identify the accounts and amounts (including (+) increase or (−) decrease) for each transaction or event.

Assets

Liabilities

Equity

Answer 1

(+) indicates increase

(-) Indicates Decrease

Adjusting Entries				Accounting Equation
Date	Account Titles and Explanation	Debit	Credit	Assets	=	Liabilities	+	Equity
Dec. 31	Wages Expenses	$9,000						(-) $9,000
	Wages Payable		$9,000			(+) $9,000
	(To record the accrual of wages expense
Dec. 31	Depreciation Expense	$10,840						(-) $10,840
	Accumulated Depreciation - Equipment		$10,840	(-) $10,840
	(To record the depreciation on the equipment)
Dec. 31	Supplies Expense	$5,926						(-) $5,926
	Supplies ($490 + $6,096 - $660)		$5,926	(-) $5,926
	(To record the usage of supplies)
Dec. 31	Insurance Expense	$2,200						(-) $2,200
	Prepaid Insurance ($5,000 - $2,800)		$2,200	(-) $2,200
	(To record the prepaid insurance is expired)
Dec. 31	Interest Receivable	$750		(+) $750
	Interest Revenue		$750					(+) $750
	(To record the accrual of interest revenue)
Dec. 31	Interest Expense	$2,500						(-) $2,500
	Interest Paynable		$2,500			(+) $2,500
	(To record the accrual of interest expense)