Question

The Office Supplies account had a $480 debit balance at the beginning of the year. During the year, $4,885 of office supplies are purchased. A physical count of supplies at December 31 shows $539 of supplies available.

The Prepaid Insurance account had a $5,000 balance at the beginning of the year. An analysis of insurance policies shows that $3,000 of unexpired insurance benefits remain at December 31.

The company has earned (but not recorded) $600 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10.

The company has a bank loan and has incurred (but not recorded) interest expense of $4,500 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, prepare adjusting entries required of financial statements for the year ended (date of) December 31.

Answer 1

Adjusting Entries: Credit [$480 + $4,885 - $539] $4,826 [$5,000 - $3,000] $2,000 Date General Journal Debit Dec. 31 Supplies Expense $4,826 Office Supplies (To record office supplies used) Dec. 31 Insurance Expense $2,000 Prepaid Insurance (To record prepaid insurance expired) Dec. 31 Interest Receivable $600 Interest Revenue (To record interest earned but not received) Dec. 31 Interest Expense $4,500 Interest Payable (To record interest on loan accrued but not paid) $600 $4,500