Question

AJE's Exercise Crumbly Inc. Following are some transactions for Crumbly Inc. during 2020. Instructions: • Record each transaction below and post all non-cash components of each entry into a T account. • Create all the necessary adjusting journal entries at year-end. For each AJE, show your computations below the entry and indicate the type of AJE you have recorded. • Create all the cash entries in the next year implied by the AJE. January 31: Crumbly purchased an office building for $320,000 and paid for the purchase with a long-term 5% note payable. Interest on the principal of the note is due every six months with the principal due in 15 years. February 1: Crumbly rented out a portion of its office building to another company. The renter signed a rental lease for the period of February 1, 2020 to January 31, 2021, and prepaid the annual rent amount of $63,000 in cash. March 28: Crumbly purchased $5,800 of supplies on account. Crumbly's policy is to debit Supplies Expense when supplies are purchased. April 8: Crumbly purchased a one-year insurance policy that runs from May 1, 2020 to April 30, 2021 for $31,000 cash and paid in full. May 1: Crumbly received $181,900 from Cookie Masters Corp. as a prepayment for Crumbly's consulting services over the next 9 months. July 31: Crumbly loaned a supplier $72,000 in exchange for an 8 month, 7% note. The supplier will pay Crumbly the principal and interest back on March 31 November 15: Crumbly purchased $3,400 of supplies on account, with the amount debited to Supplies Expense. Year end information: . Crumbly records straight-line depreciation on buildings, using a 30-year life and no salvage value. . December 31" occurs as the 6 workday out of a 10 workday pay period. Salaries for Crumbly's employees total $158,000 for each 10 workday pay period. The employees will receive their paychecks on January 7, 2021. • Supplies in the amount of $850 remain on hand on December 31, 2020.

Answer 1

please find the answers in attachment
Debit ($) Date Adjusting entries 1 31-Jan Office Building A/C To 5% Notes Payable A/C (Being Building purchased on loan) Credit ($) 320000 320000 63000) 63000 1-Feb cash a/c To Prepaid Rent A/C (Rent received for lease of office building for period 1st feb 2020 to 31 jan 2021) 5800 28-Mar supplies A/c Dr To account payable A/C ( being supplies purchased on account) 5800 5800 28-Mar Supplies Expene A/c Dr To supplies A/C (being supplies expenses recorded 5800 31000 8-Apr Prepaid Insurance A/C To cash A/C ( being prepaid insurance purchased) 31000

5 181900 1-May cash A/C To unearned Revenue A/C (being advance received for consulating service by cookie) 181900 72000 31-Jul 7 % Note Receivable A/c Dr To supplier A/C ( being loan given to supplier) 72000 8000 31-Jul Interest exp A/c To cash A/C Being interest paid on notes payable 8000 working notes payable =320000 Interest =320000*5/100*6/12 interest =8000 3400 15-Nov supplies A/cdr To account Payable A/C 3400 9 2550 31-Dec supplies expense A/C To supplies a/c ( being supplies expense charged) 2550

working 3400 supplies closing inventory supplies expense ( 3400-850) 850 2550 11 9777.77 31-Dec depreciation exp A/c Dr To office building a/c (being dep charged as exp) 9777.77 working office building straight line method dep 11 month dep 320000 30 years 10666.66667 10666.66667*11/13 9777.77 as office building was purchased on 31 st jan 12 94800 31-Dec salaries exp a/c To salaries payable A/C (being salaries due to be paid) 94800 10day salaries = 158000 we have to give 6 day salaries 158000/10*6 94800

13 57750 31-Dec rent Revenue A/cdr To prepaid rent A/c ( being prepaid rent recognised for theyear) 57750 rent =63000 11 month rent = 63000*11/12 =57750 14 20666.66 31-Dec insurance exp A/cdr to prepaid insurance A/C ( being insurance exp for the year recognised) 20666.66 insurance =31000 8 months insurance exp = 31000/12*8 20666.66 15 166741.6667 31-Dec revenue A/cdr To unearned revenue A/C ( being Revenue reconised for the year) 166741.6667 unearned revenue 181900 181900/12*11 166741.6667

account ledger

office building depreciation exp dr 31-Jan 5% notes payable 320000 By depreciation cr 9777.77 31-Dec office building 9777.77 by closing balance 320000 310222.2 320000 cisoing 9777.77 9777.77 9777.77 supplies supplies exp dr dr 5800 28-Mar account payable 15-Nov account payable 28-Mar supplies 15-Nov supplies 2550 5800 by supplies exp 3400 by supplies exp by closing balance 9200 5800 2550 by closing balance 8350 850 8350 8350 9200 7% Notes receivable supplier dr cr dr cr 31-Jul supplier a/c 72000 31-Jul 7% notes payable 72000 by closing balance 320000 72000 72000 by closing balance 72000 72000 72000

cash entry of next year

cash entries of next year 94800 7-Jan-21 salaries payable A/C To cash A/C 94800 8000 31-Jan-21 Interest exp A/C To cash A/C Being interest paid on notes payable 8000 72000 31-Mar-21 cash A/C To 7% notes receivable A/C (being payment received of loan 72000 3360 31-Mar-21 Cash A/C To interest on 7% notes receivable ( being interest received for 8 months 3360 72000 12 month interes =72000*7% 5040 8 month = 5040/12*8 3360