Arnez Company’s annual accounting period ends on December 31, 2019. The following information concerns the adjusting entries to be recorded as of that date.
Policy | Date of Purchase | Months of Coverage | Cost | |
A | April 1, 2017 | 24 | $ | 10,824 |
B | April 1, 2018 | 36 | 9,576 | |
C | August 1, 2019 | 12 | 8,424 | |
The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.)
Required:
1. Use the information to prepare adjusting
entries as of December 31, 2019.
2. Prepare journal entries to record the first
subsequent cash transaction in 2020 for parts c and
e.
Transaction | General Journal | Debit | Credit | |
a. | Office supplies expense | 13,069 | =3075+12700-2706 | |
Office supplies | 13,069 | |||
b. | Insurance expense | 8,055 | ||
Prepaid insurance | 8,055 | |||
c. | Salaries expense | 3,800 | =1900*2 | |
Salaries payable | 3,800 | |||
d. | Depreciation expense—Building | 16,375 | ||
Accumulated depreciation—Building | 16,375 | |||
e. | Rent receivable | 2,000 | ||
Rent earned | 2,000 | |||
f. | Unearned rent | 3,624 | =1812*2 | |
Rent earned | 3,624 | |||
Date | General Journal | Debit | Credit | |
6-Jan | Salaries payable | 3,800 | ||
Salaries expense | 5,700 | =1900*3 | ||
Cash | 9,500 | |||
15-Jan | Cash | 4,000 | ||
Rent receivable | 2,000 | |||
Rent earned | 2,000 | |||
Insurance expense workings: | ||||
April 1, 2017 | 1353 | =10824/24*3 | ||
April 1, 2018 | 3192 | =9576/36*12 | ||
August 1, 2019 | 3510 | =8424/12*5 | ||
Total | 8055 |
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