Question

All of the current year's entries for Zimmerman Company have been made, except the following adjusting entries. The company's annual accounting year ends on December 31. a. On September 1 of the current year, Zimmerman collected six months' rent of $9,600 on storage space. At that date, Zimmerman debited Cash and credited Unearned Rent Revenue for $9,600. b. On October 1 of the current year, the company borrowed $18,000 from a local bank and signed a one-year, 12 percent note for that amount. The principal and interest are payable on the maturity date. c. Depreciation of $3,500 must be recognized on a service truck purchased in July of the current year at a cost of $22,000. d. Cash of $3,000 was collected on November of the current year for services to be rendered evenly over the next year beginning on November 1 of the current year. Unearned Service Revenue was credited when the cash was received. e. On November 1 of the current year, Zimmerman paid a one-year premium for property insurance, $8,400, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount. f. The company earned service revenue of $4,000 on a special job that was completed December 29 of the current year. Collection will be made during January of the next year. No entry has been recorded. g. At December 31 of the current year, wages earned by employees totaled $14,000. The employees will be paid on the next payroll date in January of the next year. h. On December 31 of the current year, the company estimated it owed $500 for this year's property taxes on land. The tax will be paid when the bill is received in January of next year.

Answer 1

Effect of Adjusting Entries in balance sheet and Income Statement:

Balance Sheet: Income Statement: Amount in $

Transaction	Assets	Liabilities	Stock holders equity	Revenue	Expense	Net Income	Reasons
a	-6400			+6400		+6400	6 months revenue unearned on sept 1 out of which 4 months have been completed as on dec 31 hence the income of 4 months i.e., 6400 has been recognized as revenue
b		540			540	-540	3 months intrest on 18000 @12% is 540$ is outstanding as on dec31 to be recognized as expense
c	-3500				3500	-3500	Depreciation being recognized on service truck and the asset value is reduced to that extent
d	-500			500		+500	2 months service revenue completed in this year@3000/12*2=500 TO BE RECOGNIZED AS Income
e	-1400				1400	-1400	8400 for one year in which 2 months have been completed hence recognize the insurance expense 8400/12*2=1400
f	4000			4000		+4000	Accrued income for the completed job is to be recognized
g		14000			14000	-14000	Outstanding employee expense(liability)and expense of wages to be recognized
h		500			500	-500	Outstanding property tax(liability)and expense of tax to be recognized
				Total		-9040	transferred to shareholders fund as part of retained earnings