Question

Exercise 3-5 Verne Cova Company has the following balances in selected accounts on December 31, 2015. $ 0 0 6,421 O Accounts Receivable Accumulated Depreciation Equipment Equipment Interest Payable Notes Payable Prepaid Insurance Salaries and Wages Payable Supplies Unearned Service Revenue 10,386 2,220 0 2,466 40,070 All the accounts have normal balances. The information below has been gathered at December 31, 2015. 1. 2. 3. 4. 5. 6. 7. Verne Cova Company borrowed $9,975 by signing a 12%, one-year note on September 1, 2015. A count of supplies on December 31, 2015, indicates that supplies of $870 are on hand. Depreciation on the equipment for 2015 is $1,123. Verne Cova Company paid $2,220 for 12 months of insurance coverage on June 1, 2015. On December 1, 2015, Verne Cova collected $30,400 for consulting services to be performed from December 1, 2015, through March 31, 2016. Verne Cova performed consulting services for a client in December 2015. The client will be billed $3,687. Verne Cova Company pays its employees total salaries of $5,280 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2015. Prepare adjusting entries for the seven items described above. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.

Answer 1

Adjusting entry

No	General Journal	Debit	Credit
1	Interest expense (9975*12%*4/12)	399
	Interest payable		399
2	Supplies expense (2466-870)	1596
	Supplies		1596
3	Depreciation expense	1123
	Accumulated depreciation-equipment		1123
4	Insurance expense (2220/12*7)	1295
	Prepaid insurance		1295
5	Unearned service revenue (30400/4)	7600
	Service revenue		7600
6	Account receivable	3687
	Service revenue		3687
7	Salaries and wages expense (5280/5*3)	3168
	Salaries and wages payable		3168