Question

The following transactions occurred during December 31, 2021, for the Microchip Company. 1. On October 1, 2021, Microchip lent $99,000 to another company. A note was signed with principal and 10% Interest to be paid on September 30, 2022. 2. On November 1, 2021, the company paid its landlord $12,000 representing rent for the months of November through January Prepaid rent was debited. 3. On August 1, 2021, collected $18,000 in advance rent from another company that is renting a portion of Microchip's factory. The $18,000 represents one year's rent and the entire amount was credited to deferred rent revenue. 4. Depreciation on office equipment is $6,500 for the year. 5. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $10,000. The company records vacation pay as salaries expense. 6. Microchip began the year with $4,000 in its asset account, supplies. During the year. $8,500 in supplies were purchased and debited to supplies. At year-end, supplies costing $4,250 remain on hand. Prepare the necessary adjusting entries for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 5 > On October 1, 2021, Microchip lent $99,000 to another company. A note was signed with principal and 10% interest to be paid on September 30, 2022. Note: Enter debits before credits Transaction General Journal Debit Credit 1 Record entry Clear entry View general Journal

Answer 1

Solution

Microchip Company

Adjusting entries –

Adjusting Entries Date Account Titles and Explanation Debit Credit Dec 31, 2021 Interest Receivable $2,475 Interest Revenue $2,475 (To record interest earned for three months (Oct 1 - Dec 31) on note receivable; 99,000 x 10% x 3/12 = 2,475) Dec 31, 2021 Rent Expense $8,000 Prepaid Rent $8,000 (To record rent expense for 2 months, Nov and Dec; 12,000 x 2/3 = 8,000) Dec 31, 2021 Deferred Rent Revenue $7,500 Rent Revenue $7,500 (To record earned portion of deferred rent revenue for 5 months, August through December, 18,000 x 5/12 = 7,500) Dec 31, 2021 Depreciation Expense - Office Equipment $6,500 Accumulated Depreciation - Office Equipment $6,500 (To record depreciation expense on office equipment) Dec 31, 2021 Salaries Expense $10,000 Salaries Payable $10,000 (To record unpaid vacation pay to employees) Dec 31, 2021 Supplies Expense $8,250 Supplies $8,250 (To record cost of supplies used during the year)

Computations –

1. Interest receivable on note for three months, Oct through Dec = 99,000 x 10% x 3/12 = $2,475

2. Rent expense for Nov and Dec = 12,000 x 2/3 = $8,000

3. Earned portion of deferred rent revenue, for 5 months August through December = 18,000 x 5/12 = $7,500

4. Cost of supplies used, supplies expense = beg. Balance + purchases – ending balance

= 4,000 + 8,500 – 4,250 = $8,250