Question

PROBLEM 3-ADJSTING ENTRIES

Scotsman Company prepares QUARTELY (3-months) financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the quarter of July 1 to September 30.  

SCOTSMAN COMPANY

Trial Balance (Selected Accounts)

September 30, 2020

                                                                                                                             Debit            Credit

Office Supplies...........................................................................................        $ 2,700

Prepaid Insurance......................................................................................           4,200

Office Equipment........................................................................................         30,000

Accumulated Depreciation—Office Equipment..............................................                              $3,000

Note Payable………………………………………………..................................                                  5,000

Unearned Rent Revenue.............................................................................                                1,300

(Note: Debit column does not equal credit column because this is a partial listing of selected account balances)

An analysis of the account balances by the company's accountant provided the following additional information:

1.   A physical count of office supplies revealed $700 on hand on September 30.

2.   A two-year life insurance policy was purchased on April 1 for $4,800.

3.   Office equipment depreciated $6,000 per year.

4.   The amount of rent received in advance that remains unearned at September 30 is $500.

5.   Interest accrues on notes payable at the rate of $100 per month.

Instructions: Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30.

Answer 1

Answer

--All adjustments to be made on Sept 30

Adj#	Accouts title	Debit	Credit
#1	Office Supplies EXPENSE	$2,000
	Office Supplies ($2700 - 700)		$2,000
	(to record supplies used)
#2	Insurance expense ($ 4800 x 3 months / 12 months)	$1,200
	Prepaid Insurance		$1,200
	(insurance expired for the quarter ending Sept)
#3	Depreciation exoense - Equipment	$1,500
	Accumulated Depreciation - Equipment ($ 6000 x 3/12)		$1,500
	(to record 3 month depreciation)
#4	Unearned Rent revenue ($1300 - 500)	$800
	Rent Revenue		$800
	(revenue earned)
#5	Interest expense ($100 x 3 months)	$300
	Interest payable		$300
	(to record 3 months accrual)