Question

A review of the ledger of Kingbird, Inc. at December 31 produces the following data for the preparation of annual adjusting entries: 1. Salaries and Wages Payable, $0. There are 7 salaried employees. 5 employees receive a salary of $1,250 each per week, and 2 employees earn $900 each per week. Employees do not work weekends. All employees worked two days after the last pay period and before December 31. Unearned Rent Revenue, $375,920. The company began leasing condos in its new building on November 1. Each tenant has to make a $5,110 security deposit that is not refundable until occupancy is ended. At December 31, the company had the following rental contracts that were paid in full for the entire term of the lease: 2. Term (in months) Number of Leases Date Nov. 1 6 Monthly Rent $3,930 $10,030 4 Dec. 1 6 4 3. Prepaid Insurance, $14,160. This balance consists of payments on two policies. The terms of the policies are as follows: Effective Date Amount Policy A650 Number of Months Coverage 12 May 1 Oct. 1 $6,960 7,200 B974 24 4. Notes Payable, $82,400. This balance consists of a one year, 9% note that is dated June 1.
A review of the ledger of Kingbird, Inc. at December 31 produces the following data for the preparation of annual adjusting entries:

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Answer Adjusting Journal Entries No Date Account Title and Explanation Debit Credit 1 3,220 Dec-31 Salaries and Wages Expense Salaries and Wages Payable (1,250 * 5 * 2/5) + 900* 2* 2/5) 3,220 2 71,560 Dec-31 Unearned Rent Revenue Rent Revenue (3,930 * 4* 2) + (10,030 * 4 4* 1) 71,560 3 5,540 Dec-31 Insurance Expense Prepaid Insurance (6,960 * 8/12) + (7,200*3/24) 5,540 4 4,326 Dec-31 Interest Expense Interest Payable (82,400 * 9% * 7/12) 4,326 Effect on Net income will be (Increase) 58,474 (71,560 - 3,220 - 5,540 - 4,326)