Question

P4-2 (Algo) Recording Adjusting Entries LO4-1

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All of the current year's entries for Zimmerman Company have been made, except the following adjusting entries. The company's annual accounting year ends on December 31.

1. On September 1 of the current year, Zimmerman collected six months' rent of $8,460 on storage space. At that date, Zimmerman debited Cash and credited Unearned Rent Revenue for $8,460.
2. On October 1 of the current year, the company borrowed $14,400 from a local bank and signed a one-year, 11 percent note for that amount. The principal and interest are payable on the maturity date.
3. Depreciation of $3,100 must be recognized on a service truck purchased in July of the current year at a cost of $20,000.
4. Cash of $5,400 was collected on November of the current year, for services to be rendered evenly over the next year beginning on November 1 of the current year. Unearned Service Revenue was credited when the cash was received.
5. On November 1 of the current year, Zimmerman paid a one-year premium for property insurance, $9,480, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.
6. The company earned service revenue of $3,700 on a special job that was completed December 29 of the current year. Collection will be made during January of the next year. No entry has been recorded.
7. At December 31 of the current year, wages earned by employees totaled $13,500. The employees will be paid on the next payroll date in January of the next year.
8. On December 31 of the current year, the company estimated it owed $440 for this year's property taxes on land. The tax will be paid when the bill is received in January of next year.

P4-2 Part 2

2. Prepare the adjusting entry required for each transaction at December 31 of the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Adjusting entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Unearned rent revenue (8460*4/6)	5,640
	Rental Revenue				5,640
	(for unearned rent earned during the year)
b.	Interest expense (14,400*11%*3/12)	396
	Interest payable				396
	(for interest accrued for three months)
c.	Depreciation expense		3,100
	Accumulated dep-Truck equipment		3,100
	(for depreciation charged)
d.	Unearned Service revenue		900
	Service revenue (5,400*2/12)			900
	(for service revenue recognized for 2 months)
e.	Insurance expense (9,480*2/12)		1,580
	Prepaid Insurance				1,580
	(for insurance expired)
f.	Accounts receivable			3,700
	Service revenue				3,700
	(for revenue earned but not received)
g.	Salaries and wages expense		13,500
	Salaries and wages payable			13,500
	(for wages due and unpaid)
h.	Property tax expense		440
	Property Taxes payable			440
	(for taxes due but not yet paid)